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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 
Janos Drnovsek

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: 072 - (17/04/03)

A conservative, Alpine state
Slovenia is a great exception to the norm in the post-communist world. It is mostly Alpine in scenery and was for long part of the Austro-Hungarian empire, as later of Yugoslavia, but was always ruled, whether from Vienna or Belgrade on a light rein compared with the lowland components of these far-flung polities.
Tito had the sense to tolerate a market economy in Slovenia, even if the obligatory collectivisation of agriculture and industry took place. From the 1960s economic reforms accelerated and republican autonomy increased, which was particularly good news for the Slovenes, who had living standards five times those of the Macedonians, the poorest of the Yugoslavs. The Slovenes were in the best position to exploit widening trade opportunities to their north and participated in the long postwar boom, of the Common Market, as the EU was then called. Today 57% of GDP is exported, making the economy as open as any in the EU, to which it is about to belong in June next year.
For all its recent communist past, Slovenia is a conservative, country with a tradition of immemorial customs stretching back centuries. Northern Illyria in Roman times, it was long formally ruled by Austria whose fiat hardly extended far beyond Ljubljana and the coast. Peasant communities huddled within their high village walls were remarkably autonomous and conservative in their ways. 
The Slovenes are sticking to their old leaders, whom everyone understood were not really communists at all, but people of a political bent wanting to serve their country, which meant joining the communist party, actually the League of Communists of Slovenia. In the 1980s an intellectual revival took place, preparing the way for independence, which from 1989 everybody could see was coming soon. Slavoj Zizek, Tamas Mastnak and many others produced philosophical and political works. The New Slovenian Art movement got under way and the journal, Nova Revija, debated in numerous articles the theme of the Slovenian National Programme. A nation was being reborn.
The old communist leader, Milan Kucan, became president for two five-year terms. The premier for nearly all of this time was Janez Drnovsek, who was elected Kucan's successor last year.

EU entry almost formality
With its open economy and high living standards comparable to Greece's or Portugal's, Slovenia has an EU feel about it already. Its legislation has been adapted well ahead of time to EU norms. It will scarcely be a drain on the Brussels exchequer, unlike Poland or other entrants.
It might have been thought by some to have been preferable to stay out, as has Switzerland, benefiting from an Alpine aloofness and apartness from the mundane lands below it. But in fact 89% of the Slovenes voted for EU accession on March 23rd, just as almost as many voted for NATO membership. That is to mark a decisive break with the former Yugoslav states to their south and east. Slovenia is leading the way to join the West.

Political stability
The leading party throughout the period of transition has been the Liberal Democracy of Slovenia, not so very different from the Liberal Democrats of Germany or the UK, forward-looking, pro-Europe and pro-'social market' economics and reforms. Since liberalisation is ingrained in people's outlook, this political stance also has a conservative hue. 
To LDS supporters, the country is already fully European, with little in common with other former communist countries. The Social Democratic (SDS) opposition is concerned to open up the political system more to match the openness of the economy. The SDS backed the opponent of Drnovsek in December's presidential election, Barbara Bresigar, a state prosecutor, who surprised everyone by getting 44% of the vote, an indication that change may be on the way. The SDS briefly held power in 2000 when the coalition broke down, but did not have the time to leave much mark.

Foreign investment on the up
The cautious conservatism of the Slovenes has been shown in their attitude to foreign direct investment (FDI), which they have not welcomed like the Hungarians or the Baltic states. Their proximity to Italy and its gangsters, indeed to other Balkan states with strong mafia links, is clearly a big reason why. They do not want them to be taking over key elements of the economy, as so obviously happened in Serbia and other former Yugoslav states. 
FDI was about US$2.2bn by 2001, but in 2002 alone it rose by US$1.87bn, an indication of things to come, as EU membership relaxes the rules on foreign ownership of land and private property. The police will just have to become extra-vigilant.

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AGRICULTURE

Farmers to get 75% of direct subsidies

A group of regulations setting the level of direct payments to farmers was adopted at the weekly cabinet session, Slovenia News has reported. Following intensive negotiations between Agriculture Minister, Franci But, and Finance Minister, Dusan Mramor, who failed to reach an agreement, the government decided that farmers are to receive compensations at 75% of EU direct payments this year, and not less, as had been proposed by Mramor. 
Nevertheless, the cabinet somewhat tightened the criteria for entitlement to direct payments. As a result, the agriculture ministry is expected to save some €4.3m, Minister But noted after the cabinet session. The agreed level of compensation will enable Slovenia by 2007 to become the only candidate country to reach the 100% level of compensation being made as direct payments by the EU fifteen to their farmers. The leader of a junior partner of the ruling coalition, Minister But had threatened that SLS would leave the coalition if the demand for 75% of the EU average was not met.

Organic farming - Slovenia's niche

Agriculture Minister, Franci But, believes that a market opportunity for Slovenian farmers lies in environment-friendly, organic farming. Such farming is being subsidised by the European Union through its agriculture and environment plan. The proposed reform of the common agriculture policy goes even further in the direction of farming that will be friendly to eth environment by focusing on multi-purposefulness of agriculture, safe food and regional development, Slovenia News reported recently.
German Agriculture Minister, Ranate Kuenast, who visited Slovenia ahead of the referendum on EU membership, agreed that organic farming was a prudent decision for areas with limited production options. There are currently some 15,000 organic farmers in Germany, tilling 3.7% of all farmland. Yet Germany has further aspirations - organic farms are to represent as much as 20% of its farmland by 2010. Organic farming is most widely developed in Liechtenstein (18%), Switzerland (9%), Austria (8.6%), Scandinavian countries and Italy.
Although Slovenia did not start working intensively on this issue until after 1998, it already had some 1200 organic farmers tilling some 3% of the farmland last year. Minister But has promised more subsidies for organic farming in the future. This would make the plan to have 10% of the farmland under organic farming by 2006 much more feasible.
Slovenian organic farmers' associations nevertheless point to some problems. They say that a successful reorientation into organic farming first requires uniform and highly-profiled marketing that would educate consumers - among other things, about the related environmental issues. Slovenian organic farmers should also have their products make their way onto the shelves of big retailers, increase their harvest and adjust the diversity of supply with demand on the market. Also required is a proper national action plan for the development of organic farming.

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BANKING

SIB attracts domestic foreign bank interest

Three Slovenian banks and two foreign ones have expressed interest in the state's majority stake in Slovenska investicijska banka - SIB, namely Slovenia's NLB, NKBM and Abanka Vipa, the Austrian Bank feur Kaernten und Steiermark and the Italian Banka di Cividale. Abanka Vipa has already submitted €34.5m guarantee on SIB's liabilities. Ljubljana municipality holds 78.78% of the bank by means of Energetika. SIB only holds 0.7% of the Slovenian banking market. 
The due diligence for SIB is to be prepared by Ernst&Young, while the financial consulting is to be pwrformed by the auditing firm, KPMG, and legal advice is to be given by law firm Colja&Rojs, New Europe has reported.

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ENERGY

Roseneft keen on INA

Head of Russian state oil firm, Rosneft, Sergei Bogdanchikov, bidding for Croatian oil group INA, was quoted as saying that its main interest was INA's Adriatic export terminal to help ship Rosneft's oil to the United States. Bogdanchikov elaborated that the Omisalj export terminal should help Rosneft's deal with US oil group Marathon to start direct Russian supplies to the United States by the third quarter of 2003. "Omisalj perfectly fits our agreement." 
"In addition, INA has two refineries while Rosneft has a shortage of refining capacity," Bogdanchikov noted. Besides Rosneft, the Croatian government has shortlisted Austria's OMV and Hungary's MOL as bidders for INA and plans to choose a winner by the end of March, New Europe reported.
The sale may be followed by a floatation of another 15 per cent on the local bourse. INA's CEO, Tomislav Dragicevic, formerly stated that the firm expected its new partner to back a plan to invest US$1.6bn in INA's upstream projects and upgrading its two outdated refineries over the next five years. Accepting INA's strategic plan could be decisive to the bids, along with the price offered, which state officials have put at US$300-400m, without revealing other details.

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EU ACCESSION

EU Committee approves Slovenia's entry

The European Parliament foreign affairs committee voiced its approval for Slovenia's entry into the EU. The final endorsement is to be given by the parliament and was expected to come at a plenary session in Strasbourg in early April, Slovenia News reported. Slovenia's EU membership was backed by 56 MEPs against one, with one member abstaining. Voting against was the far-left Greek MEP Efstratios Korakas, who was dissatisfied with Slovenia's stance on the Iraq crisis. Opposing entry of all candidate countries with the exception of Cyprus, the Greek MEP said that the nine would-be members gave support to the war against Iraq and consequently to an EU dominated by the United States. 
According to the conclusions drawn by the rapporteur for Slovenia, Dimitrij Volcic, Slovenia has made progress in all major fields such as the rule of law, administration, competition and macroeconomic stability. Volcic meanwhile pointed to the need to continue work in areas of competition, fiscal and monetary policies.

Ljubljiana to receive more funds upon EU entry

Slovenia will receive €244m more funds than it will pay into the common budget of the EU within the first three years after accession, due May 1st, 2004, New Europe reported. 
Accordingly, Slovenia will contribute €771m into the EU's budget, while EU will provide Slovenia over €1bn, out of which €833m from the common budget and €182m in the form of bulk payments intended to make sure that the country is overall a net recipient of EU funds. Out of the €833m, 121m will be pre-accession aid, 324m will support agriculture, €114m will be used for the establishment of the Schengen border regime, 61m for internal policies and 52m for the improvement of capital flows.

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FOREIGN INVESTMENT

Growing interest of foreign investors

Slovenia has been growing into a country with an open and competitive economy, Slovenia News reported. Its economic lag behind the EU countries has been reduced, making the country more and more interesting for foreign investors. This is reflected in the growth of foreign investments in Slovenia, Economic Minister, Tea Petrin, said at the opening of the first international conference on investor relations. 
Major Slovenian companies expect no big chances after EU accession, as most of them are already present on EU markets, the CEO of oil trade,r Petrol, Janez Ltric told a round-table. As Ales Razpet of the PR company Pristop noted, Slovenian companies will probably not float their shares on foreign stock markets at once, since they currently have no need to do "external business."

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MINERALS & METALS

Slovenian Steelworks divests stakes

The state-owned Slovenian Steelworks recently published a public call for offers for the purchase of ownership stakes in three companies that were created after the forced settlement of STO, a company that is part of the Slovenian Steelworks group. According to SBW reports, 80% stakes in Kovani valji Ravne and Sistemska tehnika are up for sale, as well as some real estate and equipment of STO, which falls under the company Stroji. The offers must include the price, bank guarantees and a detailed business plan for a five-year period. The business plan must list proposed development strategies, anticipated investments and an employment scheme. 
The sellers also expect data on the bidders' financial and business status. Before submitting their offers, the bidders must pick up what is called an information memorandum. They will then be given access to additional data to help them in drafting the bid, get the chance to visit and assess the company and talk to the management. Together with the offer, the bidders must also pay caution money in the amount of ten per cent of the offered price. 

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PRIVATISATION

NLB privatisation completed

The privatisation of the largest Slovenian bank has been completed. The second phase of privatisation envisaged the sale of an additional 9% stake in NLB share capital to domestic institutional investors, yet only 0.3% was actually sold. The remaining 8.7% share will not be sold to the EBRD as originally planned, but will remain in state ownership, the cabinet decided at the proposal of the Finance Ministry.
The ministry established that the desired ownership structure - one third owned by the state, another by a key investor, that is Belgium's KBC, and another third owned by portfolio investors - has been achieved even without selling off the 8.7% share. As the ministry explained, two state-run funds having stakes in the bank, namely the Pension Fund Management (KAD) and the Slovenian Reimbursement Fund (SOD), in fact classify as portfolio or institutional investors. NLB is currently 35.4% owned by the state, 34% is in the hands of KBC as the key investor and 30.6% is owned by other investors, including KAD, SOD and the EBRD - each holding 5% of the share capital, Finance Minister, Dusan Mramor, told the press, New Europe reported.

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