In 2012, Hungary introduced its Eastern Opening policy, signaling a significant shift in its economic strategy. Building upon this initiative, in 2015, the government expanded its focus by unveiling the Southern Opening policy, with a primary emphasis on fostering economic relations with two key emerging regions: Latin America and the Caribbean, as well as Africa. Notably, Africa's role in this policy framework is emphasized due to Hungary's geographical proximity and the growing interest in economic cooperation with African nations.
From the standpoint of foreign trade and diplomacy, the formulation of individual strategies and long-term plans assumes critical importance in shaping a nation's economic agenda. Integrating the Southern Opening into the government's strategic framework was deemed essential due to Hungary's historical reliance on European markets. Diversifying the domestic economy by engaging with new market players was thus deemed imperative to mitigate risks associated with overreliance on a single market.
As part of the strategy, the Ministry of Foreign Affairs and Trade has been assigned the responsibility of exploring new markets and facilitating opportunities for Hungarian companies while providing diplomatic support. Key focus areas include infrastructure development, agro-industrial expansion, and the implementation of modern water management technologies. Additionally, the strategy emphasizes promoting the country and strengthening relations with the Hungarian diaspora, alongside economic objectives.
The government opened the trading houses first in the economic expansion, which were closed in 2017 due to operational inefficiencies. The non-profit organization HEPA (Hungarian Export Promoation Agency) partially assumed the role of the trading houses. The organization aims to accelerate export activities, improve trade relations, venture into new markets, and facilitate information exchange for Hungarian companies, aligning its operational strategy with the concept of the former trading houses.
Additionally, the establishment of the Hungarian Investment Promotion Agency (HIPA) in 2014 underscores Hungary's commitment to attracting foreign investment. HIPA focuses on identifying ideal investment locations, gathering labor and taxation data, and fostering communication between businesses and the government.
To ensure adequate financial support for both the Eastern and Southern openings, EXIM Hungary serves as the official export credit agency. It supports Hungarian companies seeking to engage in export activities. EXIM Hungary is dedicated to international trade, investment, exploring foreign markets, and facilitating expansion. The bank offers a robust financial foundation through a range of credit services and risk insurance products tailored to foreign trade. Additionally, EXIM Hungary collaborates with the European Investment Bank on various initiatives such as refinancing agreements and sustainable development goals.
It is important to highlight that EXIM Hungary has entered into a reinsurance framework agreement with the Turkish Eximbank. This strategic collaboration aims to strengthen the external performance of their exports and foster enhanced trade relations with third-party countries. Through this partnership, both institutions can provide coordinated financial assistance to Hungarian and Turkish companies, thus streamlining export transactions in those third-party countries.
Some data are worth including in this short analysis. According to the Statistical Office of Hungary, Hungarian exports are currently concentrated approximately 80% within the EU, while imports comprise 70%. Thus, implementing the Southern Opening policy could contribute to the economic diversification of Hungarian trade both in terms of exports and imports. Diversifying trade partners and markets can help reduce susceptibility to external economic shocks and pave the way for sustained long-term growth. However, it is notable as well that according to data from Trading Economics from 2022, the region targeted by the Southern Opening policy, encompassing Latin America, Africa, and Oceania, represents only about 5% of Hungary's total exports, despite the fact that the "America" category includes North American countries, which may actually yield a lower real value.
In conclusion, Hungary's Southern Opening policy serves as a multifaceted approach to address various economic challenges and opportunities. Although the targeted regions currently contribute relatively little to Hungary's exports, this policy could represent a significant step towards future economic development.
Primarily, it aims to broaden Hungary's trade partnerships beyond its conventional focus on Europe by strengthening economic ties with regions such as Latin America, the Caribbean, and Africa. This expansion offers Hungarian businesses fresh opportunities to penetrate rapidly evolving markets and diversify their revenue streams. Moreover, the policy endeavors to attract foreign investment from these regions, thereby stimulating economic growth and fostering new business prospects domestically.
By leveraging the potential of emerging markets in Latin America, the Caribbean, and Africa, Hungary aspires to fuel its own economic growth and prosperity. Additionally, the Southern Opening policy contributes to diplomatic endeavors by fostering stronger relations with countries in these regions, promoting collaboration across various economic, political, and cultural domains.
