In 1990 Hungary decided to employ the then prevailing model of economic transition from a state run economy to one based on market principles. It entailed mass privatizations of previously state run companies and the opening up of its borders in front of international capital without much mitigation with regards to its destination and long term objectives. Due to lack of domestic long term strategy and policies directed at creating technological and other forms of spill-overs for the Hungarian producers, the country’s economy soon became dualistic in nature: a relatively strong, productive and competitive foreign owned and a capital-poor non-competitive domestically-owned. The former set up factories for assembly and service centres for their international operations, while the latter merely acted as suppliers for them. In the absence of internationally competitive products the Hungarian economy soon became dependent of foreign investment, whereby the large majority of exports – and thereby international trade – was carried out between local affiliates of multinationals and their headquarters in the form of intra-firm trade. This model persists to date. German investments have from the outset dominated the manufacturing sector within the Hungarian economy and as a result the country has become its most important trading partner, as well as source of capital investment within the country.