Over the past thirty years, Hungary’s foreign economic relations have changed significantly. As a result of globalization, many non-European countries play a significant role in the economic performance of Hungary. South Korea, one of the largest economies in the world, stands out among those.
It surprised many when the Hungarian minister of foreign affairs and trade revealed that in 2019 about 409 billion HUF worth of development was linked to South Korean working capital, meaning Hungary received the most investment in the first half of 2019 from South Korea. This is rather extraordinary, as Germany, most notably German car manufacturers, are usually the ones pouring the most foreign money into the Hungarian economy. However, looking at the bilateral economic relations and the global economic trends, it is not as surprising as it first seems.
The 30th anniversary
The revival of the economic relations between Hungary and South Korea started 30 years ago in 1989. Hungary was the first country from the former Communist bloc to establish diplomatic relations with the Asian country.
According to information from the Hungarian Embassy in Korea, although the annual trade turnover in the ’80s did not reach the volume of 5 million USD, it almost reached 2 billion USD in 2014. Korean export activities have also enriched the Hungarian economy – the balance of trading activities shows a significant Korean surplus.
The signing of the EU-Korea Free Trade Agreement (FTA), which entered into force in 2011, gave a new perspective to the development of multilateral trade relations, knocking down 99% of EU tariffs and 96% of Korean customs.
Today, the number of Korean companies settled in Hungary is close to 50 and the volume of foreign direct investment from Korea exceeds USD 2 billion.
The most prominent South Korean investors include giants such as Samsung Electronics, Samsung SDI, Hankook Tire, SK Innovation, Hanon Systems, KDB Bank. So far, the Hungarian government has already entered into strategic cooperation agreements with 2 of them: Samsung Electronics, and Hankook Tire.
Between 2014 and the first half of 2019, a total of 18 large-scale South Korean investments concluded or began in Hungary. Together, they represent more than $2.86 billion in investments and 4,780 new jobs for the Hungarian economy.
As an example of the significant economic relations, according to the Hungarian Foreign Ministry South Korea was the 22nd most important trading partner of Hungary in 2018. In addition, it ranks 3rd among Asian countries in exports and 2nd in imports.
The focus is on car batteries
The largest South Korean investors are backing battery manufacturing, as demand for electric cars has increased worldwide. European manufacturers do not have the necessary battery capacity, so new suppliers are emerging.
Lately, South Korean Inzi Controls announced plans to build a HUF 14.8 billion plant. SK Innovation also chose Hungary for battery manufacturing.
Also, the company recently announced that it would like to increase its manufacturing capacity tenfold by 2022 in order to make the most of the expected spread of electric cars.
Tourism: steady growth
Tourism between the two countries has also developed significantly. Over the past decade, South Korean tourism demand has grown dynamically for Hungary.
While only 50,000 South Korean tourists visited the country in 2012, the figure was 160,000 in 2017.
According to information from the Ministry of Foreign Affairs and Trade, this means that their number increased by 69% between 2016 and 2018.
Last year and in the first six months of this year, tourist traffic increased by 13-14%, bringing more than 170,000 Korean tourists to Hungary.
The increase in tourism between the two countries was not influenced by the 2019 tragic sinking of Hableány (Mermaid), where 33 South Korean passengers and two Hungarian crew members died.
Among non-European countries, the Republic of Korea represents the 3rd most important country in terms of the number of tourists and 4th in terms of consecutive night stays.
In addition, South Korean Asiana Airlines launched its first direct charter flight between the two countries in 2016 while Polish airline LOT launched its first direct flight to Seoul in 2019, operating on the Seoul-Budapest route three times a week. All this can be of great help to further strengthen tourist relations.
Featured photo via Pixabay/eoulinspired