On the 2006 issues of the Külgazdaság journal

Külgazdaság 2006/6.

Brief Summary of the Articles

Financial Support from the European Union - a New Phase of Redistribution?
ÉVA VOSZKA

Having joined the European Union, Hungary now receives financial support form the community. Is this support something different from state aid, well-known even in the transition period, or international funds become the part of domestic redistribution processes? Initial and still partial experiences show that instead of a sharp turnover we only face a modification of quantities and methods in providing state aid to enterprises. Additional funds in the first years are still modest but considering the nearly unchanged level of aids form national government, the total level of support to the firms has slightly increased, despite that enterprises received only one third of the European structural and cohesion funds - the rest went to nonprofit organizations, local governments and to state apparatuses. The method of redistributing via open tenders is not the only channel of redistribution, case-by-case decisions of state bureaucracy remained important.

The Hungarian minimum wage in international comparison
DÓRA BENEDEK - ÁGOTA SCHARLE - PÉTER SZABÓ

In 2001 and 2002, the Hungarian miniumum wage increased in real terms by 65% percent. In 2006, this was followed by a further increase of 6.5 %, and a new regulation that sets a higher minimum wage for employees with e secondary education at 110% of the general minimum. In the 25 EU member states, 19 members have a compulsory minimum wage and 6 members (including Germany) have no such regulation. Some member states set different minimum levels for various labour market groups; in most cases this is supposed to account for the lower average productivity of these groups (for example school leavers). Empirical evidence on the employment effect of minimum wage increases is mixed, but large increases almost always seem to lead to losses in employment. In Hungary, the large increase in 2001-2002 was followed by a significant drop in employment in some branches of the economy, but there was no decline in total employment. The increase in 2006 is expected to affect 700-900 thousand employees and self-employed and is likely to significantly reduce the employment opportunities of low skilled and older workers.

From crisis to crisis? Development and prospects in the Hungarian textile and clothing industries
JUDIT HAMAR

Policies and studies on competitiveness of the Hungarian economy, its growth prospects, on employment and social problems, rarely mention problems and challenges in the TC industry, while the world conditions for this sector are under dramatic changes. Geographical location has been restructured radically, essential transformation has reached in each segment of the production line in the sector. All of these certainly do affect Hungarian actors in the sector; the new challenges force them to adjust more, than ever before. What is happening meanwhile in Hungary? What are the possible answers to the international challenges, and what is the role of policies to help this adjustment? Based on the relative small share of the sector in the economy, previous expectations estimated relatively few detrimental impacts - of the EU-accession and that of the WTO liberalization process - on the Hungarian TC sector. Contrary to this, our analytical results proved a strong declining trend of this sector. TC sector (especially clothing industry) was the first being able to succeed after the transitional crisis, and was a leading export-oriented industry during the 90s. Since 2000, however, it seems to be "out of breath" as a result of its ways of adjustment to the new emerging situation. Our main conclusion to macro and industrial policies is that the similarly serious problems to the agriculture can be eased and competitiveness of the sector can be improved only by introducing and applying the already existing measures invented, decided and already used by the EU and by some EU member states. This would, however, require a "new way of thinking" of policy-makers at macro and even at local level.

Külgazdaság 2006/4-5.

Brief Summary of the Articles

Economic Analyses in Spring 2006

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 focus on the possible consequences of the big current-account and budget deficit. They analyse several aspects of this issue as well as the possible short-term developments.

Integrational crisis in Europe: will it be lasting or transitional?
ÉVA HAVASI

After nearly two years of the eastern enlargement, the European Union can be characterised by an integrational crisis. It is true, that the Hungarian citizens hardly experience directly this crisis and its impacts. But considering that Hungary is one of the member states of the Union, the infavorable symptoms of the european integration could concern our country's present and future economic and social development. In any case, Hungary is absolutely interested in the quick solving of the crisis and in the further development of the integration process. But we must recognise that the necessary changements can be only possible in the longer run.

The liberalisation of the rail freight network industry in the European Union
GÁBOR KOÓS

The liberalisation process in the rail freight transport industry began in 1991 in Europe. The process took place step by step in packages. All the member states - including Hungary - had to form the conditions of the competeting rail freight transport market. It had to establish the ground regulation framework and to set up the necessary institutions. This means that Hungary had to change the structure of the hungarian state railway monopoly, had to provide it for financial and organizational independency. The transport services must be separated from the infrastructure maintenance. The required institutions must be set up ensure the access to the required infrastructure, to control the market, and to license the railway companies. These changes are to ensure the adequate competitive environment for the entry of new service providers on the rail freight transport market.

The Relations of the European Union with the Balkan Countries
TAMÁS SZEMLÉR

For the European Union (EU), the economic and political stability of the countries in its direct neighbourhood is of extraordinary importance; it is also important for the EU to maintain a predictable development of its relations with these countries. In the last decade, the development of the external relations of the EU brought an institutionalisation of these relations. Bulgaria and Romania are now at the threshold of EU-membership, Croatia has begun its accession talks in autumn 2005, while Macedonia (FYROM) has got the candidate status in December 2005. The other countries of the region are still further from membership, but the Stabilisation and Association Process (SAP) - supporting bilateral relations as well as intra-regional multilateral cooperation - provides them with a stable, but flexible framework to deepen their relations with the EU and with each other, too.

From Owner to Regulator: Explanations for the Spread of Independent Regulatory Agencies in Europe
DÓRA PIROSKA

This review article introduces studies from the field of international political economy which analyze the spread of independent regulatory agencies in Europe. Independent regulatory agencies are state found institutions, which operate more ore less independently from the state hierarchy, financed by an independent budget, have a complex administrative tasks and powers to make and enforce rules. Although the spread of independent regulatory agencies in Europe is very dynamic, very little is known about the reasons of the process. The study analyses the following theories that aims at explaining the spread of independent regulatory agencies: the principle-agent theory, theory of the European regulatory state, theory of the regulatory competition, and discusses the motivations of agents behind the process. Finally, the article considers a few of the unanticipated consequences of independent regulatory agencies. This study not only presents the above theories, but also evaluates their explanatory strength.

Hungarian Policy of Higher Education and the Overeducation
ISTVÁN POLÓNYI - JÁNOS TIMÁR

This article deals with the overeducation of university-graduates in consequence of campaign of higher education. It is on interest of institutions in raising the number of students and on discrimination of "postsecondary higher education". A further reason is the effort of political parties to get the sympathy of students. The overeducation produces within a few years a stock of one million graduates. Their quality deteriorates, their unemployment increases, their relative salary decreases. Some economists deny this, because on mistaken concept of relative salary, limitation of labour market analysis to facts and disregards on prospective graduates. They don't take in consideration on effects of their poor quality, and the costs of higher education.

Külgazdaság 2006/3

Brief Summary of the Articles

All-round inquiry about reforming the general government, especially the large distributive systems - Part III.

Reforming the general government, especially the large distributive systems, has already been part of the intellectual and economic policy discussions for a long time. On the one hand, problems of macroeconomic imbalances, and on the other, the continuous tensions of the fields related to public finances support the overwhelming importance of the issue. Problems and dilemmas related to the introduction of the euro gave an additional actuality of these questions.

There is a general agreement that moderating of the general government deficit can be supported, inter alia, by the reforms of the government subsystems, especially the large distributive systems. Our questions are about the operationalization of the reforms (conceptualization, introduction, timing and delay):
1. What are the main causes and limits, which contributed to the lack of the necessary reforms?
2. What is the proper ranking and timing of the reform steps related to the large distributive systems?
3. In the process of reforming the particular systems what are the key steps?
4. What are the risks of the introduction and the delay of the different reform steps and what are the related conflicts?

Trends of Automotive industry in the World and Hungary
NÓRA KEMENCZEI - ANTAL NIKODÉMUS

The scope of this article is to make an overview about the cycles in the automotive industry in our home country and the global economy in the past fifteen years and to review the main investments in Hungary and in its region. Our further aim is to support a development conception for integrated supply chain program particularly in automotive industry based on the trends in accordance with the professional programs made in the Ministry of Economy and Transport. The trends in the section indicate characteristics of globalization. On the one hand we can talk about capital concentration among the integrator companies, on the other hand the automotive industry concentrates evidently in our region, namely in Central-Eastern Europe. Hungary must try to use its comparative advantage in field of logistics, which can be realized in the automotive industry as more value added services.

Külgazdaság 2006/2

Brief Summary of the Articles

All-round inquiry about reforming the general government, especially the large distributive systems - Part II.

1. What are the main causes and limits, which contributed to the lack of the necessary reforms?
2. What is the proper ranking and timing of the reform steps related to the large distributive systems?
3. In the process of reforming the particular systems what are the key steps?
4. What are the risks of the introduction and the delay of the different reform steps and what are the related conflicts?

Does Hungary gain from relocations?
GÁBOR HUNYA - MAGDOLNA SASS

Relocation is not a new phenomenon, but it takes place more and more often, embraces more and more countries and sectors. The new EU member states have become important targets of relocation. Relocation of production and service activities affects employment, foreign trade and incomes in both the countries of origin and destination. The literature however, concentrates on the labour market impact in the countries of origin. The article lists the definition and methodological problems, the gains and losses from relocation in countries of origin and destination. It compares relocations to Hungary with those to other new member states. It describes in detail - on the basis of company data - the characteristics of relocations to and from Hungary, the affected foreign locations, sectors, impact on the labour market, and nationality of relocating investors. It shows, that relocation is confined to Europe, which enables companies to keep their production capacities in the continent and improve their competitiveness with the help of a "European cooperation". The distribution of advantages from relocation is not so unequal as it is revealed by the Western European literature, because besides job losses, gains may arise from improved competitiveness, repatriated capital incomes, from job creation financed from it, and from lower prices - which latter are not analysed by the researchers.

Economic Freedom as an Index of Institutional Environment New Tendencies in Development Economics
PÁL CZEGLÉDI

Thanks to a paradigm shift in the 80's, development economics is now closer to mainstream growth theory which, on the other hand, makes use of the ideas of new institutional economics. This induced a new and dynamic research program, which has been developing from the middle 90's. This paper is a review of a significant part of this literature focusing on the index of economic freedom, and argues that economic freedom as a theoretical concept is useful when investigating the effect of institutional environment on economic growth. The essay also shows that this empirical research confirms the theoretical insights of the new institutional economics.

Külgazdaság 2006/1

Brief Summary of the Articles

All-round inquiry about reforming the general government, especially the large distributive systems - Part I.

What are the main causes and limits, which contributed to the lack of the necessary reforms?
What is the proper ranking and timing of the reform steps related to the large distributive systems?
In the process of reforming the particular systems what are the key steps?
What are the risks of the introduction and the delay of the different reform steps and what are the related conflicts?

Reforms, disintegration and transformation in China
MÁRIA CSANÁDI

The paper deals with the issue how reforms nested in the context of the structure and dynamics of party-state power contribute to the self- consumption of the Chinese arty-state system. The author concludes that China may be able to avoid system collapse accompanied by macroeconomic crisis similar to her East European and Soviet counterparts. However, she cannot escape the disintegration of the party as an institutional power structure neither the waning of the system. This latter however may occur gradually, with the spreading of partial disintegrations, and with the capacity to compensate tensions that emerged within the system through the dynamic growth of the economic field outside the party-state network. Due to this capacity, the disintegration will not occur suddenly.

Market services and economic development
ANDREA SZALAVETZ

This paper analyzes the role market services play in economic development and calls for the necessity of elaborating a services-based development strategy. It reviews the arguments why this sector can be qualified as an emerging one. The paper provides statistical data to prove the sector's increasing capital-intensity. It analyzes the sector's contribution to productivity growth as well as its role in the national innovation performance. The main message of the paper is that as opposed to other emerging industries, market services and in particular knowledge-intensive business services not only enhance the inequality of economic development, but they are at the same time also capable to diminish the dualistic character of the economy. The paper provides input-output calculations to support this claim.

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