Hungary, in terms of all political parties had been firmly committed to the integration of Euro-Atlantic Organizations. Hungary’s social expenditures are expressed in millions of Forint (HUF). During the 19th century, the monetary policy of Hungary includes the active exchange rate management based on a currency peg within a narrow band. Its goal was to appreciate the forint in helping combat domestic inflation. The policy of this was imposed to prove that being too costly or expensive can declined the competitiveness of Hungarian exports and sluggish growth. But the policy was failed to provide a nominal exchange rate anchor to lessen inflationary expectations. The government’s budget deficit remained high and the fact that the foreign debt was increasing that put Hungary at risk of insolvency. Vaknin, S. (2002).Analysis: Hungary’s ever closer union. United Press International, 34 (1), 12-15
The trade policy of Hungary was deteriorating because of growing budget deficits and a higher level of foreign debt. The solution would be financing this deficit in order to expand the monetary unit and have a high interest rate so that the commercial banks would find the government securities more attractive. There are two conflicting priorities of the government: first, the control of the inflation and the improvement of international competitiveness, resulting to speculations against forint, which sabotaged the credibility of exchange rate. Hungary, with its long experience of market-oriented reforms, a strong case of any form of active industrial policy should be developed. It indicates the identifying and finding the specific failures which cannot be assumed to be self-correcting and in the absence of intervention would result in serious resource misallocation within the industry. Industrial policy will be strongly oriented towards preparing Hungary for an EU membership. It encourages a higher level of foreign investment, to ease the debt constraint and to improve the export capacity and competitiveness. Its policy objectives should focus in managing the immediate crisis and eliminating the weak points in the industrial structure. It also supports the creation of market-oriented microeconomic environment not just macroeconomic. It also gives incentives to innovations and the formulation of government programs and seminars of technology development, modernization of the infrastructures and the development of basic market services like marketing and finance. It has also three classifications according to Torok, they are transitional, strategic and regulatory. Hare, P.G. (1994). Industrial Policy In Eastern Europe: the case of Hungary. Atlantic Economic Journal, 23(3), 23-26.
Transitional, is the key tool in privatization, an emphasis in finding new owners capable of providing improved management, additional investment resources and new technology. Strategic, referred to investment incentives, incentives to entrepreneurs, technology policy, export incentives, protection of the domestic market and produces employment policy, regional and the development of infrastructures. Regulatory, are relevant in maintaining or promoting the normal functioning of the market such as competition policy. There are cultural variable that may affect operations and profitability is always referring to historical injustices in advancing the rights of the Hungarian minorities. The Hungarian government must make a clear distinction between the citizens of Hungary and ethnic Hungarians in the neighboring state. They should support cultural autonomy and general governmental decentralization over territorial-based ethnic autonomy. Kardos, G. (1995). The culture of conflict: Hungary’s role in resolving ethnic disputes. World Policy Journal, 25 (3), 45-48.
On the other hand, Slovakia, although has prospered on the growing years that leads to ex-communist nations in the economic growth race, its international image as a nation is less than inspiring and encouraging because of always postponing the privatization efforts. Politically speaking, the republic of Slovakia has gained a bad international image because of the actions of the prime minister and his coalition partners. Prime Minister Vladimir Meciar, unfortunately didn’t believe in the effectiveness of privatization efforts. This country was regarded as the smaller, the weaker and poorer part of the Czechoslovak federation. It inherited the severe economic problems. It had been also the recipient of substantial provision of help, aid and support from the federal budget. The chances of switching Slovak exports to western market were not also considered and regarded. However, the Slovak crown has recently started to be strong and its government’s bonds had been attracting buyers. The so-called convergence game is an asset with types they are: the shares, the government debts, the currency and the property. It implies that it should increase the value of an asset as the country moves into a European Union towards the membership of a unified currency. However, there are opportunistic investors that buy bonds for the good of himself who makes the local interest of the EU fall averagely. Jones, C. (1996). An image problem: Slovakia’s economic policy. The Banker, 22 (1), 27-30.
I recommend that Hungary should be the one to have the Greenfield production facility because of its economic growth that can easily catch-up and can easily cope up. Hungary, though experiencing a hard times in monetary policy convergence issues, still they are open for changing and correcting the things that need to be changed and corrected. It has an open economy which constitutes the trade. Hungary is deserving to have the facility because it is becoming an important components in manufacturing and assembly zone for richer countries. Its financial system is already advanced and sophisticated and the interest trends are on a downward trend. Thus, it makes the Hungary worthy in accepting the facility. The rationale of the Greenfield production facility by the steering committee to be given to Hungary is very important because it gives more opportunities to the people living in. It increases the production output and the fact that a certain country is under the European Union is already a big incentive.
Credit:ivythesis.typepad.com
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