The Effects on Hungary as a New Member Nation in t Essay Example For Students

The Effects on Hungary as a New Member Nation in t Essay he European UnionThe Effects on Hungary as a New Member Nation in the European UnionTeam 5Paul DavisGulizar HalisKristin HanlonAlyson HellerOverview/History of Hungary and the European UnionThe nation of Hungary is a country that has come a long way in a short period of time. In the years since the fall of communism in 1989 in this country, Hungary has managed to establish an extremely prosperous economy and population. Because of this, Hungary has developed into one of Eastern Europes most attractive business environments. The level of political, structural and economic stability it has achieved demonstrates the success of its transition into a modern market economy. This stability has allowed for Hungary to become a member of numerous international organizations, such as the OECD, NATO, and most recently the European Union in May 2004. Hungarys membership in the EU, although short so far, has brought about many changes in the nation, both positive and negative. The nation has alway s served as a crossroads that connects Eastern Europe to Western Europe, and this coupled with EU membership will only allow Hungarys economy to grow more. The Eastern European nation of Hungary has a population of a little more than 10.2 million people with about 2.5 million, or 25% of the countrys population, living in and around the capital city of Budapest. Hungarys populace is made up of mostly Hungarians with ethnic minorities of Romanians, Germans, Serbs, and Slovaks. The nation is mostly Catholic with minority religions of Calvinism, Lutheran, and other religions. The life expectancy for the total population is 72.25 years and the literacy rate is very high, with 99.5% of the total population able to read and write, which demonstrates the exceptional educational system in this country. The nation has well-established transportation, communication, banking, insurance, accounting, and legal systems. All of this allows for a prosperous nation. For centuries Hungary had been part of the Holy Roman Empire under the rule of the Hapsburg monarchy. This was until the monarchy was overthrown during WWI and Hungary became a democratic republic; however political and social unrest continued for many years, with the government returning to a monarchy at the end of WWI. The nation also lost two-thirds of its territory as part of the unfair peace settlements following this war. This coupled with economic distress provided incentive for resurgent Hungarian nationalism. After World War II, Hungary became a republic once again and held democratic elections after which a coalition government was formed. However, the Hungarian Communist Party, supported by the Soviet army, did not accept the results and overthrew the lawful government and assumed power. Communist policies were implemented in the nation, including the collectivization of agriculture, forced development of heavy industry, and rigid central planning, all of which ruined the economy within a few years. Hungary also joined the USSR and other Eastern European Communist countries in forming the Warsaw Pact. In 1956, a revolt broke out against the communist government. This was at first successful, but then the Soviet army put down the rebellion and did so for any other revolts that followed in the years to come. As inflation grew, as the standard of living became lower, and as the economic condition of the country worsened, strong opposition to the government began to grow. Slowly over the years, the government began to ease their strict policies and allowed the economy to partly operate according to free market forces. In the summer of 1989, negotiations took place between the representatives of the government and the parties of the opposition concerning the creation of the political and legal conditions for peaceful transition and the creation of the democratic rule of law with a multiparty system. The government began to ease restrictions on emigration, revised the constitution to provide for a democratic multiparty system, and changed the countrys name to the Republic of Hungary. In 1990, free elections were held, the first in 45 years, completing the establishment of parliamentary democracy in Hungary. The new National Assemblies and the coalition governments formed after the elections committed themselves to the establishment and stabilization of the political, economic and legal foundations of the systemic change. The occurrences in Hungary helpe d to bring about the demise of communist rule in several other countries in Eastern and Central Europe as well. After non-Communists came to power, the country accelerated the pace of free-market reforms. The government was successful in attracting foreign investment, and by 1993 Hungary accounted for more than half of all foreign direct investment in Eastern Europe. Since 1989, the private sector has grown from approximately 20% to over 80% of the GDP, and nearly 2,000 state-owned companies were privatized. One of the main attractions of Hungary is that is has a developed western-style business infrastructure available at one of the lowest costs in Central and Eastern Europe. Most of the businesses in Hungary are headquarter in and around the capital city of Budapest. The main industries of the Hungarian are in industrial production of high-tech products such as computers, telecommunication equipment, and electronic consumer goods like televisions. Another important industry in Hun gary is the automotive industry with motor vehicle manufacturing and automotive parts manufacturing. These industries account for over half of Hungarys industrial output. In the early 1990s as Hungarys economy began to grow, the nation wanted to join the European Union. An application for membership was submitted in 1994 and they were finally made a full member in May 2004. For Hungary to become a member, they had to meet many conditions set forth in the Copenhagen Criteria; these included economic, political, and infrastructure conditions. For the first condition, Hungary had to demonstrate, stability of institutions guaranteeing democracy, the rule of law, human rights and respect and protection of minorities. Hungary had met this condition by having free and fair democratic elections, a constitution that guarantees freedom of expression and civil rights. The nation also had anti-discrimination laws that meet international standards as well as a well-developed framework protecting the interests of minorities and promoting their cultural. The second condition Hungary had to meet was demonstrating the, existence of a functioning market economy with the capacity to cope with competitive pressure and market forces within the EU. This was achieved through price and trade liberalization, an enforceable legal system with property rights for individuals, an economic policy that has enhanced the performance of the market economy, and a well-developed financial sector with the absence of any significant barriers to entry and exit. These have all improved the efficiency of the economy. Hungary also has a highly skilled and educated labor force. Funds from the EU were used for new infrastructure projects like improving airports, roads, and rails, all of which greatly helped the nation. The final criteria Hungary had to meet were to demonstrate the ability to take on obligations of membership including adherence to the aims of political, economic and monetary union. To m eet this, Hungary made advancements in a number of areas, like social policy, justice and home affairs, telecommunications, culture, the energy market, environmental laws, consumer and health protection, and with the budget and financing issues, all to meet the requirements. Hungary has achieved all of the EU requirements and was thus finally made a full member in 2004. Since joining, Hungary has had many positive experiences. The nation has enjoyed increased stability, growth, and welfare. Security has been increased because they now can rely on other EU nations for support and protection. New markets are now open for Hungarian goods and new opportunities for the inflow of foreign capital from member states have occurred as well. Because of the new markets, exports and imports are the highest they have ever been. Hungary has access to different development funds of the EU since they are new to the union and are also not a terribly wealthy nation compared to other European countries. Finally, Hungarian citizens can enjoy easier, visa-free travel between member nations because of open borders. All of these and other positive benefits of joining the EU will help Hungary to continue to prosper in the years to come. Even though there are many positive aspects of joining the EU, Hungary has also experienced some negative effects. Within the EU, citizens are allowed to live in one nation and to work freely in other EU nations. Some of the nations that have been in the EU longer are not allowing Hungarian citizens to work in their nations yet because they are afraid Hungarian laborers will work for cheaper wages and take away many jobs from their citizens. This is expected to change in the next few years, but for now this discrimination is taking away possible jobs from Hungarians. Another negative factor is the rise in illegal immigrants entering Hungary. Citizens of poorer and less prosperous nations surrounding Hungary are seeking refuge in Hungary to escape conditions in their nation. One of the requirements of joining the EU was to provide refuge to these people, but there are an enormous number of people attempting this, causing a huge problem for Hungary. In addition to this, even though Hun garys economy is growing and prospering, they still have high inflation and, because of this, they cannot yet join the European Monetary Union (EMU) and adopt the euro. Originally, they were aiming to join the EMU in 2008, but this date had to be pushed back to 2010 because of their monetary problems. Finally, some Hungarians feel as if they are losing their national identity. The purpose of the EU is to achieve a more unified Europe with similar policies in every nation. Because of this assimilation, nations are becoming more and more alike in Europe. Even though this is occurring, each nation can still maintain their own national identity and unique culture. Industry Analysis: TelecommunicationsThe telecommunications industry is perhaps the fastest growing industry in Hungary today. The term telecommunications refers to any company that provides voice, data, and video communications services. Within this industry in Hungary lie three major sub-sectors. First, there is the fixed-li ne voice services providers, which, as the name suggests, provides voice communications services along fixed-line networks. Next, there is the data services, which provide, operate, manage, and maintain data networks and provide data transmission and related services. Finally, there is the wireless communications services, which provide wireless voice telecommunications services including, cellular, mobile, paging, and unified messaging. Among the top telecommunication companies in Hungary, and perhaps the most successful currently, is Matv. This particular company is maximizing Hungarys potential as the telecommunications revolution takes hold in Eastern Europe. Matv is marking its territory as the primary provider of fixed-line services with 2.8 million lines in service. The carrier also has rivals in Internet, data transport, and mobile phone markets. Matv is the leading wireless telecom carrier in Hungary with 3.8 million subscribers through its Westel unit, an extension of the company. Axelero Internet, another extension of Matv, connects 210,000 users to the Internet. In order to fully understand the grasp that Matv has on the Hungarian telecommunications industry, it is important to first understand the history of this industry. In 1989, the Iron Curtain fell ending the communist rule that the Soviet Union had over Hungary. This action allowed the Hungarian government to modernize its economy, including the telecom sector, which had been plagued by drastically slow growth in light of the Soviet Unions rule. The opening of this sector led to the joining of two powerful forces in telecommunications: Matv and Deutsche Telekom in 1990. The following year, the government of Hungary began to privatize the sector by setting up the shareholding company of Matv Hungarian Telecommunications to take over the state entity. This would have permitted Matv to have unopposed rule over the telecommunications market in Hungary. However, in 1992, the Hungarian government passed the Telecom Act that stated that monopoly status of Matv would end by 2002. Still, the company had ten years of absolute control of the market in its future. Cancer Essay IntroductionThe Convergence Program of Hungary-2004 indicates that, in 2001-2002, the Hungarian economy diverted from the investment and export driven growth path. Consumption growth over that of GDP, and real wage growth exceeding that of productivity created a situation, which definitely called for a change in economic policy. From 2003, the focus has been shifted from the stimulation of domestic demand to the improvement of competitiveness, and to the reduction of the increased budget deficit. In the 2003 budget, the government set up the conditions for a stricter fiscal policy than before, which, beside the improvement of the internal balance, aimed to promote a more favourable environment for enterprises. According to the web site of the Ministry of Finance of Hungary, the export volume has strongly increased since last July, due to external conditions turning more favourable and improved competitiveness. Import growth was primarily related to the import of consumer goods (cars and pharmaceutical products) and increasing imports of machinery for investment and production purposes. Comparing to previous years, during the first quarter of 2004, the countrys GDP increased by 4.2% and then decreased to 4% during the second quarter of this year. The deficit of the trade balance amounted to EUR 4.3 billion. Nevertheless, the gap between the growth of exports and that of imports has begun to narrow since July 2003. The dynamic growth of exports was maintained in the first quarter of 2004, too, while imports increased slower than exports, primarily due to the lower growth of household consumption. . The investments of the national economy are projected to grow by 6C8% in 2004, which will also be accompanied by further improvement of the investment structure. The increase will primarily be related to the investments of the corporate sector- in line with an improvement of exports outlook and increasing capacity utilisation C and to those in housing and motorway construction, which began last year and will accelerate this year. For 2004, it is expected a much lower growth in the household consumption than that of last year, which is also in line with the economic policy objectives related to the return to a more balanced growth path. As of October 3, 2004, the exchange rates are as follows: 245.71 Hungary Forint per Euro, and 0.0040 Euro per Hungary Forint. As of September 24 of 2004, the interest rate differential between HUF (Hungarian Forint) and EUR further declined in the three-month segment due to the Hungarian yields lowered to break through this time even the limit of 900 basis points. The premium of HUF securities denominated in EUR remained stable. The Hungarian currency continued its appreciating trend to be strengthened at record height of 16 months by overcoming the various levels of resistance. The exchange rate of 245.7 HUF/EUR as Sunday, October 3rd. closing price was corresponding to 12.98 per cent in the strong end of the band. The strengthening of the Forint was all the more remarkable in the light of the fact that meanwhile the regions currencies weakened. In August of 2004 the price level of industrial production compared to July was a little bit higher, by 0.2%. The monthly rate of growth in case of domestic sales amounted only the half of July (0.4%). In 2004 due to tax changes related to EU harmonisation, increase in preferential VAT rates and energy prices, the disinflation of the last few years will temporarily come to a halt, but in the second half of the year, the government expect a marked decline in inflation. On a medium term, inflation will start to gradually decelerate again. The key settings of Convergence Program in clude simultaneous increase of employment and productivity, which continuously require improvement in competitiveness. The Government intends to improve competitiveness with the use of numerous economic policy instruments. Of these, modification of the proportions of income redistribution in favour of the entrepreneurs, easing of the tax burden, and reduction of the financing needs of the public sector are of fundamental importance. The program also states that increased efficiency and productivity is one of the main sources of competitiveness, requiring continuous innovation, development and investments from the corporate sector. In order to promote this, the Government provides support to R D activities, and, in the framework of SMART Hungary and Economic Competitiveness Operational Programme, which provides access to financial sources from the EU; it allocates funds for various development and capital investment projects. The reduction of the deficit and the scope of the general government are expected to encourage investments by the private sector, and promote more effective capital allocation. A lower tax burden (primarily in relation to labour) contributes to an increase of competitiveness through cost reduction and release of additional resources. On the other hand increasing competition arising from the accession to the European Union will probably force enterprises to increase wages only in accordance with productivity growth. According to the article on website of Inter fax Europe dated on June 30th 2004; Hungarys unemployment rate was 5.8% in March-May 2004, according to figures released by the Central Statistical Office and among the population aged 15-64 (the cohort used in international comparisons); labor force participation was 60.3% in the first quarter of 2004. ConclusionAs Hungary enters the European Union, it should see much economic success. The country as a whole has been growing greatly over the past years, and its admission to the EU should perpetuate this growth. Out of the new ten nations added to the European Union, Hungary ranked highly in terms of the criteria required for admission. The nations admittance into the EU will bring with it many victories. Innovation will grow due to an increase in market accessibility. Also, with so much inward foreign direct investment pouring into the country, Hungary will soon be able to participate in a great amount of outward foreign direct investment. The highly developed nations of the European Union will serve as role models for strategy and success, and perhaps, in the future, Hungary will become a role model itself. Bibliography2002 Regular Report on Hungarys Progress Towards Ascension. http://www.fifoost.org/ungarn/EU_Hungary_2002/index.php Center for International Private Enterprise. 2004. www.cipe.orgCountry Commerical Guide. 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