There has been an increase in outward foreign direct investment (FDI) and in the number
of locally-owned or controlled multinationals in the Czech Republic and Hungary. However,
data problems hinder to determine accurately the underlying trends and the main factors
behind the changes. Data on outward FDI contain investment realised by all locally
operational firms, regardless of their ownership. We rely on newly available balance
of payments manual 6 (BPM) data and on company case studies. We show that outward
investment by Czech firms must be much higher than what balance of payments data show.
Hungary's case is the opposite. The leading Czech and Hungarian foreign investor firms
can be categorised as “virtual indirect” foreign investors: they are in majority foreign
ownership, but under domestic control. The reason for this special type of firms dominating
in outward foreign direct investments can be found in the privatisation technique
applied in these countries during the transition process.
