Role of foreign capital in domestic agriculture

Antal, Katalin – Guba, Mária

According to KSH data the interest of foreign investors in Hungarian agriculture peaked in 2002 at a sum of 87.2 billion HUF. At HUF exchange rate the foreign portion of registered capital in Hungarian agriculture increased by 6.3 fold between 1993 and 2001 and at Euro exchange rate it rose by 2.6 fold. In case of farms practicing double bookkeeping, foreign capital rose from 7.3 billion HUF in 1993 to 31.5 billion HUF in 2000 and then it fell to 24.5 billion HUF by 2003. A decline of more than 20% in two years indicated a loss of foreign interest. The fall was greatest in cereals and in plants listed under miscellaneous branches. Two-thirds of foreign investors bought interest in plant cultivation and gardening sectors. Of the livestock foreign investment preferred primarily cattle.

In the past decade the machinery supply of domestically owned agricultural enterprises practicing double bookkeeping has little more than doubled, whereas that of enterprises involving foreign investors increased nearly by six fold. The net income from sales of enterprises owned entirely by foreigners increased 9.5 times more than that of domestically owned companies. For wholly domestic enterprises an increasingly smaller proportion of net income derived from so-called business activities. For enterprises involving foreign interest the proportion has increased somewhat but their pre-tax profit per own capital increased more than that of their domestically owned counterparts.

Primarily large farms attracted foreign capital. From the point of view of efficiency farms involving large capital and producing relatively higher sales income achieved higher profits in relation to both own capital and income.

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