UCL School of Slavonic and East European Studies, University College London, 7th Annual International Postgraduate Conference

The fall of the Berlin Wall in 1989 opened up the former communist countries in Central and Eastern Europe to the rapid onset of both processes of globalization and regionalization. Defining both phenomena in terms of diffusion and adaptation of networks, I will compare the two processes in two formerly communist countries – Bulgaria and Hungary. The comparison is appropriate since the two share enough similarities such as size and politico-economic structures before 1989, but also enough differences such as pace and degree of liberalization and geographical location. The goal is to trace the divergent paths towards globalization and regionalization in the two countries.

Globalization is defined as the inclusion of local firms into international networks of production, while regionalization is defined as the adaptation and embedding of such networks into local relations. A region, then, is the meeting ground of networks of local actors in both private and public sector. Network organizers will be key in aligning these networks and serving as brokers in negotiations (Radosevic, 2000).Reviewing the academic literature and government publications on foreign investments and on subcontracting relations, I hope to reveal important differences in the manner in which local firms in Bulgaria and Hungary are being included in such international production networks. Similarly, by reviewing the differences in terms of attracting such networks on the sub-national regional level in each country and the characteristics of political decentralization, I hope to trace the nascent development of local networks of relations among corporate, government and non-government agents.

If the governments in Hungary and Bulgaria are hoping to draw benefits from globalization, their goal is to "hold down the global" (Amin, 1998) and encourage regionalization. Their task differs from similar successful projects in Western Europe who had to globalize existing long-standing local products. In Eastern Europe regionalization starts with globalization and has the opposite goal – to restrain global production networks with local production and cooperation. Rather than creating "tradition via isolation" (Storper, 1997), Hungary and Bulgaria are challenged to create tradition via inclusion. Including local enterprises as an integral part of international production networks and turning them into learning and cooperating performers for the local economies are the two distinct parts of such a strategy. The comparison between Hungary and Bulgaria reveals that governments in the two countries have to follow different paths in the struggle to the same end. While Hungary has positioned itself as Europe’s low-cost base for multinational corporations (MNCs) in automobiles and electronics, Bulgaria’s foreign investors and partners tend to be small companies in the textiles and food industries. Furthermore, if the central government in Hungary is actively pursuing policies encouraging cooperation between the multinationals and local suppliers, in Bulgaria where such initiatives are found, they are coming from local authorities. In conclusion, in Hungary the MNCs have the potential to be the network organizers around which viable regions can form, while in Bulgaria municipalities are the candidate for this role.