Hungary clamps down on foreign investors, Poland to follow?

The Hungarian government has stipulated that foreign investors will need to apply for a special permit to acquire more than 10% of local companies deemed strategically important.

The degree was published on May 26, making use of emergency legislation which critics have described as ‘dictatorial.’

Hungary’s government stipulates that foreign investors undertaking deals worth more than €1 million in sectors like healthcare, energy, food production, waste management, construction, finance, shipping, defence and IT will need to submit documentation to the minister of innovation and technology, who then has a 45-day deadline to approve or deny the request.

These rules are set to stay for the remainder of 2020, with the government defining a ‘foreign investor’ as anyone from outside the EU, the European Economic Area (EEA) and Switzerland.

Tamás Schanda, a deputy minister at the Innovation and Technology Ministry, said: “This is not a question of economics but also of sovereignty. These new rules will protect Hungarian companies from foreigners who want to take advantage of the coronavirus crisis to gain market share.”

The parliament granted Prime Minister Viktor Orbán the right to rule by decree in March to help fight the Covid-19 outbreak. This move was widely criticised in part because it was open-ended, and also due to some of the legislation passed following the decree having little relevance to fighting the virus.

One such piece of legislation blocked the ability for opposition-led municipalities to take part in the decision-making process and allocating financial resources.

However, Hungary’s justice minister, Judit Varga, said earlier this week that they aim to lift these sanctions – and with it the prime minister’s ability to rule by degree – on June 20.

In a Facebook post, Varga described the international criticism of Hungary as ‘unfounded attacks,’ adding: “We expect our critics to apologise for waging a smear campaign instead of cooperating on defence against the coronavirus.”

Conversely, earlier this month, the NGO Freedom House’s latest Nations in Transit report claimed that Hungary was no longer a democracy, labelling it a “hybrid regime,” having lost its status as a “semi-consolidated democracy” due to Mr Orbán’s continued hammering of the country’s democratic institutions.

The NGO Freedom House’s various reports on Hungary also claim it has institutions that hamper the operations of opposition groups, journalists, universities, and nongovernmental organisations.

According to the same report, in 2019, many parliamentarians and journalists lost their ability to criticise and oppose the government, however a law granting politicians access to enter the offices of public buildings without permission was repealed.

The adoption of a Covid-19 emergency law that allows the government to rule by decree “has further exposed the undemocratic character of Orbán’s regime,” Freedom House claimed.

In the wake of Hungary tightening control over foreign investors, there have been concerns that Poland may also be considering a similar move.

The Polish government believes that with the market value of many Polish companies having been reduced by the impact of Covid-19, they need to be protected from foreign takeovers.

In a statement last week, Deputy Prime Minister and Minister of Development Jadwiga Emilewicz, said: “In a crisis, Poland is not for sale.

“We cannot allow companies that have been painstakingly building their brand for 20 to 30 years to become cheap booty today, especially for funds from outside the European Union.”

Back to Homepage

Back to Politics & Economics