- Observatory: EMCC
- Published on: 02 March 2008
Disclaimer: This information is made available as a service to the public but has not been edited or approved by the European Foundation for the Improvement of Living and Working Conditions. The content is the responsibility of the authors.
Although the successive Hungarian governments have had no stated position on globalisation, they have had an open entry policy since the late-eighties. It resulted in mass-scale privatisation of industries and services, with the exception of the period of the centre-right government in 1998-2002, as well as supporting green-field FDI in all sectors, except agriculture. Neither trade unions, nor employer organisations have stated positions on globalisation. Trade unions welcome new jobs created by foreign companies but are generally effortless to step up against relocation of production from Hungary, therefore their general policy is confined to alleviating the negative impact of such processes on their members. As regards major employer organisations, its members from multinational companies ensure a pro-globalisation attitude, while employer organisations representing mainly domestic firms, typically small and medium sized businesses, sometimes take positions against their foreign-owned competitors.Studies conducted on the perception of globalisation reveal a mixed attitude towards it among Hungarian population. Although in European comparison Hungary may seem more pro-globalisation and more welcoming to foreign investment, in some cases there seem to be worries about its impact on culture, the environment and there are fears about relocation of jobs to other countries.
Institutional responses to globalisation
Government action to prevent or reduce the extent of off shoring/relocation
Are there any recent examples in your country (i.e. over the past 3-4 years) of the government intervening to prevent particular activities from being relocated abroad or to reduce the scale of this?
If so, please give summary details and indicate the activities concerned
Social partner attitudes towards off-shoring/relocation
Have there been cases over the past 3-4 years where the possibility – or threat – of relocation of production has featured as a factor in collective bargaining?
If so, please indicate the cases concerned, how the possibility has been used and whether its use has become a more frequent occurrence.
In the low-wage-low skilled industries (textile, garments, footwear, assembly of electric components) relocation of production is a relatively new trend due mainly to increasing labour costs and the opening up of the adjoining countries as a result of possible or actual EU enlargement. It is a common practice at multinational companies that the headquarter forces the production facilities located in different countries to compete with each other, therefore the local management is keen to maintain the labour cost low and create the precondition of flexible production in order to be competitive. Therefore, in the course of collective bargaining, the management often refers to the threat of relocation unless the labour cost remains low and the plant maintains flexibility advantages in the production process. This features the general climate of collective bargaining at Hungarian subsidiaries of multinational companies, however, there is no concrete case known in which actual relocation of production had been an outcome of bargaining failure.
Are there any cases over the past 3-4 years where trade unions have successfully resisted plans to relocate production abroad or have managed to reduce the extent of this?
If so, please indicate the cases concerned and outline their main features Are there any cases where trade unions have accepted the need for the relocation of production – or part of it – abroad as a means of maintaining or improving the viability of companies and so of preserving some jobs and even ultimately expanding them?
If so, please briefly describe the cases concerned
Government policy on foreign-owned firms controlling significant sections of the economy
Does the Government in your country have an explicit policy on restricting the acquisition of domestic companies in certain sectors by foreign-owned firms?
If so, please give summary details and indicate which sectors this applies to as well as whether any distinction is made between companies according to their nationality (e.g. whether non-European companies are treated differently from European ones)
No, on the contrary. Basically Hungary has followed an open entry policy since the late-eighties; mass-scale privatisation of industries and services, as well as supporting green-field FDI, were the backbone of restructuring in the manufacturing industries. Even the majority of public utility sectors have been privatised. None the less government policy on privatisation changed under the different governments; characteristically the socialist-liberal coalitions have been in favour of privatisation, while the centre-right government of 1998-2002 practically halted the privatisation process. As far as the country of origin, only Russian or Ukrainian companies evoked public discourse, which is understandable given the historic dependence of the country on the former Soviet Union. (Such a recent event was the acquisition of MALÉV, the national airline company, by a Russian owner. The government in this case, however, was in favour of selling the company, and eventually it did so.)
Are there any restrictions on foreign-owned companies setting up branches or subsidiaries in your country either generally or in specific sectors?
Please indicate the sectors concerned and the stated reasons for the restrictions. Please also indicate whether the restriction apply to companies from other parts of the EU as well as from outside
The only exception for FDI trends is agriculture. Although there is no definite ban on the acquisition of agricultural companies, foreigners are not allowed to own arable land. None the less, this has not been an effective constraint, as foreign companies are able to lease land from domestic owners.
Are there any sectors of the economy in which the acquisition of a domestic company has not been allowed over the past 3-4 years?
If so, please indicate the sectors concerned and the nationality of the foreign companies involved as well as the reasons given for the decision
The appendix of the privatisation law includes the list of companies which are to be kept in state ownership with the indication of the share of compulsory public ownership. Thus the mandatory ban on acquisition is limited to certain companies, but not applicable to entire sectors. Currently this system is undergoing major changes. On the one hand, due to the accession to the EU, the so-called ‘golden shares’ (i.e. 50 % plus one share to maintain state control in strategic companies’ decision making), which was a common solution earlier, cease to exist, as it is not in line with the EU regulations. On the other hand, now the current government wants to privatise a couple of state owned companies, therefore it proposed to amend the privatisation law, which move is otherwise heavily attacked by the opposition
Social partner responses to the take-over of domestic firms by foreign-owned ones
Have there been any recent cases (i.e. over the past 3-4 years) where trade unions have resisted foreign acquisition of domestic companies explicitly because of the nationality of the company concerned?
If so, please give summary details, indicating whether there is any evidence of different attitudes being shown towards European firms as opposed to companies from outside Europe
Have there been any recent cases (i.e. over the past 3-4 years) where domestic companies have resisted acquisition by a foreign-owned firm on the grounds of its nationality?
If so, please give summary details, indicating the nationality of the company concerned and whether there is any evidence of European and non-European companies being regarded differently in this regard.
Attitudes to globalisation
Have employers’ associations in your country adopted a stated position as regards the main aspects of globalisation – i.e. outsourcing or the relocation of production abroad and the acquisition of domestic companies by foreign-owned ones?
If so, please give summary details, indicating whether or not the position varies across sectors of the economy
Foreign owned companies are decisive members of employer associations representing major businesses; therefore it is not likely that they would adopt any position against globalisation. Moreover, foreign firms have their own representation on the basis of country of origin (i.e. AMCHAM for American firms, DIHK for German ones, etc.), though they do not qualify as employer associations. Employer associations representing mainly domestic firms, typically small and medium sized businesses, sometimes adopt positions against their foreign owned competitors. An often voiced blame in the commerce sector is that shopping malls in the suburbs and big stores, factory outlets, characteristically belonging to international chains, ruin small shopkeepers in the traditional downtown shopping area.
Have trade unions in your country adopted a stated position as regards the main aspects of globalisation – i.e. outsourcing or the relocation of production abroad and the acquisition of domestic companies by foreign-owned ones?
Trade unions are aware of the merits of globalisation too; they know well that relocation of production into Hungary and the establishment of green-field plants created numerous jobs following the ‘transitional recession’ of the early nineties. Of course, relocation of production from the country is a major concern for unions as well, and they often join initiatives of business circles to promote more favourable business climate, for instance support their demand for decreasing taxation, to avoid relocation. Nonetheless, Hungarian trade unions are not in the position to influence the relocation process in a meaningful way; their general policy is confined to avoiding the negative impact of such processes on their members, for instance to minimise job losses in concrete cases of acquisition or relocation.
If so, please give summary details, indicating whether or not the position varies across sectors of the economy
*A Eurobarometer survey on globalisation was carried out in 2003 in the EU-15 Member States. This might serve as a useful point of reference for the countries concerned, to see, for example, whether or not national attitudes expressed in the survey are in line with similar surveys which have been conducted nationally. The survey findings are available at:
Have there been any surveys of public opinion in your country over the past 3-4 years on attitudes towards globalisation or on the various dimensions of this (as listed above)?
If so, please summarise the main findings of these. Please give a breakdown, where possible, in terms of the characteristics of respondents (e.g. by sex, age, socio-economic group, education level, occupation, sector of employment or region).
In October/November 2001, the Central European Opinion Research Group Foundation (CEORG) conducted a survey on ‘Perceptions of foreign direct investment’ in the Czech Republic, Hungary and Slovenia. (See: http://www.ceorg-europe.org/research/2001_11ec.pdf ). Out of the respondents in the three countries, the Hungarians agreed in the largest proportions (57%) with the statement “The economy of your country is better off with foreign direct investment”. Most of the Hungarians (46%) preferred foreign minority share in an existing domestic company, instead of green-field FDI or majority take-over. The share of those who agreed with government policies encouraging foreign investment, including acquisition of majority shares, was the highest in Hungary, 9.8 fully and 41.4% partly agreed. On the other hand the Hungarians proved to be unconcerned by policy issues, as almost half of them (a far higher share than in the two other countries) expected the country’s authorities neither to discourage, nor to encourage share holding by foreign companies in domestic industries.
A study conducted by M&H Communications between October 2000 and January 2001 aimed at exploring the attitudes of college/students towards globalisation. The sample consisted of 450 higher education students of 20-28 from all over the country (55.8% of them from the capital; 21.8% from Western Hungary, 21.5% of the respondents were from East Hungary). The method included questionnaires, focus groups and interviews. The results show that students’ perceptions of globalisation were very vague, yet a large majority of them thought that it had negative impacts for the country. One fifth of the respondents were unable to define what globalisation meant, while two thirds identified globalisation with the process of unification (of economies, countries, culture). One third of the respondents considered globalisation a negative process, as they attached to it such concepts as the hegemony of multinational companies, environmental pollution, etc.. Vague though the perceptions of globalisation were, processes generally attached to globalisation evoke stronger feelings in the youth, which shows that few see the various phenomena as part of one process. Students studying economics or finance assessed more positively the impacts of globalisation on Hungary: one third thought that globalisation was good for the country, while 40% of them saw both positive, as well as negative impacts. On the other hand, students of agriculture had the most negative perceptions of globalisation.
The 2005 spring Eurobarometer (www.tns-global.hu/eurobarometer/index.html), conducted between 9 May and 14 June, in 25 member states of the EU, found that Hungarians see foreign investment in the country more positively than either in the EU-15 or in the NMS. When speaking about globalisation in relation to trade and commerce, 26% of the Hungarian respondents feared relocation of companies to countries with lower labour costs; 21% thought that it meant more competition for domestic companies; 15% linked it with the prospect of new markets for domestic companies; while 22% of the respondents thought it brought more foreign investment into the country.
An Internet-based survey was carried out in October 2006 by ACNielsen, international market research company, to explore attitudes toward globalisation in 42 countries (http://www.pointernet.pds.hu/ujsagok/evilag/2006-ev/10/20070219143636694000000857.html). According to the study, the majority of Internet users in Hungary think positively of multinational companies: not only do they open up job opportunities and enhance career prospects, it is thought, but these companies also provide access to products and services of the quality available elsewhere. However, almost two thirds of the people in the sample think that globalisation endangers cultural values and local traditions, while life is at risk of becoming inhuman.
Have these surveys made a distinction between the different dimensions of globalisation (as listed above) or have separate surveys been carried out on these dimensions?
On the separation of the different dimensions of globalisation, see the results of the 2005 Eurobarometer above.
If so, please summarise the main findings of these as regards:
off-shoring(or the relocation of production abroad;
the take-over of domestic companies by foreign-owned ones and/or the growing extent of control by foreign companies of parts of the domestic economy
the establishment of new plants and offices by foreign-owned companies
Where possible, please give a breakdown in each case in terms of the characteristics of respondents (e.g. by sex, age, socio-economic group, education level, occupation, sector of employment or region)
Have these surveys made an explicit distinction between globalisation and the process of European integration, by, for example, distinguishing between relocation of production to other EU Member States and relocation to countries outside the EU or between the take-over of domestic companies by EU-owned firms and take-over by a non-EU companies?
If so, please give summary details of the differences in response to EU integration as opposed to globalisation.
Lazlo Neumann and Orsolya Polyacsko , MTA PTI