DURING THE LAST TWO DECADES
4. Summary and conclusions
In the 1990s the positive professional image about foreign ownership in the Hungarian food industry has become a controversial issue. In the Hungarian economic policy of the 1990s the reduction of the trade balance defi cit was implemented through privatization sales and green-fi eld investments. It is clear, however, that foreign investors expected balanced and predictable markets. Since the markets were not balanced in Hungary, the country and the food industry sector lost the ability to attract capital and some of the existing investors have left the country, which further reduced the number of the food industry companies.
While the importance of food industry is declining in Hungary, its strategic role is vital. It should be noted that the role of the food processing industry in the national economy is more than just its share in the national GDP. The sector has a signifi cant, even a strategic role in ensuring food safety, and this sector provides continuous market for agricultural raw material producers. In 2014,
András Schlett – Judit Beke: Foreign Direct Investment (FDI)… 153
the Hungarian government declared the food processing sector a strategic sector and as such it became a priority area and gets special attention at the Ministry of Rural Development. The ministry has drawn up a strategy underpinning the development of the food industry, and in the design of the 2014-2020 EU co-funded programs a signifi cant amount of attention is paid to the food industry.
The strategic goal is to restore its competitiveness therefore, a priority is given to the promotion of stable funding opportunities, the increase of the effi ciency of enterprises by encouraging innovation, the increase of the share of well-trained employees, the strengthening of the food chain’s market position and the promotion of a supportive business environment.
Agricultural production is mostly competitive, whereas food processing and retailing take advantages of the economies of scale, therefore in the food chain, the producers and the consumers have the weakest bargaining position and are most vulnerable since they do not have advance information and are not fl exible. Retailers and food processors on the other hand have advance information, are often large, and fl exible so that supply can match consumer needs quickly. In Western Europe, most agricultural cooperatives are specialised and can improve the effi ciency which is benefi cial for each member of the cooperative. The cooperatives can provide a countervailing power to counteract monopolistic competitors, which can increase competition. Producers (farmers) gain big benefi ts from agricultural cooperatives as cooperatives can address the problems of small farm ineffi ciencies and have stronger bargaining power. In the agricultural market an effi cient marketing system is vital – the competitiveness of cooperatives is ensured not only by the rate of sales of the products but by the effi ciency of the institutions and loans facilities as well [LENTNER (2014)].
Market regulation or intervention distorts the markets and can decrease the effi ciency of resource allocation signifi cantly, whereas the positive impacts of the regulations are not always readily quantifi able. The activity of large-scale retail chains must be regulated because their activity raises welfare, social and regional development issues. However, caution is needed since intervention raises concerns about the market impacts of regulation and about private property rights. Therefore, the establishment of self-regulatory bodies, working on a voluntary basis is essential.
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