ABSTRACT
The first eight years of transformation in Hungary offer perhaps the fullest picture of foreign capital’s Janus-faced nature. Rather by default than by any grand design, Hungary has opened up its economy more extensively than any other country in the region. As a result, the country has managed to secure an impressive amount of funds, particularly direct investments. International capital flows may take many forms including bank loans, equity investments into existing companies, and green field investments. Money is fungible, and one form of funding can easily be transformed into another, thus rendering the distinction of various kinds of moneys a relative, if not a futile matter. However, from the viewpoint of transition countries direct investment stands out as perhaps the most welcome form of capital inflow. Strong capital inflows into manufacturing, infrastructure and banking should be reflected in increased international competitiveness and productivity.
