Abstract

Communist Economies & Economic Transformation, Vol. 6, No. 3, 1994 341 The Pattern of Foreign Direct Investment and Joint Ventures in Hungary SARAH J. LANE Eastern Europe captured the headlines in 1989 and 1990 as countries there an- nounced intentions of extensively transforming their political and economic systems. The economic research on this transition has focused primarily on macroeconomic issues such as appropriate fiscal and monetary stabilisation policies, foreign debt renegotiation and currency liberalisation. While macroeconomic stability is a necess- ary precondition for successful restructuring, it is time to focus on the microeconom- ics of the infrastructure and institutions necessary to support the development of the private sector. There are various means of creating private firms and encouraging the growth of the private sector.1 Though most visible and frequently discussed, privatisation of large industrial enterprises has been slow and fraught with controversy.2 Frequent policy changes have been the response to unplanned outcomes, scandals and flagging investor interest.3 Fortunately, other transition mechanisms have been more success- ful at increasing the size of the private sector. Small-scale privatisation has been proceeding at a fast pace;4 there has been an enormous increase in business starts, and foreign involvement through foreign direct investment