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Update No: 058

The Slovenes are in a different class from other countries in transition. Their 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 Ljubjlana.
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.
Slovenian businessmen are adopting a shrewd line. They are already investing in entrant economies to the EU. The drug-maker KRKA is a case in point. It has a huge site in Warsaw, opened in October last year. The imminent adhesion of both countries to the EU should see their economies grow and their demand for competitively-priced generic drugs.
Indeed Premier Janez Drnovsek was able to point out to businessmen from the Maribor region that Slovene companies had launched an export drive to the east, notably to Russia, to compensate for slack demand in the EU right now. It helps that Russia's leaders are keen on Slovenia, Premier Kasyanov having been in town recently and Putin, a great fan of Ljubljana, where he first met Bush in June, is expected again soon. Mutual trade now tops the US$1bn mark.
The Slovenes are mavericks in the Balkans in more ways than one. They tolerate private education, as befits a liberal-democracy. This is being taken advantage of by the new rich. The standards of public education are high; but that of the private sector even higher. 
With a highly educated work force, an excellent location athwart the Alps and impending EU membership, Slovenia should soon be attracting far more foreign investment than it has so far done, around US$2bn. The clarification of its legislation in its negotiations with Brussels is helping greatly to create a more business-friendly climate.

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AGRICULTURE

Slovenian agriculture becoming ecologically friendlier

On January 9th, Die Presse published an article on Slovenian agriculture stating that it is becoming ecologically friendlier. Slovenian agriculture is characterised by small family farms. In the future, the organic production of food is set to have an important position, since Slovenia sees itself as a 'delicatessen' of Europe. 
The cliché associated with the agricultural structures of former Eastern bloc countries does not hold true for Slovenia which was, in the time of former Yugoslavia, named the Switzerland of the Balkans. The outskirts of Ljubljana are interspersed with farms and are a little reminiscent of the Swiss impressionists. Statistically, agricultural land covers 38% of the entire area with only 3% of it considered urbanised. An additional 57% of the country is covered by forests. Although at first glance Slovenia is a rural country, the share of agricultural production only amounts to 3% of GDP. 57% of the nation's people live in the countryside (a statistic comparable with Austria and Ireland) yet only 5% are employed in agriculture, mostly on small family farms with no more than 3ha of land dealing mainly in cattle breeding. By making 41% of its subsidies for agricultural products via direct payments, Slovenia is within the European average and, according to the OECD report for 2001, is an exceptional example among candidate countries. Slovenia opened agricultural negotiations with the EU in 2000. 
Minister of Agriculture, Franc But, is pleased with the progress Slovenia has made since 1999 when it launched an extensive reform programme to prepare for harmonisation with the European legislation. The key goal of this reform is to replace price subsidisation with direct payments and thus create a more transparent market. Opening the so-far protected sector up to international competition poses a great challenge. At present, Slovenia is a net importer of agricultural products, which has a negative influence on its trade deficit. In order to provide healthy foundations for the initiated privatisation of the food-processing industry, extensive capitalisation of new industrial plans is needed as well as foreign direct investment.

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BANKING

Italian bank increases Slovene bank takeover bid for fourth time

The Turin-based banking group, Sanpaolo IMI, has increased its purchase bid for Banka Koper shares by 10 tolars [per share] for the fourth time. It is now offering 102, 011.72 tolars [about US$405] per share, Television Slovenia teletext web site has reported .
At the same time it also extended its purchase bid for 451,655 ordinary nominal shares with voting rights by seven days and it is now valid until 25th February inclusive.

Banka Slovakia gets bid

A consortium of European American Investment bank AG and brokerage house Slavia Capital will submit a bid for a 60.07 per cent stake at the smallest Slovak bank, Banka Slovakia, the Slovak Spectator has reported.
Both parties expect that their mutual offer will persuade the central bank o their serious interest in the bank.
Slavia Capital had already tried to get the stake on its own in the second round of a tender, but did not succeed after the tender was cancelled.

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ENERGY

Slovene, Russian oil firms sign deal on cooperation on former Yugoslav territory

Representatives of the [Slovene] Petrol oil company and Russia's third-largest oil company, Tyumen, signed an agreement on cooperation on the markets of the former Yugoslavia, Petrol management board chairman Janez Lotric told Radio Slovenia.
Lotric said: "The basis of the agreement is that the Tyumen oil company - which produces large amounts of crude oil - is to take over the responsibility for crude oil supply and its processing in one of the refineries in the region. Petrol will take over the retail responsibility for the said derivatives and for the development of the retail network on the territory of former Yugoslavia."

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EU ACCESSION

Slovenia unhappy with some of EU Commission's financial proposals - minister

It is evident that the time of real negotiations with the EU has begun, the time of getting in line with the EU legal system is over, said Minister for European Affairs, Janez Potocnik, after the European Commission had presented its strategy for financial negotiations regarding agriculture and regional and budgetary policies, Vecer web site has reported. These are not the final documents.
Within the next month, foreign and finance ministers will discuss them. Within these documents, there are many topics which will force Slovene negotiators to stress Slovenia's specific characteristics more firmly and to demand a differentiated approach [to Slovenia].
Minister Potocnik believes that this is not a negotiating starting point. He believes that this is only a financial framework and that the commission will present its real strategy in March. Even then, the commission will supposedly not present a joint point of view of members and candidate states. Firm negotiations are to follow. Potocnik said that "we need some time to think about it all because we do not want be too quick with our comments on what is written." Nevertheless, the head of the Slovene negotiators has obviously expected something more. A ten-year transitional period and a gradual increase of direct payments are not acceptable to Slovenia, said Minister Potocnik, which was repeated by Agriculture Minister Franci But.
There is some optimism to be found within the commission's proposal for additional direct payments from the budgetary funds. Potocnik believes that the only possible approach to negotiations is in taking specific differences between the EU candidates into account.
Minister But says that Slovene agriculture has prices which are 10 per cent higher than the EU average. According to But, Slovene agricultural policies can be compared [to EU agricultural policies]... 
Regarding regional policies, framework proposals seriously intervene in the structural policies area. It will be hard to deal with such financial obstacles. "We will have to do everything to prevent the commission from using 'a low capability of absorbency' as its argument. We cannot allow this," says Potocnik, who is pleased with the announcement that Slovenia will not be a net payer into the European budget until 2006. Slovenia wishes to participate as an equal member in planning the EU funds for the period ending in 2013. 
Igor Strmsnik, the Economy Ministry state secretary, said that the EU had not found new funds to ensure equality of its members and candidate states. According to Strmsnik, the EU has increased the agricultural funds by 37 per cent by taking money from elsewhere, also from the regional policies funds, which is wrong. It is also wrong that it has increased funds for administration by 36 per cent and in that way violated its own principles on investing more into programme funds and on making administration more productive through its education.

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FOREIGN LOANS & AID

€16m for three projects

The EU is to allocate almost €16m to three projects within the pre-accession transport and environment aid programme, ISPA, Slovenia Weekly has reported.
The water supply project on the Trnovsko-banjska planota plateau will be supported with €2.6m from the EU. The project of construction of a water management centre in Novo mesto is to be awarded €5m from the ISPA programme. €8.4m will be allocated from the EU to co-finance a project to modernise signalling lights and security devices on the railway track Divaca-Koper. The funds for the three projects are allocated from the 2001 ISPA budget, from which Slovenia has acquired €10.5m to co-finance projects valued at over €41m.

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INDUSTRY

Independent company

Lek Kozmetika, the cosmetics unit of the Slovenian pharmaceutical company Lek, has started operations as an independent subsidiary of Lek as of 1st January in a bid to increase the market re-orientation of its line and successfully redesign its products, Slovenia Weekly has reported.
Lek Kozmetika aims to become Slovenia's leading supplier of facial and body care cosmetics in the markets of Central and SE Europe, according to the company. Lek Kozmetika employs 124 people and already cooperates with the cosmetics group, Revlon. However, it will seek new strategic partnerships, according to Cvetana Rijavec, the head of Lek Kozmetik. Apart from Slovenia, Lek Kozmetika's key markets include Croatia, Bosnia, Macedonia, Russia, the Czech Republic, Slovakia, Ukraine and Macedonia.
The new subsidiary will make efforts to strengthen its presence there and it believes it has an advantage as its products are based on rich medicinal and pharmaceutical knowledge and experience gathered in Lek's core activities, namely the production of medicine, it was announced at the news conference on 23rd January.

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TRANSPORT

Government approves finance plan for Motorway Company

Slovenia's government recently adopted the interim 2002 financial plan of the Motorway Company in the Republic of Slovenia (DARS), which envisages income of some 66bn tolars and ensures the company can continue to implement the national motorway construction programme. In 2002, these funds will enable the opening of three motorway sections (AC Krtina-Lukovica to CP Kompolje, Razdrto junction and AC Vransko-Trojane), the uninterrupted construction of nine motorway sections plus finishing and transitory work on certain sections. The adopted DARS financial plan is harmonised with the draft annual development programme for the year, Slovenia Weekly reported. In 2002, the DARS budget will consist of a total of 65.9bn tolars, 33.5bn tolars of which should come from the special state tax on petrol, 2.4bn tolars from tolls, while 24.1bn tolars shall be gained from loans provided by the European Investment Bank (EIB).

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