Page 56 - BNE_magazine_11_2019

56 Opinion
bne November 2019
A delicate balancing act
Hungary and Poland are unique case studies in that their respective political economies cannot be placed in the same category as the usual suspects of the “new authoritarian” world. Institutional decline has occurred, but it has been creeping, mostly remaining just within permissible limits. Risks remain low compared to the 1990s, when the pillars of good governance and the market economy were very much works in progress. There is a far higher degree of institutional predictability for foreign investors in both countries than
in much of the rest of CESEE, including Romania, Bulgaria, Croatia, the Western Balkans, Ukraine and Turkey.
Hungary and Poland also demonstrate the importance of micro political risks in determining FDI patterns. Investors are not a passive, unified collective, but a disparate mass of proactive actors with varying interests; they can form strategies to mitigate risks and seize the opportunities that arise out of them. Risk is a rocky landscape to be navigated rather than a storm to be endured. Hungary and Poland continue to offer a wide range of instruments and benefits to this end.
TASHKENT BLOG:
Uzbekistan reforms are real, can they sustain them?
Eric Hontz of CIPE in Tashkent
Uzbekistan, a previously closed country of more than 30mn people, has been on the radar of frontier market investors since President Shavkat Mirziyoyev began
a large scale economic reform programme nearly three years ago. The changes in Tashkent are palpable.
There are no more questionable currency checks at the border, investment in real assets is increasing, and more investors are exploring the market. The government seems to have successfully completed some of the reforms that were low hanging fruit with wide buy-in from all sectors of the Uzbek community.
This “easy” reform period is now coming to an end. Now the real tests will begin. As one astute observer noted in a recent meeting in Tashkent: “[The government] want to change everything without changing anything.”
www.bne.eu
Foreign multinationals and state-favoured actors are thus able to coexist alongside each other, or even enter into mutually beneficial agreements – cynical though they may be. Institutional risks need not matter if a foreign investor sees an opportunity and has conducted the necessary hedging and adopted appropriate risk management strategies.
These considerations highlight how many factors would need to combine to create the kind of perfect storm capable of prompting mass disinvestment from Hungary and Poland, such as that experienced by Turkey. More likely, given the uncertain direction of the EU – what will it look like in 10 years? The question for both countries will be a long-term one and one that does not just involve a calculation at the single country level.
Marcus How is the Head of Research & Analysis at ViennEast Consulting GmbH
To my surprise, during this early reform period, a number of business associations have appeared and, more importantly, the government has turned to them for advice and input in the reform process. While the structure of the dialogue was often inadequate in terms of a review period and formality
to my standards, it was nonetheless present. The government was smart enough to know to engage independent representatives of the business community in the reform process, showing an aptitude that I only wish was shared
by other states in the region.
However, there are indications that the government might want to control this dialogue more directly through the creation of
a state chamber of commerce, along the lines of Atameken in Kazakhstan. The creation of such an entity would undermine the fledgling roots of a real and robust dialogue with the