On the 2005 issues of the Külgazdaság journal

Külgazdaság 2005/11-12.

Brief Summary of the Articles

The budget of the European Union between 2007-2013 and interests of Hungary
ÁKOS KENGYEL

The changes in future structure of expenditures of the European Union budget imply several important questions to be analysed which can have a decisive impact on the successful development of integration in the long run. The future changes in budgetary expenditures may have an influence on competitiveness, world economic position and internal cohesion of the Union. The study is dealing with the most important considerations influencing the structure of EU budget between 2007-13, it points out the shifts in contents of new budgetary headings and analyses the present situation concerning the debate between member states on the final amounts of expenditures. At the beginning of the study a short analysis is given about the considerations defining tasks of the common budget and about circumstances influencing debates. The following chapters analyse the content of individual budgetary headings and the proposed amounts of expenditures. Concerning each budgetary headings the study gives a short evaluation about the needed amount of expenditures, the present state of discussion and dilemmas. The study is concluded with a systematic summary of important changes for Hungary and definition of the most important tasks to be done.

Science-industry relationships in Hungary: the impact on innovation
BALAZS BORSI

The relationship between companies and research organisations receives increased attention as the development theories of the knowledge-based economy gain importance. In the developed countries the relative isolation of scientific research has been disappearing: the boundaries between scientific disciplines fade away and the more interdisciplinary research looks for direct answers to the problems of businesses and society. The linear model of innovation is outdated and the different interactions between research organisations and companies became important competitiveness factors. Although the topic is on agenda, so far only a few studies were published about the relationships of Hungarian companies and research organisations. The article is based on empirical data. It calls the attention to the low levels of mobility between the two sectors as well as the small number of companies that are engaged in innovation relationship with research organisations. It shows that cooperation induces higher sales of new products in Hungarian companies; however, it is not true when a government research unit cooperates with the company. As compared with the developed economies, international financial statistics confirm that the unfavourable financing structure is an obstacle to more intense relations. Company-level data show that cooperation, in which innovation is the most important objective, is less frequent in Hungary than in the developed European countries. The article concludes with the institutional / regulatory possibilities to improve the relationships.

Nanotechnology and the new industrial revolution
ANDREA SZALAVETZ

This paper intends to be one of the first contributions to the emerging economics of nanotechnology. We try to answer the question whether nanotechnology will be capable of initiating a rapid technological development and economic growth driven by technological opportunities - similarly to the technological and economic effects of the information technology revolution. Will the term "new economy" pop up again as a consequence of the nanotechnology revolution? Which are the similarities of and the differences between the economic effects of information technology revolution and nanotechnology revolution? Answers to these questions are provided by examining the relevance of two theories to both technologies: the theory of general purpose technologies and that of Schumpeterian disruptive technologies. The paper argues that as soon as nanoscience turns into technology this will initiate a new industrial revolution.

More and more limited possibilities for national agricultural policies - The shaping new WTO Agreement on Agriculture
ANDREA ELEKES - PÉTER HALMAI

As the Hong Kong WTO ministerial meeting is getting closer and closer, and agriculture continues to be one of the most sensitive areas of the negotiations, it is time to review the state of the agricultural negotiations. In August 2004 member states agreed on the Framework for Establishing Modalities, which contains relatively few details on the size and timing of the proposed reductions. The framework agreement proposes among others progressive and tiered reductions of duties and domestic support and envisages phasing out all forms of export subsidies. Manoeuvre place of national agricultural policies will be further limited by the fact that - besides the general AMS reduction - the framework agreement also proposes special commitments on different forms of domestic subsidies. Although WTO members still have to agree on the details of the new agricultural agreement, in sum we can state that member states made a further step in the direction of a more liberalized agricultural trade.

Külgazdaság 2005/10.

Brief Summary of the Articles

Inflation Targeting: Lessons from the First 15 Years
LÁSZLÓ JANKOVICS

The economic background of the design of monetary and exchange rate policy has been essentially changed during the last couple of decades. One of the practical consequences of the aforementioned theoretical revolution is the invention and the following quick success of inflation targeting (IT). Inflation targeting is a relatively new type of monetary strategy, however up to date more than 20 developed and emerging countries (including Hungary in 2001) adopted it since its inception in 1990 in New Zealand. Its comparatively successful performance amongst the rapid globalization of financial markets and the frequent outbreak of various types of financial crises has substantially contributed to the IT's attractiveness. This study analyses the rich international experiences concerning the introduction, operation and design of inflation targeting systems. Then the paper turns to the special problems and dilemmas in emerging markets, and assesses the results of empirical investigations. Finally, it draws some conclusions and lists a few normative recommendations in order to improve the Hungarian version of IT.

The Washington Consensus and what comes after
GYÖRGY SZAKOLCZAI

The first part of the article describes the Washington Consensus and the circumstances of its original formulation and presentation. It supports the view represented also by Williamson, who originally formulated this expression and its first description that it is not the neoliberal manifesto as it is generally characterized or even caricaturized. The second part deals with the lost decade of Latin-America, the eighties, and the attempt of the best heads of the Latin-American macroeconomic community to renew the growth process and even to attain the 7 p. c. growth rate. This attempt needs an even broader approach than the correct interpretation of the Washington Consensus, and an attempt not only to attain higher growth rate but also grater equity. The third part deals with a very recent publication of OECD the aim of which is partly the same: the renewal of the growth process in the OECD countries and the closing of the gap between the leading country, the United States and the other members. The author expresses the view that the proposals presented in this publication lack the broad horizon represented by the Latin-American authors of the publications reviewed in the second part, and that the adoption of some forther elements of the American institutional system will not lead to closing the gap between the United States and the other OECD member states.

Dynamics of Intra-Industry Trade and Adjustment Costs. The Case of Hungarian Food Industry
IMRE FERTŐ

If increases in trade are intra-industry in nature, the standard assumption is that adjustment costs will be less forbidding. This propostion had become known as the smooth adjustment hypothesis. The paper investigates the smooth adjustment hypothesis using the example of Hungarian food industry between 1992 and 2002. The costs of labour adjustment is measured by the change in the number of employment. The main results are following. First, the improving labour productivity leads to the decrease in the number of labour, whilst growth in domestic demand has an opposite effect. Furthermore, there is no significant relationships between good sectoral trade performance, marginal intra-industry trade and the employment. However, our results are very sensitive for the choice of marginal intra-industry- trade, and the period and lag structure are chosen.

Külgazdaság 2005/9.

Brief Summary of the Articles

The end of accession-driven transformation
LÁSZLÓ CSABA

The constant reference to European standards and requirements of the past 15 years has lost its significance with the crisis of European institutions and policies that have come to the open by the Brussels Council of June 2oo5. The radical overhaul of both EU policies and institutions have become indispensable, and that renders most analyses based on "what is due for us, ceteris paribus" grossly immaterial. Europeanization continues despite the rejection of the Constitutional Treaty by the Dutch and French electorates. However it does not require, not even allows for uniformization in "all walks of life" particularly in environmental and social affairs. In order to remain workable the EU must give up its reliance on Franco-German bureaucratic and centralistic traditions, while new members need to focus their policies on other objectives than maximization of net transfers.

The impact of financial globalization: measurable gains in developed and in developing countries (1972-2002)
ISTVÁN MAGAS

Over the last thirty years, have there been any strong (measurable) gains of financial globalization in the industrialized and in the developing countries? Surveying the international empirical literature, the article offers an affirmative answer in case of both country groups. In section one, it has been shown that in both a longer and in a shorter historical perspective, indicators of macro economic volatility have exhibited noticeably dampening trends. There has been a strongly established pattern of easing business cycle volatility in both the U.S. and in the German economies, and in the EU in general. This is what is being identified as a measurable gain of globalization in the developed world. In section two, the issue to be discussed is whether in a developing environment economic growth is helped by financial openness. We review the analytic relationship that can be used for modeling (and for empirical) purposes between growth and openness. Then, the costs and benefits of financial liberalization are accounted for. It is argued - as is demonstrated by the surveyed literature too - that, in the general case, financial globalization is offering more benefits than costs to developing economies as well. The intuitive reasoning that "financial openness does help economic growth" gets firm support in the empirical literature and in some general statistics.

EU-accession and adjustment opportunities in Hungarian foreign economic policy - with special regard to Hungarian-U.S. trade-relations
DOROTTYA SOMOGYI

One and first direct consequence of Hungary's EU-accession was the immediate takeover of EU's common trade policy (within this the common customs tariffs) with all consequences of this fact on trade relations with extra-EU countries. In the article we tried to evaluate the impact of these changes on one of Hungary's most important trading partners, namely on Hungarian-U.S: trade relations. In 2003 U.S.A. had a share of around 3 per cents in Hungarian foreign trade, but this share increased above 11 per cents in Hungarian extra foreign trade, within this to more than 16 per cents in Hungarian exports and to around 6-7 per cents in Hungarian imports after 1st May 2004. According to our investigations, with EU common customs tariffs the tariff burden decreased for American products exported to Hungarian market, while higher tariffs than before accession are imposed on Hungarian products on U.S. market. Analysing the dynamic and structure of the Hungarian-U.S. bilateral trade between 1999-2003, and in 2004, we can state, that the changes concern to some extent, but don't endanger the development of Hungarian-U.S. trade relations. This development depends in the future mainly on the performance of the Hungarian economy and its attractiveness for the foreign direct capital.

Company concentration in Hungarian retail trade
ANTAL SERES

Despite the permanent increase in company concentration all through the period of 1999-2002, in 2002, the Hungarian retail outlet sector still qualified as de-concentrated. Sector-level indicators (averages) concealed significant differences in terms of the trend and intensity of development and the degree of concentration among the four special branches concerned. This could be attributed, on the one hand, to activity profile/technical features and, on the other, to the presence of multinational and procurement and sales companies. A combined examination of sector-level quantitative and sales revenue indicators shows that the micro-enterprise stratum, gathering a very high proportion of companies, hardly changing in number, is "maintained" by a steadily decreasing sales revenue. The fact that this has not led to a significant decrease in their number is due among other things to the steady and major expansion of household retail purchases (and hence the volume of retail trade) over the period under study.

Külgazdaság 2005/7-8.

Brief Summary of the Articles

The Firm and the Market as Resolutions for the Two Kinds of Coordination Problems
JUDIT KAPÁS

The aim of the paper is to contribute, through an analysis of the coordination problems, to a better understanding of the nature of the firm and the market. The author differentiates between coordination problems in two respects. In the first one we can differentiate between the Hayekian coordination problem and neoclassical allocation problem. In the second one coordination problems are differentiated according to whether the actors are conscious of the fact that they are players in a coordination game (Klein 1997, Sautet 2002). As a framework for analysis the author uses Williamson's (1998) social analysis structure, in which an explanation for the nature of the firm and the market can be linked to the character of the coordination problems. The author argues that the firm and the market substitute and complement each other in the resolution of the coordination problems. In order to explain this, we must differentiate between two meanings of the market. On the one hand, market means market economy, on the other hand, market is one of governance structures. The substitution effect refers to the third level of the Williamsonian structure where firm and market appear as alternative governance structures. The complement effect refers to the second level where market and firm should be seen as elements of the market economy.

The Convergence of Financial Architecture in Transition Economies - is it a special case?
BALÁZS PÁLOSI-NÉMETH

According to the related literature there is a striking fact in the evolution of financial architecture in transition countries. Notably, in spite of the fairly different underlying conditions - as the institutional basis, the strategies for financial development or the fiscal and monetary policy -, the basic financial intermediaries of these countries became remarkably similar. Moreover, despite the initial rise of stock markets, the mass privatization, the liberalization of capital flows and several bank crisies, this financial system is dominated by commercial banks. In this study author sketches a general framework, in which he shows that there are deeper reasons of financial architecture homogenity than the features of transition process. On one hand this is the institucional dependence, namely the relationship-based system is more efficient in these economies. On the other hand the effect of financial globalization encumbers the evolution of market intensive system.

A Comparative Study of the External Debt in Eastern Europe, in Central and Eastern Europe and in Hungary
MÓNIKA KUTI

The study focuses on the external debt position of the transition economies in Eastern Europe for the period between 1970-2003. During these years external debt contributed to consumption smoothing but there were examples for debt reduction due to consumption constraints. The analysis of the period between 1990 and 2003 highlights that a negative marginal effect on gross capital formation in the share of GDP exists when the gross external debt to gross national income ratio is above 60 percent. In Central and Eastern Europe the negative marginal effect on GDP growth appears beyond the gross debt level of approximately 40 percent. In Eastern Europe - disregarding the war-struck Balkan - the debt burden could be serviced only by debt rescheduling when the gross external debt to gross national income ratio exceeded 72-74 percent; in 1995, Hungary with a value of 73.8 percent faced a serious debt crisis. The degree of Hungarian indebtedness ranged from 30 to 78 percent between 1970-2003 and from 57 to 74 percent between 1990-2003.

Developing Countries and the World Trade
Judit Kiss

With an 85% share of world population, the developing countries produced less than half of world GDP in 2003 and gave only 26.6% of world exports. While their foreign trade balance on goods was positive in 2003 (USD 246 billion), the balance on services was negative (USD 62 billion). Though their balance on current account has been positive since 2000, their capital and financial account had a deficit of USD 178 billion in 2003. The USD 2724 billion external debts of the developing countries could only slightly be counterbalanced by the USD 69 billion inflow of official development assistance in 2003. It is questionable whether the special and differentiated treatment provided for the developing countries at the Doha WTO-round would really improve their world economic position.

The functioning, activity and categories of Multilateral Development Banks
Zoltán Mácsik

This article presents the functioning and activities of Multilateral Development Banks (MDB). After presenting the individual Banks, the Author recommends criterions to categorize them, according to their functioning, structure and activities. The enlargement of the European Investment Bank as a conclusion of the enlargement of the European Union in 2004 gives particular actuality to this article, although the enlargement of the EIB has been a longer process, and has received less public attention.
After a short definition of Multilateral Development Banks and their distinction from other international financial institutions and other entities, the article outlines the functioning of Multilateral Development Banks. MDBs are established by its member states, but in practice they are funded by private investors. From the point of view of the subscriber states, this model offers a cheap method for financing the aim of the particular Multilateral Development Bank. However member states are liable for the repayment of the loans received by the MDBs. After a general presentation, the article intends to justify this model through a practical outline of the functioning of the European Investment Bank. This article gives a more detailed presentation of the Multilateral Development Banks currently active in Europe, and outlines briefly the other, sometimes less known MDBs. The classification of Multilateral Development Banks is based on three criterions. The first is based on their functioning. The single polar and bi-polar models differ in their positions of interest. In the single polar model (for example in the case of the Council of Europe Development Bank) the main owners are at the same time the main borrowers as well (sometimes on a proportionate basis), while in the bi-polar model the main subscribers do not borrow from the bank (for example World Bank's IBRD). The second, structure based criterion distinguishes Multilateral Development Banks that are horizontally divided into a number of international financial institutions, from those that are vertically integrated into a structure of international organisations. The last criterion is based on the regional aspect, and divides the Multilateral Development Banks into global, regional and sub-regional banks.

Asymmetrical price transmission on agricultural markets
LAJOS ZOLTÁN BAKUCS

Producer and consumer trusts often express their concern about the asymmetrical price transmission thought to characterise agricultural and food markets. This hypothesised asymmetry is disadvantageous for both consumers and farmers. Processors, wholesalers and retailers are thought to quickly pass the eventual producer price increases to consumers, whilst producer price decreases are only transmitted slowly and sequentially. Despite of a rich theoretical and empirical literature dealing with price transmission, those making such statements usually fail to provide the theoretical and empirical evidence needed to support their claims. Although the agricultural markets in the Central European countries first disintegrated than transformed in the early nineties, some of the distorted market structures survived. More, the low developed price discovery mechanisms and the sometimes misguided and unpredictable government policy interventions suggest a non-competitive market characterised by asymmetrical price transmission. However, the research of the price transmission on the post-socialist agricultural markets has been neglected in the international literature too. The purpose of this article is to attract attention to this unfairly neglected area of the Hungarian agricultural economy, by presenting in detail the theoretical results and empirical procedure of the international price transmission analysis literature.

Külgazdaság 2005/5-6.

Brief Summary of the Articles

China and India: New Locomotives in the World Economy?
György Csáki - András Hernádi

In the first decade of the 21st century the US still enjoys its economic hegemony while the EU had to give up the hope to become competitive with the US by 2010. Simultaneously, one can witness spectacular and dramatic changes around the third pole of the world economy, ie. Japan and its 'neighbourhood'. China and India draw growing attention by their growth rates and achievements in trade and capital flows. China also acts as the engine of world exports and imports and a protagonist in the international monetary and financial system. India excels in the exports of services, especially insourcing them at increased added value. The changes in the positions of China and India have been so far the biggest ones for the world economy of the 21st century.

Questions of China's exchange rate regime
DÁVID NÉMETH

Change of China's exchange rate regime to a more flexible one has too big risk in its recent economic situation therefore China behave rational when do not yield under the pressure of the Great Powers and leave its exchange rate unchanged. We must not forget either that its exchange rate regime needs modification parallel to its market opening because the system, which helps the development of the economy now could be the blocking factor later, therefore the introduction of managed float system is reasonable in long-term. As an edification of the Asian crisis the market opening should not be rushed. In the between-season, while China executes its necessary reforms and its economy needs defend against the free global competition its exchange rate's fixing to a currency basket would have many advantages.

Foreign Direct Investment in the Light of Theory of Internalisation
LÁSZLÓ ERDEY

The article presents and systematizes the internalisation-based explanations of trade theory about foreign direct investment and related empirical research. The tendencies and the theoretical models prove that the flows of foreign direct investment are determined by a joint set of different factors. They also corroborate the importance of integrated forms opposite to market-based solutions in industries producing R&D- and human capital intensive differentiated products and characterized by a significant role of intangible assets. The necessity of skilled workforce and appropriate physical and institutional infrastructure in the host country is reinforced as well. The future would seem to belong in this narrower field to models capable of handling locational as well as internalisational aspects of complex integration strategies of the multinational companies.

Külgazdaság 2005/4

Brief Summary of the Articles

Economic analyses in spring 2005

In springtime every year economic research institutes regularly publish their analysis about the performance of the previous year as well as their forecasts. The press informs usually only about the most important economic data and about the analysis in a few words, the detailed studies prepared by the institutions do not generally reach those who are interested. This is the reason why since 2001 we publish a short summary of the reports and prognosis of the research institutes. These analyses are especially interesting right now as they were prepared shortly after the EU accession. They analyse several aspects of this period as well as the possible short-term developments.

The Oil and the Economy
Some Reflections Concerning the Present Discussion on Russian Economic Policies

András Köves

The article aims to contribute to recent discussion, both in Russia and internationally, about Russian strategies of economic development. The debate is focused on the dangers associated with the present resource-oriented (practically: oil- and gas-oriented) growth, and the need for, as well as, constraints of, a change to priority development of non-resource, mainly high-tech sectors in manufacturing and services. The author basically agrees with the view that there is no alternative to parallel development of resource-based and non-resource sectors of the Russian economy with a view of maintaining and widening the scope of the dynamic sectors and branches. However, as against the prevailing judgement according to which resource-oriented growth in Russia is responsible for the neglect and under-development of non-resource sectors, he insists on another more important relationship. Namely, the present structural pattern dominated by the resource-based sectors (itself an important constraint to modernizing growth in the whole economy) is, first of all, a consequence of the perpetual weakness and inefficiencies of the manufacturing and other non-resource sectors resulting from the economic policies of the Soviet times, as well as post-Soviet destabilization, continuous lack of confidence on the part of the economic actors, plus politically motivated inadequate and one-sided integration into the world economy.

Corporate Law and Corporate Governance - the Hungarian Experience

ISTVÁN CZAJLIK AND JÁNOS VINCZE

In this paper our aim was to establish legal facts for Hungary, in order to put the country's situation into international context, and to find new avenues for comparative research. Investor protection indicators are updated, and new enforcement indicators determined. We hypothesize that the dynamics of legislation must be an important topic for research. An analysis of the dynamics of legislation in Hungary indicates that two tendencies could be observed. One responding to actual challenges, leading to more reliance on the interpretation of law by judges, the second following the German-tradition resulting in bright line rules, and more complicated legal regulation. To make the former workable political and financial independence is a necessary, though not sufficient, condition.

Külgazdaság 2005/3

Brief Summary of the Articles

All-round inquiry: about joining the EU and the manoeuvring possibilities of the economy policy - part III

Hungary's accession to the EU - as we know it today - will take place under unfavourable international and domestic macroeconomic conditions. On one hand the slow expansion of EU member countries and the budget tensions in the largest countries, on the other hand the balance problems of the Hungarian economy will influence the manoeuvring possibilities of the domestic economy policy in the following years.

Our inquiry this year lists some opinions on the following questions: what are the tasks in this relatively short period of time for the Hungarian economy policy to restore the internal balance in the short term, to encourage the growth and the involvement of FDI and to fulfil the requirements of EMU membership in the medium term. How is it possible to rank the goals and how can a their harmony be achieved?

Thoughts about the development of the single European market at the beginning of the new millenium

MARGIT RÁCZ

The single market of the European Union exists since 1993. The article takes a look at the developments and unsolved questions of the past 10 years, deals with the mechanism of how to further shape the single European market as well as with the different characteristics of the member countries' behaviour. The creation and the functioning of the single European market is the biggest achievement of the integration from the economic aspect. The European Commission not only has functions in the traditional sense but also regulating functions in two different areas (competition policy and state subsidies), which results in conditions that are difficult to solve for some member states. Finally, the article reviews some typical features of the learning process in the individual member states.

Agricultural consequences of Cancún's failure

JENŐ SZABÓ

Cancún will take its place in the history of the negotiations as it has been a crucial venue. Some say that it was the unprecedented "alliance" of the developing world whereas others regard it as the fiasco the Mexican diplomacy being the main reason behind the stranded talks. Nevertheless, the developed world had been preparing seriously for the successful termination of the long lasting talks. Moreover, the U.S. and the EU had even started to reform their agricultural policies before the 5 th Ministerial Conference and leaving behind their often contradictory views, they managed to hammer out a joint proposal. No matter how laudable it was from the big players to seek consensus instead of further confrontations, some circles of developing nations thought it was a dangerous step. With the joint EU - U.S. proposal the critical mass was reached and a new interest group was born within the developing world. The G21 group with leading countries such as Argentina, Brazil, China, India seems to have had enough at the dawn of the 21 st century that the big countries decide on them without their involvement. The result is disappointing, the developing world claims victory but they hurt themselves the most.

International competitiveness as a capability to attract foreign direct investment

GYÖRGY CSÁKI - ANDREA SZALAVETZ

As an economic actor becomes integrated in a transnational corporation (TNC) its competitiveness will have to be redefined and measured with other than the traditional indicators of competitiveness. These actors will compete in a different market structure and under different market conditions. It will face new type of competitors and its competitiveness will be determined by new factors. Competition for a TNC-subsidiary is internal competition for allocation of resources. Similarly if the share of economic actors integrated in TNCs significantly increases in an economy, national competitiveness will have to be redefined and its analysis has to be complemented with new, non-traditional factors.

The authors analyze competitiveness defined as a capability to attract foreign direct investment (FDI). We discuss how this approach is related to some traditional indicators of competitiveness. We try to explain why the capability to attract FDI was seemingly unrelated to unit labour cost indicators in some Visegrád countries, or at least why the two indicators did not develop according to the predictions. We also review the reasons of an apparent lack of relation between economic growth and the capability to attract FDI. Finally we present some weaknesses of the Hungarian FDI-attraction performance and its future perspectives.

Külgazdaság 2005/2

Brief Summary of the Articles

All-round inquiry concerning tasks related to Hungary 's EU membership - Part II.

Following Hungary 's accession to the EU medium - and long-term issues of accommodation are becoming more relevant. Thus, the goal of our inquiry is to present different opinions regarding the medium- and long-term conditions supporting real convergence of the Hungarian economy. We try to get answers to some questions as follows:

What kind of institutional reforms are necessary (and what time-schedule would be desirable) either due to EU objectives or simply based on individual national goals?

What are the areas where an adjustment of the legal framework should be enforced?

What kind of adjustments should be made in respect of major economic policy objectives?

Growth Theory - World Model - Economic Development Strategy

GYÖRGY SIMON

The author, starting from the regularities of technical progress and relying on a worldwide (131 countries) investigation, has elaborated a growth model (world model) explaining the fundamental characteristics of functioning modern economy: the causes of growth rates and cross-country differences in productivity and income, the equilibrium price, profit and wage, as well as capital formation. The revealed regularities give ground to shape an efficient economic development strategy. The validity of theoretical considerations was proved by the results of worldwide econometric analysis, furthermore by the investigation of the development of most significant capitalist countries (US , Japan , FRG , UK , France) as well as the Hungarian economy.

Strengthening the innovation-capacity
of technology-intensive Small and Medium Enterprises

ANTAL NIKODÉMUS

The benchmarking analysis of innovation gives notable assistance to the incitement of technology-intensive SMEs; as those points of the innovation-process, in which the government intervention provides the greatest effectiveness, can be revealed through the applied indicator-system. In Hungary - like in some other EU member states - it causes serious problems that knowledge hardly utilised in practice (the rate of utilisation is around 10 percent). Hence, the amelioration of knowledge and technology transfer, and the development of the necessary network of institutions have become essential. The Hungarian Ministry of Economy and Transport promotes the transfer process with different measures in order to strengthen the development of technology-intensive, innovation capable SMEs. These measures partly solve the financing problems of SMEs in the phase preceding the involvement of risk capital, aiming to support the development of ventures by incubation, and by strengthening their ability of attracting capital. The most important measures incite and support the establishment and development of spin-off firms, which utilise the knowledge and research of universities. These measures also support the establishment of incubator-houses in the PPP method, promote the attainment of knowledge as regards patents, support SMEs to protect their patents abroad, and incite the extension of incubation-services of industrial parks.

Fiscal Deficits in the Era of Globalization: Lessons for Hungary

DÓRA GYŐRFFY

The fulfillment of the fiscal criterion has proven to be the most challenging criteria for Hungary on the road to the euro. A gradual path of accession is often suggested because the contractionary effects of fulfilling the fiscal criterion of the Maastricht Treaty might contradict with the objective of real convergence. The paper examines the dangers stemming from such strategy by considering the origins and history of the present-day global financial markets. It argues that given the high degree of systemic risks individual countries face, the credibility of macroeconomic policies is crucial to minimize the vulnerability to crises. For Hungary this means that regardless of the date of introducing the euro the consolidation of public finances is unavoidable. The diminishing reputation of economic policy and the weak institutional structures governing the fiscal process make the reestablishment of credibility an even more pressing issue. The overall conclusion from this overview is that delaying entry in order to delay fiscal adjustment can greatly increase the trade off between real and nominal convergence instead of mitigating it.

Külgazdaság 2005/1

Brief Summary of the Articles

All-round inquiry concerning tasks related to Hungary 's EU membership - Part I.

What kind of institutional reforms are necessary (and what time-schedule would be desirable) either due to EU objectives or simply based on individual national goals?

What are the areas where an adjustment of the legal framework should be enforced?

What kind of adjustments should be made in respect of major economic policy objectives?

A resource-based view of puablic corporation

TIBOR KÁRPÁTI

Most of scholars dealing with public corporations hold a narrow view about the role of corporate governance. The appropriate aim of it is the maximization of shareholder value. Therefore one have to constrain management opportunism effectively because it is the most important barrier achieving it. But alternative opinions turned up already in the first half of the last century which emphasized the importance of utilizing employees' special capabilities as much as possible in order to be the corporation run efficiently. This article presents a theoretical platform which reflects this latter view. The shareholders don't have here any special capabilities and seeing the corporation as a public institution deprives shareholders of their owner position. The aim of corporate governance, however, remains shareholder value maximization.

"Global Bazaar" or Digital Monopolies?
The transformation of competition in the information economy

BALÁZS HÁMORI

As internet made markets even physically global, many economists expected the renaissance of pure competition. According to them, as it is easy to enter and leave the market and due to "smooth" transactions and immediate access to information, the economy has come more and more near to the ideal perfect competition so fervently expected by the economists. Market being characteristic of the information economy has been often named "global bazaar" where any merchandise is accepted. But relying on the experiences accumulated since then, we can form a more subtle view on the trends of the market development. Though now it is really easier to enter the market, many anti-competitive factors have also occurred from the phenomenon of lock in through network effects to standard-wars. By mapping the factors strengthening and restricting competition, the study tries to give a tinged picture of the development trends of the market. In the opinion of the author obviously robust trends of concentration and monopolization don't exclude that another time, in other segments a great number of racers start again. The "competition - monopoly" cycle embracing decades (sometimes centuries) during the evolution of the industrial capitalism, now needs only years, sometimes months in the "ontogenesis" of the different segments of the information economy. "Pure competition" arising again and again leads always to the emergence of monopolies. Though enterprises do everything even in the digital world for building and protecting their monopolistic positions, their chance for possessing durably this position becomes less and less.

The role of locational signals in a deregulated electricity market

PÉTER GORDOS

The attention of the decision makers both in the administration and in the electricity industry was drawn by previous year's big blackouts in Europe and North America to the elementary need that the regulatory environment should be changed to guarantee the safe and reliable operation of interconnected electricity systems in a deregulated market.

The article explores how the measures taken after the Italian blackout occurred on 28 September 2003 had an effect on the locational signals influencing the investments regarding the power-plants and transmission networks. The author on one hand provides a brief description of the theoretical mechanism of locational signals, on the other hand analyses the European regulatory environment with respect to the possible and/or binding use of them. The author concludes that although the short term locational signals are sufficiently present at the European internal electricity market, the long term locational signals should be implemented taking into account the technical and economic conditions.

The agricultural trade between Hungary and Russia ,
and the prospects of the improvement of the hungarian export

GÁBOR KŐNIG

The effect of the Russian crisis on the Hungarian agricultural export in 1998 was the most adverse in comparison with other significant events of the past 20 years. The effect of the crisis in 1998 surpassed both the disadvantages of the perestroika and the glasnost and the damage of the downfall of the COMECON and the USSR . The structure of the Hungarian export was realigned significantly: instead of a safer heterogeneous structure, which was characterized by four dominant products before 1991, it transformed into a homogenous structure, that was characterized by the 60 percent of dominance of processed vegetables and fruits. However the Russian market recovers quickly, the side effects of the crisis will prospectively determine and limit for still a long time the chance of the expansion of the Hungarian export. The convergence of Russia towards the membership of the WTO limits the possibilities of the import regulation that make the export to Russia more predictable. The significant negotiations between Hungary and Russia in the past years get the tendency of our trade again intensified. The increase of the export of the poultry and pig meat is limited still by several factors. The chance of the improvement of the Hungarian export appears particularly at cereals and at processed vegetables and fruits.

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