During the past decade, Hungary has passed beyond the decisive phase of political and economic transformation, and has built foundations for a successful market economy.

Over this time the Hungarian economy witnessed a change of structure and ownership – for example over 80 per cent of Gross Domestic Product (GDP) is now generated by the private sector.

The Hungarian economy is almost completely liberalised and in 1996 Hungary was admitted into the Organisation of Economic and Cooperative Development, as clear recognition of its compatibility with other developed countries.

Since 1990, Hungary attracted US$20.5 billion of foreign direct investment which was by far the highest in the Central European region, and accounted for 40 per cent of the capital stock invested in Central and Eastern Europe.

Currently, 30,000 foreign-owned enterprises operate in Hungary accounting for 78 per cent of the country’s industrial exports. Popular areas of investment are the automobile industry, telecommunications, electronics, the financial sector, pharmacology, tourism and the food industry.

In addition to European and North American investors, many Far Eastern manufacturers have set up production facilities in Hungary. Japanese companies - whose example is followed by Korean, Singaporean and other Asian firms - realised that they can export more easily and cheaply to European markets by having a production base in Hungary.

Amongst other motivations for setting up production facilities there is that Hungary concluded an association agreement with the European Union, a European Free Trade Agreement and is a founding member of the Central European Free Trade Agreement. Therefore products have preferential access, not only to the relatively small Hungarian domestic market, but also to a much larger European one.

Hungary also has excellent telecommunication and transport systems, a robust financial infrastructure and low cost, highly skilled labour.

Corporate tax is also relatively low at 18 per cent and larger projects connected to priority areas and entrepreneurial zones enjoy special tax concessions. The standard of living for expatriates is high and the country enjoys political stability and predictable government economic policies.

Hungary has also experienced favourable macroeconomic conditions. Last year, Hungary’s 5.1 per cent GDP growth was double the average of European GDP growth. For 1999, a four per cent growth figure is expected and the forecast for 2000 is 4.5 per cent growth. The unemployment rate and inflation level decreased considerably to single digits during 1999 and the net external debt position improved.

Parallel with the country’s approach to the Euro-Atlantic organisations, Hungary attaches great importance to the establishment of diversified economic relations, and takes an active interest in strengthening ties with countries and territories outside the European Union. Priority is given to those Asian economies which experienced a period of painful restructuring during the Asian financial crisis, but who are emerging from their dislocations with restored confidence, commitment to reforms and sustainable growth strategies.

Mr Laszlo Vizi, the Consul General of Hungary in Hong Kong, spoke about his aims at a Chamber Roundtable recently.

"The Consul General was established here in June this year to enhance cooperation between Hong Kong and Hungary in the areas of commerce, investment and tourism - and the statistics are healthy," he said.

In 1998, the two way trade index stood at just over US$100 million between Hong Kong and Hungary, with US$91.7 million worth of Hong Kong exports to Hungary and US$12.5 million worth of Hungarian exports to Hong Kong.

According to the figures for the first seven months, 1999 may see an almost 90 per cent growth in Hungary’s exports to Hong Kong and a 32 per cent growth in Hong Kong’s exports to Hungary.

"The Consul General is ready to play a matchmaking role between Hong Kong and Hungarian companies. At the moment we are trying to source buyers for Hungarian food products. The Hungarian wine industry is particularly strong, using very old traditions. We are also trying to find markets for IT products, handmade porcelain, pharmaceutical products, buses and railway rolling stock," he said.

As for the possibilities of further expanding Hong Kong exports to Hungary, Mr Vizi stressed the steadily increasing consumer spending and import levels in the Hungarian domestic market.

"All these highlight the desirability of Hong Kong to follow in the footsteps of other Asian countries which use Hungary as a center and stepping stone for their commercial and financial activities in Europe," he said.

Hong Kong companies with considerable capital investments overseas are taking an interest in Hungarian privatisation and concession projects in the areas of telecommunications and infrastructure development.

"The Consul General is now distributing data on the remaining large Hungarian state–owned or partly state-owned companies earmarked for privatisation over the next 2-3 years," he said.

Hong Kong SMEs are also targeted by the Consul General who wants to encourage them to become component suppliers for big multinational companies active in Hungary.

With Hungary ranking eighth in the world for the most popular tourist destinations, Mr Vizi is keen to encourage Hong Kong visitors to come to Hungary. In addition to the usefulness of such grassroots ties and the possible business generating aspects of tourism, Mr Vizi also wants to attract Hong Kong investors into the Hungarian tourism industry.

"With the combination of experience and the capital resources of Hong Kong developers on one side, and the robust profitable Hungarian tourism sector on the other, joining together could be a winning formula. Joint ventures could be formed for construction of multi-functional conference centres, privatisation and refurbishment of existing hotels or green field investment into health and spa resorts," he said.