“EU companies will face increasing pressure to monitor their suppliers”

– It has been a great honour for our Faculty to have you here as a visiting professor. How did you get in touch with the ELTE Faculty of Economics?

Actually, I got in touch with Professor Dombi as the head of the Department of Comparative Economics through Professor Tibor Mandják, who worked in France for a while at my institution. He was the one who introduced me to his university here, then together with Professor Dombi, we arranged this visit which took place in the frame of Erasmus+ Mobility Program. Of course, I knew a bit about ELTE because some students from my university come here every year to study, and some of my colleagues have already been guest lecturers at the Faculty of Economics. They told me about their positive experiences and the warm welcome they received, therefore I was excited to come.

Olivier Lamotte and Ákos Dombi

– That’s really nice to hear. Let's talk about the two presentations that you offered: one for the colleagues of the Faculty organized by the Department of Comparative Economics in the frame of the series „Research seminars in economic development and policy”, and one specifically dedicated to our students. What were the topics of these presentations, and what is your personal motivation in them?

In the presentation I gave to the scholars of the Faculty, I talked about the impact of sourcing from industries with a large informal economy on the internationalization performance of emerging market companies. The study I presented focuses on how these companies can gain a cost advantage in their export activities due to the large informal economy in their sourcing industries.

In the presentation I gave to the students, I talked about two of my recently published studies – co-authored with my colleagues – which focus on how companies behave in emerging markets, particularly in relation to their international activities. I used these studies to provide some explanations for why the EU has recently adopted the Directive on Corporate Sustainability Due Diligence (CS3D). That’s an interesting topic for me because France was the first country which adopted such a law seven years ago providing, thereby, a benchmark for many NGO's worldwide.

– What are the most important implications of this CS3D directive for EU companies?

EU large companies will face increasing pressure to monitor their suppliers and select those partners who respect human rights and the rights of workers. Although the law is not yet in force, it will likely exert more pressure on EU companies in the future (involving their operation outside of the EU as well). On the one hand, the Directive can strengthen their ability to respect human rights. On the other hand, it can increase the gap between EU and non-EU companies, because, for example China or India do not have such a law, which may imply a cost advantage for their companies. Furthermore, at the EU level, it's always complicated because some countries are not very enthusiastic about this law, depending on their position in the foreign markets.

– How do you see Hungary's position in terms of internationalization and attracting foreign directive investment (FDI) these days? 

Well, I don't know exactly the specific situation of Hungary now, but 20 years ago, when I was doing my PhD, I was working specifically on transition economies. At that time, as a gate to the EU market, Hungary attracted massive amount of FDI, also from non-EU countries. This was especially the case for the automotive industry but not exclusively; the electronics, pharmaceutical, and services sectors also received significant FDI. I don't have much information on the current situation, but I guess it's still a very attractive country because of strong institutions, highly skilled workers and its central location in Europe.

– What do you think about the increasing number of Chinese companies investing in Hungary and their endeavour for seeking, thereby, an entrance to the EU’s markets? Is Hungary benefiting from these investments? 

Well, the effects of FDI in a country are very heterogeneous depending on several factors. When a company invests in a country, it seeks access to markets and resources. For the host country, the effects of incoming FDI depend crucially on the underlying motivations of the investing company. According to the literature, FDI can have ambiguous effects on economic development in the long run. Nonetheless, in the short run, Chinese investments will positively affect growth and employment in Hungary.

– Last, but not least, your recent visit to Budapest lasted only few days. Did you have time to explore the main sights of the city? What are your impressions concerning the city, the country, and the Hungarian people?

I was first impressed by the university: on the one hand, it has beautiful historical buildings, on the other hand, the classrooms are modern and equipped with high-tech solutions. I also visited the examination centre of the Faculty of Economics which impressed me very much; it must be very convenient both for the professors and the students to have such a facility. I could also walk around the city a bit: I visited the Buda Castle and the Parliament. I was amazed by the beauty and atmosphere of Budapest and the kindness of the people here. Thanks to Professor Dombi, I had the opportunity to taste Hungarian wines. It was a big surprise for me as I didn't know that they taste so good. In France, Hungarian wines are unfortunately not very well known, but from now on, I will promote them for sure!

We are very grateful to Professor Olivier Lamotte for his visit and sharing his views with us!

Photos: Gergely Bernáth