The foreign capital inflow to Central Eastern Europe has accelerated, particularly in the past three years. Hungary has kept pace with the moves since 1990, during which time it has remained an attraction centre of the region to the foreign working capital. The political and economic stability of Hungary, together with the institutional and ruling system, are gradually resembling that of Western Europe. Meanwhile, legal harmonisation and Hungary joining international organisations all play a great role in this process.

Nevertheless, privatisation proved to be the principal attraction for the capital. In the last seven years the country attracted working capital to the amount of nearly US$16 billion, of which an amount of $8 billion was collected directly from the privatisation of domestic companies.

Foreign capital inflow in the region was the largest in the top year of privatisation, ie, in 1995. In Central Eastern Europe, APV Rt. (Hungarian Privatisation and State Holding Company) was the first to privatise strategic companies, companies of public service belonging to the large supply systems of the national economy. Foreign investors acquired business shares in power stations, in the Hungarian Oil and Gas Company (MOL Rt.), the Hungarian Telecommunication Company (MAT¡V Rt.), in addition to the gas and electricity supply companies. The latter company in the listing, (MAT¡V Rt.), was the first company in Central Eastern Europe, the shares of which were admitted to listing on the Stock Exchange in New York. We may not fully renounce our ownership in these companies, particularly important for the purpose of the operation of the country. The amendment to the act, accepted in July of this year, determined the proportion of permanent state ownership in 116 companies. The extent of this ranges from the share providing one vote preference, up to 100 per cent state ownership. As a consequence, once privatisation is complete, the importance of asset management activity will naturally increase. This makes it necessary to extend the sources and means of asset management activity, and to renew the applied methods.

An act will, of course, provide the specific legal and organisational solution of how to manage state owned assets. To this we should search for and develop an appropriate form, adjusted to our features. Research institutions and scientific workshops of good reputation help the decision makers through preparation of a survey, evaluating international practice.

Great interest was also shown in our banks. This was so intensive that the privatisation of the Hungarian financial institutions was closed this year. We managed to achieve the highest rate in case of privatisation of Kereskedelmi és Hitelbank (Commercial and Credit Bank, 567 per cent), but nearly all the financial institutions were sold at a rate considerably higher than the per value. In most cases the investors brought their money with the unhidden intention that starting from here and utilising the favourable geographical features of the country, they could also get a footing within the other countries of Eastern Europe. These conceptions also coincide with those of the Hungarian Government, since their principal purpose is that Budapest becomes the commercial and financial centre of not only Hungary, but the whole region of Central Eastern Europe.

The particularly high value of foreign capital per capita is worthy of attention in our country. According to the data of 1995, in this respect we are twice as good as the other 'star country' of the region, the Czech Republic. This data provides a good basis for our hopes, according to which the trust and interest of the investors remain on a long-term basis, even if those with the intention to invest no longer receive 'ready' factories, banks, or large plants. As we slowly reach the end of privatisation, the privatisation of some particularly important companies like MAHART (Hungarian Shipping Agency) or MVM (Hungarian Electric Works) is still before us.

Naturally we do not wish to close the gates on foreign capital, even in the future when we have no more assets to sell. The Government, in agreement with all political powers, is working to create such conditions, which continue to make our country attractive to foreign investors.

The Hungarian Government clearly knows that the stabilisation, development and improvement of the Hungarian economy mainly depends on performance of foreign trade and the flexibility of the economy on foreign markets. Consequently, putting the economy ahead of permanent and balanced growth is only feasible on the basis of an export oriented economic policy and practice, adjusted to the international environment.

Therefore Hungary has the fundamental interest to obtain a modernisation capital injection, improve the capital insufficiency, and start the structural changes which allow for the creation of funds of competitive export goods.

The fundamental purpose of our strategy in foreign trade is to develop a more efficient cooperation with the foreign working capital, and to assist the already domiciled multinational companies develop the basis of their subsuppliers in Hungary.

Thanks to its geographical situation, Hungary is attractive and continues to remain attractive in order to gain foreign capital in the future. The Government recognises this situation and would like to use it to the benefit of both the country and foreign investors. In the eastern gate of Hungary a great number of incentives are offered to those intending to invest, namely those companies which are interested in involving themselves in Eastern Europe. We would like, and make all effort to place our country at the heart of Europe, not only in geographical terms but also in an economic respect. Such a hart provides the economic circulation between East and West.

The transformation of the ownership structure has made significant headway in the past five years or more. The decisive portion of the Gross National Product is produced by the private sector. In 1996 the majority of formerly privatised companies closed a successful year. The telecommunications industry, certain companies within the chemicals industry and some other areas showed exceptionally good results. In production, the dominance of private ownership made irreversible the results achieved to date in the economic and social transformation.

The profitability of privatisation is also well-reflected in the expected results of 1997, as the last large privatisation year. The figures are self-explanatory. According to the preliminary plans, APV Rt. should have earned a revenue of HUF 189.7 billion by the end of 1997. Contrary to this, the expected performance will reach HUF 334 or 354 billion.

Mass privatisation will be terminated by 1998, and by this we achieve the end of a very important and difficult period of our economic history. Hungary will once again become a market economy, and this is an indispensable and important condition of our joining the European Union. APV Rt. makes all efforts to ensure that this is feasible, with as much success and as little shock as possible.