Made and/or Invented in Hungary? The Transformation of the Hungarian Investment Promotion System from the Change of Regime to Our Days with Special Respect to the VIP Cash Subsidy system

Abstract

The study presents the transformation of the Hungarian investment promotion system from the change of regime to our days, with special respect to the non-refundable cash incentive system based on individual government decision (VIP cash subsidy) and the period after 2010. The emphasis is laid on the main territorial, sectoral, and regulative changes, as these have received relatively less research attention so far despite their significant policy relevance. Our research questions are (1) if the Hungarian investment promotion system has followed the global tendencies, (2) if it contributed efficiently to the reduction of double duality (sectoral and territorial), and (3) what kind of future processes could be outlined. Firstly, the most relevant data and literature has been analysed, then the main stages of the Hungarian investment promotion system and their characteristics are introduced and integrated into a specific conceptual system of the author, with a strong concentration on the processes in the last decade, and lastly conclusions and policy recommendations are formulated. The main contributions to the state-of-the-art are the complex, process-oriented presentation of the Hungarian investment promotion system (especially the VIP cash subsidy schemes) with the definition of its main stages, and the analysis of the recently published data on the allocation of VIP cash subsidies between 2004-2023. The main novelties of the study lay in its approach and conceptual framework.

The timeliness and relevance of the research is further strengthened by the recent global pandemia and the armed conflict in our neighbourhood together with their impacts and the countermeasures of the Hungarian government, as the Competitiveness Increase Incentive and the Factory Rescue Program. The results show that the Hungarian FDI support system has followed the global tendencies, but with a time lag, its contribution to the reduction of the double duality is only limited, especially in case of the sectoral duality, and the future holds most challenges in the field of higher value added, the Green Transition, digitalisation, the limited volume of state aids (EU and national) for potential beneficiaries and the headway of Asian companies and investment projects. We expect that this gap filling summary contributes to better understanding of the examined theme and era, the exploration of the correlations, and thus, to further research, especially in the field of inter-country comparisons in the CEE region and more effective policy interventions.