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slovenia

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  SLOVENIA

REPUBLICAN REFERENCE

Area (sq.km)
20,300

Population
1,930,132

Capital
Ljubljana

Currency
Tolar

President
Milan Kucan

Private sector
% of GDP

40%

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Background:
In 1918 the Slovenes joined the Serbs and Croats in forming a new nation, renamed Yugoslavia in 1929. After World War II, Slovenia became a republic of the renewed Yugoslavia, which though communist, distanced itself from Moscow's rule. Dissatisfied with the exercise of power of the majority Serbs, the Slovenes succeeded in establishing their independence in 1991. Historical ties to Western Europe, a strong economy, and a stable democracy make Slovenia a leading candidate for future membership in the EU and NATO.

Update No: 063 - (23/07/02)

Presidential elections
The main architect of Slovenian reforms over the last ten years has been Premier Janez Drnovsek. The country has been doing solidly and the political situation is stable. However, Slovenia faces elections for the presidency and Drnovsek has decided to stand in them. 
The current situation in the republic is stable enough for a smooth change in government. He will almost certainly win. 
When the Yugoslav army attempted to suppress Slovenia's independence drive, triggering a 10-day war, Drnovsek persuaded Belgrade to withdraw. He formed the Liberal Democrats in 1992 and won his first term, commencing his second term in 1996. Although his governing coalition collapsed in mid-2000, he returned to power in elections six months later. Drnovsek has been in the forefront of Slovenia's efforts to join the European Union and NATO. Today, the Alpine state of two million tops the list, together with Estonia and Latvia, for membership in both organisations. The premier has declined comments on his health following the removal of a cancerous kidney in 1999, with his candidacy indicating his condition is now fine. 
He obviously subscribes to the well-known dictum that ten years is enough for a leader in any country. Even de Gaulle lost his touch after ten years in 1968 and was voted out in January 1969. Drnovsek prefers to bow out gracefully and end up in the largely ceremonial post of president. He must have noticed over the last decade that the president has all the pomp and perks of high office without the cares and responsibilities of the premiership.
Drnovsek is likely to win the presidency, having become a highly respected mediator on the world stage. It was he who introduced Bush and Putin to each other for the first time in June last year in his capital Ljubljana.

FDI factor
It is not surprising that they should find Slovenia a good place to meet. It is a delightful country a sort of Balkan Switzerland, mostly, high in the Alps, with fabulous scenery and great architecture in wonderful natural settings (as in Geneva) but without the reserve and stodginess.
It is surprising in a way that it has not attracted more foreign direct investment (FDI), which is scarcely more than US$2bn to date. Its population is only two million so that this is a relatively high figure per capita, US$1,000 per head. This is one of the highest figures in the post-communist world.
But then Slovenia is very special in that world. It has by far the highest standard of living of any post-communist country, with a per capital income of nearly US$17,000. But that means high wages compared with other Balkan countries. 
The Italian mafia eye Slovenia, hence the legislative bulwarks against FDI. The regime for FDI on EU entry is not so favourable either. But the country has too many advantages not to do well.

Steady growth of the economy
The republic's economy has been growing steadily, if not spectacularly, but then from a much higher base than in other post-communist countries. GDP grew by 4.6% in 2000 and then by 3.0% in 2001 and a prospective 3% in 2002, very respectable compared to an EU average expected for this year of 1.3%, the relevant point of comparison for Slovenia these days. The figures for foreign direct investment (FDI) are more disappointing, a meagre US$110m in 2000, US$330m in 2001 and a derisory US$131m expected for this year.
That should all change once Slovenia is in the EU, with a compliance with all the chapters of 'l'acquis communitaire.' For there could be no better place for foreign investors, the natural gateway to the entire ex-communist Balkan region, yet in effect an EU country already, with, as it so happens, higher educational standards and a tradition of multi-lingual cosmopolitanism. The very reluctance to accept newcomers on any terms is a proof of the integrity and soundness of the Slovenes as potential partners. There is no post-communist country with brighter prospects.

Inflation the problem
The rate of inflation is around seven per cent annually. Indeed, the May figure was of 7.5% on an annual basis. But the price rises in 2002 have been of a one-time nature, analysts aver. The central bank is determined to reduce the inflation rate to 3-4% per annum by the time Slovenia joins the EU, due in 2004. Drnovsek and central bank chairman, Mitja Caspari, are of like mind here.

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BANKING

EBRD acquires a 5% stake in NLB 

According to the European Bank for Reconstruction and Development (EBRD), the Slovene government is going to sign a contract on the sale of a five per cent stake in the largest Slovene bank, the Nova Ljubljanska Banka (NLB), CEE News has reported. 
The EBRD will acquire the state-owned stake for almost 64 million euros. The same basic conditions and price per share will apply as when the government sold 34 per cent of NLB to Belgian banking group KBC.

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ENVIRONMENT

Purifying plant celebrates first phase completion

A host of prominent officials gathered at the opening of the main wastewater purifying plant in Maribor recently, honouring completion of the first stage of construction. The opening of the facility, one of the country's largest ecological investments in recent years and worth about 30m Euros, was attended by Environment Minister, Janez Kopac, head of the European Commission delegation to Slovenia, Erwan Fouere and Maribgor Mayor, Boris Sovic. 
Although the EU has provided 6.5m Euros for the purifying plant, the majority of funds have come from private companies within the EU. Maribor city had awarded a licence tender, and in 1998 the city municipality gave a 20-year licence to Aquasystems Ltd., a Maribor-based company for construction of wastewater treatment plants. Construction works commenced in 2000, and the second phase is already under way and is slated for completion by 2004.

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EU NEGOTIATIONS

27 chapters closed

Slovenia has closed the Institutions chapter in the new round of accession talks with the EU, Slovenia Weekly has reported.
Slovenia has thus incorporated the solutions of the Nice Treaty, which secures the country seven seats in the European Parliament and one commissioner. By closing the Institutions chapter, Slovenia has so far closed 27 chapters of the acquis. Held at the ministerial level, the negotiations also formally confirmed negotiating solutions from previous rounds of talks, namely the closure of the transport chapter.
The talks also touched on the budget chapter, where no agreement has been reached, while agriculture was not on the agenda as the issue remains open among the EU member-states. Slovenia regrets that the EU failed to adopt a common standpoint on agriculture, said Foreign Minister Dimitrij Rupel, who headed the Slovenian negotiating delegation. 
He added that Slovenia nevertheless expects the EU to harmonise its standpoint in due time, as any delay might postpone enlargement. However, Dimitrij Rupel expressed an understanding of the current political situation in the EU and the fact that the main issue of the agriculture negotiations - the entitlement of candidate-countries to direct payments - has been postponed until October.

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FINANCIAL NEWS 

EBRD presents investment strategy for Slovenia 

A delegation of European Bank for Reconstruction and Development [EBRD] executive directors concluded its visit to Slovenia on 3rd July.
Jure Kranjc reported for Radio Slovenie: The EBRD is completing preparations for a new investment strategy in Slovenia and the leadership is to give its final approval to the document in the next few weeks. Peter Engstroem, the director for Sweden, Iceland and Estonia, explains the main priorities for investments in Slovenia: "First, support the local corporate sector, second, support the expansion of Slovene businesses towards the broader Southeastern European region. Third, support financially the projects of local communities in the area of communal infrastructure, and fourth, the construction of motorways and the maintenance of state roads and railways. Here I have to stress that the EBRD's loans are not aid but an investment, therefore all the projects must be profitable." 
So far, the EBRD has invested 350m euros into various Slovene projects and, among other things, it is considering the possibility of cooperating in the privatisation of Postna Banka [Slovenije] and Nova Kreditna Banka Maribor. Finance Minister Tone Rop has announced a new programme for the privatisation of the Maribor bank for October. This will most probably be a combination of privatisation and recapitalisation where the EBRD could also cooperate. This will most probably be recapitalisation of between 10 and 20 per cent.
The government and the EBRD will sign a contract of sale of 5 per cent of Nova Ljubljanska Banka shortly.

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FOREIGN ECONOMIC RELATIONS

Boosting politico-economic ties with China

The visiting member of the political bureau of the Chinese Communist Party and Secretary of the Shanghai branch Committee, Huang Ju, accompanied by a delegation, met with President Milan Kucan, Foreign Minister Dimitrij Rupel and representatives of the Slovenian Parliamentary Foreign Affairs Committee, Slovenia Weekly has reported.
The Chinese official assessed that the basis for cooperation between Slovenia and China is good and enables further upgrading, especially in business. Huang Ju also said that Shanghai would help Slovenian companies penetrate the Chinese market in the future. Foreign Minister Rupel presented the Chinese guest with details of Slovenia's political and economic system and the country's actions for EU membership. Membership will make Slovenia even more attractive for non-European countries, including China, as it will be easier for them to enter the EU market via Slovenia, Rupel pointed out.
To President Kucan, Huang Ju conveyed greetings from the Chinese President Jiang Zemin, who has a positive memories of Kucan's visit to China a few years ago. President Kucan took the opportunity to stress the importance of personal meetings between statesmen.

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FOREIGN LOANS

4.4m Euros of ISPA funds for the environment

Minister of European Affairs, Janez Potocnik and Head of the Delegation of the European Commission in the Republic of Slovenia, Ambassador Erwan Fouete, signed the first ISPA financial memorandum this year, giving the municipalities of Velenje and Sostanj one billion tolars (4.4m Euros) for the construction of a wastewater treatment plant and water supply system. The entire project is valued at SIT 2.5bn (11.1m Euros), Slovenia Weekly has reported.
Slovenia first received ISPA funds for the construction of environmental and transport infrastructure in 2000, acquiring funds worth around SIT 10bn (44.2m Euros) in the first two years. Six projects that were awarded funds include the construction of environmental infrastructure, while three deal with transport.
It is not enough to adopt environment-friendly legislation, it must be implemented, Fouete stressed at the signing ceremony, adding that Slovenia is the first EU candidate to have closed the negotiating chapter on the environment. Minster Potocnik, who expected that six more projects will receive ISPA funds this year, stressed that Slovenia has been making intensive preparations to be fully prepared to manage ISPA funds, which will be replaced by cohesion funds after 2004, when Slovenia is to be come a full-fledged member.

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NUCLEAR ENERGY

Slovenia contemplates buying out Croatian share in nuclear power plant 

The Slovene-Croatian agreement on the Krsko nuclear power plant will not be ratified, i.e. will not come into force by 30th June, therefore Croatia cannot renew its supply of electricity from Krsko in July in line with this agreement, Slovene Radio has reported. 
It has been mentioned that Slovenia will offer to buy out its share] according to the commercial value. It is now obvious that after 1st July both sides will also officially start searching for an alternative solution. One of the most likely ones is that Slovenia will buy out the Croatian share. In doing this, both sides will, initially, have different views regarding the value of the nuclear power plant...

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TRANSPORT

Slovenian Railways to be transformed and privatised 

The government the bill on the transformation and privatisation of the public company, Slovenian Railways (Slovenske Zeleznice), which envisages the transformation of the company into a holding and at least three subsidiaries, Slovenia Weekly has reported. 
One company is to maintain and upgrade the infrastructure, while the other two are to operate both international and inland passenger and goods trains, respectively. The holding can also establish additional companies, but only with the prior approval of the owner. 
Although the government has not yet named potential strategic partners, privatisation has also been partially set down in the bill. The bill, which has been put into Parliament's fast-track procedure, also provides for SIT 4.2bn (EUR 18.6m) of back taxes, transforming them into the state's capital stake. The company, Slovenian Railways, currently has some SIT 51bn (EUR 225m) of liabilities to the state, with a total of SIT 6.3bn (EUR l27.9m) of debt to the pension and health insurance funds that cannot be written off.

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