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Update No: 057

The Slovenes are doing very well, much better than anyone else in the former communist world. But then the Slovenes were always a special case in the former Yugoslavia, with a much higher standard of living and a market economy that Belgrade wisely tolerated.
The per capita income is in the EU class already at US$16,800, on a par with Greece or Portugal. That Slovenia will join the EU in the first wave is taken for granted now in Brussels and indeed in Ljubljana. A wine agreement allowing Slovene wines into the EU free of customs was already concluded on January 1st.
The growth of the economy has been most satisfactory, GDP rising by 4.6% on an annual basis before 9:11 last year after a rise of 5.2% in 2000. Industrial output rose by an even more striking 9.4% in 2001 after a rise of 7.4% in 2000. No wonder the international agencies regard Slovenia as a star turn.
There are problems of course, even for frontrunners. The rate of unemployment at 12% of the work force is far higher than the government would like, as is the rate of inflation at 9%. But the government is maintaining a sound fiscal policy; the public budget is in modest deficit of 1.1% of GDP, while the external account is in deficit to the extent of only 0.2% of GDP.
The republic is basically a success story still needing to be rounded out by accession to the EU and attraction of more than its at present modest amount of foreign investment, whose accumulative total is only US$2.7bn. Foreign direct investment amounted to only 1% of GDP in the last two years, well behind the main stars here, Hungary, the Czech Republic, Poland, Estonia.
There is still a lot of red tape that needs clearing away ahead of EU membership and establishing an investor-friendly regime. That it will be done is now highly likely, not least because the Slovenes are keen to be accepted into Europe as soon as possible.
One reason not usually mentioned for past caution on the investment front is that the Slovenes have been afraid that foreign gangsters could take advantage of an 'open- door' policy. Indeed Italian mafia have been eying Slovenia for years; so very well might smugglers and Mafiosi in Croatia, Bosnia, Montenegro and Albania, that all, like Slovenia, abut on the Adriatic, a longstanding route for contraband trade. The Greeks have similar fears.
But the new better condition of the Balkans could help the police to tackle the problem. Be that as it may, the Slovenes are taking a more positive attitude to their Balkan neighbours or near-neighbours, investing now in Yugoslavia and surrounding states. Things are looking up for investment both into and out of the Slovene republic.
One person who appreciates what Slovenia has to offer is President Putin of Russia, who is planning another trip there soon, after meeting Bush for the first time in Ljubljana in June last year. He would like to see Russian-Slovenian trade top US$1bn, which is perfectly possible. Russian premier Kasyanov was also in town recently.

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ENERGY

Slovenia lifts ban on Austrian electricity imports

Following the 17th December announcement of the Austrian electricity market regulator, E-Control, that it would withdraw the order which bans Slovenia from exporting its electricity to Austria, Elektro-Slovenia - ELES [Slovene Electricity Board] - decided to do the same. 
Joze Skok reported on Radio Slovenia, that following Minister for the Environment, Janez Kopac's announcement of the withdrawal of the Austrian order, this has now actually happened. 
ELES acting chairman Vekoslav Korosec said: "On 17th December, the Austrian E-Control announced a change to the order concerning the import of ecologically-disputable electric energy from third countries and on the basis of this order it took Slovenia off its list. Therefore ELES is of the opinion that there is no reason to carry on using Article 28 of the Energy Law."
The withdrawal of E-Control's order has still not been published in the Official Gazette, but it does appear on the E-Control's web site. This makes it totally clear that it has withdrawn the order that concerns Slovenia.
Korosec added: "Therefore, from today onwards, i.e. from 18th December 2001 onwards, Elektro-Slovenia - as the network operator - will enable access to Austrian electricity providers' networks in accordance with technical and operational possibilities."
ELES informed the Energy Agency of the Republic of Slovenia of its decision...

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ENVIRONMENT

US$4.3m from Global Environment Facility

Slovenia will receive US$4.3m in non-refundable funds from the Global Environment Facility (GEF) after Minister of the Environment and Spatial Planning, Janez Kopac and a representative of the Un Development Programme, Ben Slay, signed a contract. The money will be used for a programme aimed at boosting the use of wood biomass and cutting greenhouse gas emissions, Slovenia Weekly reported. 
The project "Removing Obstacles to Increase the Use of Biomass" anticipates the construction of five biomass-powered heating plants, which together with the existing ones will provide valuable experience for the future use of wood biomass. Budget funding of US$2.5m has also been allocated to the project.

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FINANCIAL NEWS

€5.79bn for development

The Government adopted a draft development programme for Slovenia in the period from 2001 to 2006, the basis for receiving the EU's Phare funds for the economy and social affairs. The programme consists of five key priority tasks, namely boosting the entrepreneurship sector and the economy's competitive strength, upgrading human resources and employment policy, improving information technology and infrastructure, reforming the agriculture sector, as well as boosting regional development. Drawn up simultaneously with the state budgets for 2001, 2002 and 2003, the programme is valued at SIT 1,269bn (€5.79bn) in this period, or 8.9% of GDP in the period from 2001 to 2003. SIT 47bn (€214m) is to be obtained from EU pre-accession funds, while the rest is to be provided by domestic sources.
The Government cabinet adopted the programme of Slovenia's electricity consumption in 2002, and established that all conditions to liberalise another part of the electricity market in 2002 have been met. The Government also amended the privatisation programme for Nova Ljubljanska banka (NLB), which now anticipates a 15 per cent supply of fresh capital in the second phase of its privatisation, with the extra option of Slovenian investors acquiring the newly issued NLB shares. A decree on agriculture structural policy measures of the 2000-2006 programme on Rural Development (Sapard) was passed in a move that will open the way to publishing public calls for offers for individual measures of the Sapard programme.

Key aggregates under control

Presenting the guidelines for Slovenia's monetary policy in 2002 and 2003, Bank of Slovenia Governor, Mitja Gaspari, said recently that until Slovenia becomes a full-fledged EU member, the central bank's monetary policy will be targeted at controlling the key monetary aggregates, preserving the controlled floating exchange rate and neutralising the great influx of cash caused by the exchanging of European currencies into euros, reports Slovenia Weekly.
The central bank will also be preparing for Slovenia's accession to the EU in 2004, said Gaspari, adding that the country will hopefully take part in the exchange rate mechanism 2 (ERM2) as soon as possible so as to become a member of the European Monetary Union two years later. Before introducing the euro, Slovenia must meet both the nominal convergence criteria, which are based on the Maastricht criteria, and the real convergence criteria based on the relatively faster growth of Slovenia's economy due to its more rapid increase in productivity, Gaspari noted. Therefore, the central bank is determined to bring inflation down to around 5.3% in 2003 and some 4% in 2004, Gaspari said.

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FOOD & DRINK

Interbrew raises its offer for Slovenian brewer

Interbrew SA raised its takeover bid for all remaining shares in Slovenian brewer, Pivovarna Union, to 80,500 tolars (€366.52) a share from 73,000 tolars a share, the Wall Street Journal reported on December 19th.
Interbrew, which currently owns 24.6 per cent of the brewer, said that as a result of the price increase, its current tender offer will be extended and will remain open until January 3rd.
Pivovarna Union has 451,000 shares, so the value of the bid for the 75.4% stake totals 27.37bn tolars.
Interbrew said the price rise follows discussions with Slovene state funds that hold 22.5% of Pivovarna Union's shares. The revised price represents the Belgian brewer's best and final offer to buy all outstanding Pivovarna Union shares, Interbrew said. Interbrew announced the original takeover bid last month after forming a strategic partnership with Pivovarna Union in October.

Wine agreement signed

European Commissioner for Agriculture, Rural Development and Fishery, Franz Fischler, and Slovenian agriculture Minister, Franci But, signed a wine agreement between the EU and Slovenia. The Belgian Ambassador to Slovenia, Georges Godart, also signed the agreement on begalf of the EU. The agreement is to allow customs-free trade in wine between Slovenia and the EU as of 1st January 2002, reports the Slovenia Weekly. 
In line with the agreement, Slovenia will be able to export 48,000 hectolitres of wine yearly without paying customs as of 1st January 2002. Wine export quotas are then to gradually rise to 72,000 hectolitres in 2007. In return, Slovenia agreed to an import quota of 12,000 hectolitres for wines from the EU in 2002. That quota is to rise to 15,000 hectolitres in 2005. The agreement also includes mutual recognition, protection and control of wine labelling and other brands of alcohol. The agreement reflects the orientation of the two signatories to protect geographical labels in the EU internal market and in the Slovenian market, according to Fischler.

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PRIVATISATION

Slovenia's privatisation drive, firms short-listed

Slovenia's second largest international airport in the city of Maribor is to be sold in an auction after it was declared bankrupt, STA News Agency reported recently. The public auction was set to be held on January 15th. The bidding will start at 320m Slovene tolars (around €1.44m), it was reported.
Moreover, the Slovene government is to privatise its national telecommunications provider, Telekom Slovenije. The privatisation process is to begin this year and is expected to be completed by the end of 2003. The price will be around US$2bn.
The government said the new owner would have to pledge to continue investing in the company's further development. It is also considering floating Telekom on the Ljubljana Stock Exchange before privatisation.

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TELECOMMUNICATIONS

UMTS licence agreement signed

Minister of the Information Society, Pavel Gantar, and Anton Majzelj, Manager of Slovenia's leading mobile telephony operator Mobitel, signed a contract on the UMTS third generation mobile telephony licence recently, Slovenia Weekly reports. The licence fee, totalling SIT 22bn (€99.7m), is to be settled by Mobitel's 100% owner, Telekom Slovenije, a phone service provider in which the state has a majority stake. Some SIT 20bn (€90.6m) of the fee is to be settled with Mobitel being supplied with fresh capital from Telekom, while Telekom will add an additional SIT 2bn (€9m). With UMTS technology anticipated to spring to life by 2003, the licence is to be granted for a period of fifteen years, with two options for extending it for a period of five years. According to Minister Gantar, signing of the licence agreement is an important step in the development of third-generation mobile telephony as well as the Slovenian economy in general. According to Minister Gantar, the government will closely follow trends in the telecommunications market and will issue another licence for the same fee if UMTS proves to be a profitable business.

The third mobile operator

On December 3rd, the third mobile telecommunications operator Western Wireless International launched its operations in Slovenia, reports Slovenia Weekly. Its brand name, Vega, symbolically marked the beginning of its activity with a celebration of the opening of its first shop in Ljubljana. The Minister of Information Society, Pavel Gantar and American ambassador to Slovenia, Johnny Young, made the first official call in Vega 070 network. The first talks on this occasion focused on successful cooperation between both countries in all areas.
"We estimate that in the field of GSM mobile telephony services, Slovenia will soon be able to compete with the top developed countries, where market penetration already exceeds 85% of the population. We are going to offer users new services that they haven't been familiar with so far. Our goal in the next five years is to achieve a 20 per cent market share," stated Julien Coustaury, Managing Director of Western Wireless International d.o.o. at the start of business in Slovenia.

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TOURISM

Spa coming to Sarajevo

The Terme Catez Spa group is to build a sports centre in Sarajevo, BIH into which it will invest DEM 45 to 50 million, reports Slovenia Weekly. The centre will cover an area of 20 ha and have several indoor and outdoor swimming pools, plus catering and sports facilities. The first phase should be finished in 2002. This will be one of the biggest Slovenian investments in BIH this year.

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TRANSPORT

Upgrading transport links

Transport Minister, Jakob Presecnik, and his visiting Israeli counterpart, Ephraim Sneh, discussed ways of boosting bilateral cooperation and setting up transport infrastructure to link the two countries, Slovenia Weekly reported recently. 
They agreed on re-establishing a direct air route between Slovenia and Israel, aimed at increasing business links as well as tourism between the two countries. The Israeli Minister expressed interest in upgrading cooperation in the two countries' tourism sectors, as well as expanding the facilities of Ljubljana and Maribor airports, as they could play a major role in transporting goods from Central Europe to the Mediterranean region. Sneh also stressed that a significant role in connecting the two countries could be played by the Port of Koper. The visiting Israeli delegation also met representatives of the Chamber of Commerce and Industry and Foreign Minister, Dimitrij Rupel.

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