% of GDP
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: 078 - (27/10/03)
Economy doing well
The Slovenian economy is doing well, its GDP growing at 2.9% in 2001 and again in 2002. This needs to be compared to EU growth of 0.1% last year and this.
The reason for steady growth is not that Slovenia is enjoying the advantages of backwardness. It is not really backward at all, having had a market economy in Yugoslav times, when its output per capita was fivefold that of Macedonia, the poorest republic. Tito, as a Croat, knew well that the Slovenes were a special case, within the broad parameters of market socialism, the peculiarity of Yugoslav communism.
The Slovenes are the most fortunate of all the former communist states. It helps that they have the highest standard of living. But they have many other assets as well.
But to understand its remarkable performance, which has put it on a par with Greece and Portugal, already EU states (something it is shortly to be itself), one needs to go further back and perceive it in a longer perspective of time.
History and geography ; the positive repurcussions
The clue to understanding Slovenia is its remarkable geography. Mostly mountainous, it has never had the security problems of the folk in the plains. Feudalism, and its key institution serfdom, never really developed. As in Switzerland, Slovenia had an independent life by and large for centuries.
Nevertheless, unlike the Swiss, the Slovenes did become part of several larger agglomerations, notably the Austro-Hungarian Empire and then of course Yugoslavia.
But it is noticeable that they were able to opt out of both with scarcely a fight. The former collapsed in 1917-9 while the latter did in slow motion after 1991. The Slovenes lost 79 soldiers in declaring independence from Belgrade in 1991, but it had nothing like the violence that beset Croatia and, above all, Bosnia in their secession from the Yugoslav Federation.
History and geography; the negative repercussions
Nevertheless, the legacy of the past and location has left behind certain hang-ups all the same. The Slovenes in a recent rather whimsical opinion poll opted more than 50% in favour of not having Croatia as their neighbour. Either Macedonia or Bosnia would be acceptable. But Serbia also gets a negative rating of 24% in this regard.
The poll showed that 43% would not want to visit Croatia, fearing a falling out between Ljubjana and Zagreb. Such is, indeed, possible, although not in any way likely to lead to war.
Slovenia has recalled its ambassador to Croatia for consultations over a statement by Croatia's foreign minister on plans to proclaim an exclusive economic zone (EEZ) in the Adriatic Sea, the Slovene Foreign Ministry stated.
In a recent interview with the Croatian Slobodna Dalmacija daily, Croatian Foreign Minister, Tonino Picula, said that Slovenia "did not have contact with the open sea, which is manifestly untrue, and that the agreement on the border between the two countries, which was initiated in 2001 but has not been signed or ratified, had no legal effect." The Slovenian ministry, reasonably enough, said that such a statement was "unacceptable and not in the spirit of good neighbourly relations."
The two fledgling states have been at the odds over a maritime border in the northern Adriatic. Their bilateral relations worsened this summer when Zagreb announced it would proclaim an EEZ. According to the international conventions and law, each state, which has access to the sea, has the right to proclaim such a zone.
This does not mean that a state is allowed to stretch its sovereignty over international waters, merely be given the right to fish in those waters, was Zagreb's reason for proclaiming the
Once proclaimed, the EEZ would give Croatia the right to exploit part of the international waters in the Adriatic several nautical miles from its territorial sea borders, depending on the distance between Croatian territorial sea and international waters.
According to the Slovenes, if Zagreb proclaims the EEZ, this would prejudge the final demarcation line in the Adriatic between them, which still has not been officially determined. Slovenes claim that in the case of Zagreb proclaiming the EEZ, the indication would be that the solution on the border was already reached - and Slovenia would not have access to international waters, something Ljubljana is strongly opposed to.
Slovenia looks north
As the northernmost former Yugoslav republic they were always 'different,' a sort of mini-Switzerland in the communist world, having borders with Italy and Austria.
That is of course a contradiction in terms. There is no way one can be both capitalist banker and communist businessman, at least without torment of the soul. That was for long the Slovenes' predicament.
Their economy always worked better than those of their communist neighbours; but never as well as their capitalist ones. A rich relation of the East, but a poor relation of the West.
Now they look definitively Westwards, (which in their geographical situation means northwards). They will be joining the EU on May 1st 2004 and are the best equipped of the entrant states to do well.
Slovenia looks south
The Slovenes know, nevertheless, that the greatest asset they have to offer the EU is their unrivalled experience and expertise in the Balkans. They are the natural gateway to the region, the one already 'Westernised' country where one can operate in familiar ways, while penetrating true terra incognita.
The Slovenes are, consequently, fervently hoping that EU expansion does not stop short at their own border with Croatia. Croatia and all the former Yugoslav republics deserve inclusion into the EU, with Slovenia holding the door open.
President Janez Drnovsek is the key player here. For over a decade the premier of the country, he is now happy to be an elder statesman, thinking of the long-term destiny of his people. He invited his counterpart in Croatia, Stipe Mesic, to Ljubljana in early May to mull things over. The timing is not quite right. The EU is absorbing 10 new entrants in 2004. It is in the doldrums economically and will need several more years to take on the idea of incorporating the whole Balkans. But when it does Slovenia will be the key
Renault could offer major project to Revoz
The French car maker, Renault, has put Slovenia on the top of the list of candidates for a location for production of a new car model, in an investment worth some 350m, the business paper Finance reported.
According to the management of Rivoz, the Novo mesto-based subsidiary of Renault, the production of the new model would enable Revoz to create at least 700 new jobs, while an equal number of jobs could be expected with contractors. The project would bring investments of 200m into the factory in Novo mesto, an additional 100m into machinery and warehouses of the contractors, and some 50m into R&D. Currently manufacturing 500 cars a day, Revoz would see its production double.
Slovenia's NLB bank opens branch in Italy
Slovenia's largest bank, Nova Ljubljanska banka (NLB), opened its first retail bank office in Italy on 1st October. This way the bank realised its third phase of development, namely the presence of NLB in a neighbouring state, said the bank in a press release, STA News Agency has reported.
By opening a branch office in the border city of Gorizia [Gorica in Slovene], the bank took another step in upgrading its presence in Italy. This happened on the fourth anniversary of the Italian subsidiary of NLB moving from Milan to Trieste, said NLB CEO, Marko Voljc, at the launch.
NLB to solve IT problems by the end of the year
Nova Ljubljanska banka (NLB), which has been plagued by IT problems accompanying the introduction of transaction accounts earlier this year, is expected to eliminate key difficulties in a "very short time." More complex problems, such as making sure that banking instruments are online non-stop, are to be resolved within two months, while the entire system is to function flawlessly by the end of the year, NLB board member, Borut Stanic, told the press, Slovenia News reported.
"The information system did not fail, but it did show certain weaknesses," NLB chair, Marko Voljc said, adding that the management has certainly assumed responsibility for the institution's operations. Voljc said he is leaving it up to the supervisory board to decide about possible further measures if an independent audit shows that weaknesses were indeed crucial. The IT system in Slovenia's largest bank is being examined by the independent auditing company Accenture, which was expected to deliver a full report and recommendations by October 15th.
Motorway company to be restructured
The government has set about restructuring the country's motorway company, filing legal changes in parliament that will transform DARS into a more market-oriented company, Slovenia News reported. In line with the proposed changes to the DARS act, private capital will now be able to participate in the construction of Slovenia's motorways.
Moreover, DARS is to be transformed from a public stock company into a regular stock company. The measures are also designed to bring the sector into line with EU standards. DARS will continue to be in charge of organising and directing the construction, management and maintenance of motorways, according to the changes in question; yet the amendments also allow new contractors to enter the field.
Contract signed to build power line to Hungary
The chairs of the Slovenian and Hungarian electricity grid operators signed an agreement to build a 400-kilovolt power line between the two countries, Slovenia News reported. This will be Slovenia's first electric main with the neighbouring country, and an important international line envisaged in the draft national energy scheme, the Slovenian power company ELEs said. The agreement was signed at Hungary's Heviz by the chair of ELES, Vekoslav Korosec, and the chair of Magyar Villamos Muevek, Laszlo Pal. Hungary has already built its part of the line, while Slovenia still needs to construct some 80 kilometres of this 400-kilovolt power line, complete with optical cables. The power line is expected to be completed by the end of 2007.
IMF lowers GDP forecast for Slovenia
The International Monetary Fund (IMF) has substantially downgraded its estimate for Slovenia's GDP growth in 2003, Slovenia News reported. While the April forecast gave Slovenia a 3.2% GDP increase, the IMF now maintains that GDP growth will only total 2.2% this rear, according to the IMF's World Economic Outlook. The 2004 GDP growth figure has also been downgraded. The April forecast anticipated growth of 3.8%, according to the report published ahead of the annual IMF meeting in Dubai.
FOREIGN ECONOMIC RELATIONS
EU Accession to help relations with Russia
Economic cooperation topped the agenda as Russian Foreign Minister, Igor Ivanov visited Slovenia recently. Both countries' goal of increasing bilateral trade to one billion dollars is ambitious, but realistic, Ivanov said after talks with top Slovenian officials, Slovenia News reported.
Following meetings with his counterpart Dimitrij, President Janez Drnovsek, Prime Minister Anton Rop, and Parliament Speaker, Borut Pahor, the Russian official also noted that Slovenia's upcoming membership i the EU would help bilateral relations in the long run, as well as Russia's relations with the EU as a whole.
Ivanov and Rupel discussed joint projects, especially in energy. Rupel was reluctant to go into detail, but Slovenia has announced recently that it will consider Russia's proposal for the expansion of a gas pipeline that goes through Slovenia. It was pointed out that the exchange of goods accounts for 90% of bilateral trade. Yet growth in the trade of goods slowed down in 2002, the reason for which experts have pinpointed as a lack of new products that would be of interest for both sides.
The next chance to discuss economic cooperation will be when Minister Rop visits Russia, when the Slovenian pharmaceutical firm Krka opens a new plant.
Both sides sees strong potential for joint appearances on third markets, especially in SE Europe. Ivanov stressed that Slovenia and Russia could undertake joint ventures in Serbia-Montenegro, where he also stopped before arriving in Ljubljana as part of his tour of countries of the former Yugoslavia.
Ivanov also welcomed the recent establishment of a bilateral inter-ministerial working group, which is examining Russian-Slovenian relations in the context of EU enlargement. He pointed out that the EU would have to seek political dialogue with its new neighbours and improve economic cooperation. Relations with Russia need to be given special attention, he said. As part of the visit to Slovenia, Rupel and Ivanov also signed an agreement on cooperation between the two foreign ministries.
FOREIGN LOANS & AID
Slovenia received 10.62m euros worth of SAPARD funds in 2002
Slovenia was granted 65 projects worth a total of 2.5bn tolars (10.62m euros) within SAPARD, the EU pre-accession agriculture aid programme, in 2002. The EU contributed 1.7bn tolars (7.2m euros) and Slovenia 800m tolars (3.3m euros) of the funds, the European Commission revealed in a report published on 7th October.
The biggest chunk of the funds, namely 1.2bn tolars (5.09m euros) went for investments into the food-processing sector and marketing of agricultural and fishing products. 550m tolars (2.33m euros) were earmarked for improving farming infrastructure, 448m tolars (1.90m euros) for broad diversification of farms, while 311m tolars (1.32m euros) went for investments into farms.
Given the fact that there was little interest in Slovenia for financing investments into farms, the Commission adopted slightly changed criteria for allocating these funds to Slovenians, namely by abolishing the recepients' age limit, including horticulture in the sectors entitled to funds, and lowering to three hectares the minimal size of a farm entitled to funds.
The Commission's first annual report on all the acceding countries receiving the SAPARD funds, reveals that Slovenia received the least among the 10 countries.
MINERALS & METALS
Privatisation of Steelworks put on hold
The government adopted a scheme for the sale of the Steelworks companies in September 2001, which envisaged privatisation of all four core companies (Acroni, Metal, Nozi and STO) as well as those companies that were not included in the privatisation programme of 1998. The companies were to be sold off by the end of 2003, whereupon the holding was to be liquidated, Slovenia News reported.
The two main objectives of the planned sale were to bolster the efficiency and competitive edge of the Slovenian steel industry by streamlining operations and attaining adequate ownership structure in the companies as well as to realise the best possible purchase price for the state in order to reduce public debt. Both objectives were reflected in the criteria and terms for the selection of the best bidder. The state decided that the potential buyer would be chosen with respect to the expansion of the market share it predicted, its willingness to retain production, provide further investments, its credit status, the purchase price as well as proposed business plan and number of jobs it intended to retain or even increase.
None of the bids reviewed by the commission were found to be suitable. However, the commission says this does not mean that all the bids were bad, but they merely reflected recession on the world market. The unstable economic climate was the main reason the bids did not meet government expectations, and why privatisation was suspended. The shortlisted bidders for the purchase of Acroni were the Italian companies Intersider and Valbruna and Slovenia's Hydria, yet only Valbruna made a binding offer. Negotiations for the sale of Metal were led by Austria's Inteco, which was joined by Prevent of Slovenj Gradec and a consortium of local bidders (Unior, Merkur, Kovintrade, Climos). The nominated bidders for Nozi were IKS Klingelnberg and Euco Industriemesser of Germany, Dutch Asko and US Kinetic.
The state has already managed to sell off the energy companies of the Steelworks concern. Energetika Ravne and Energetika Store were sold to the Slovenian oil company petrol, Energetika-ZJ was sold to the Italian company Sol, and Enos Energetika to local JES Energetika. Moreover, the first of the STO subsidiaries was sold to the leading Slovenian transport company Viator&Vektor. They are to pay 2m for the 80% stake in Sistemske tehnike - and are bound to invest 3.4m and keep on at least 290 workers.
The 12 companies that make up the Steelworks group in total, generated revenues of 312m last year. About a third of the goods sold were exported. The group employs 3,650 workers and works with equity capital of 250m.
Slovene pharmaceutical company opens production plant in Russia
A new Krka plant was opened in Istra near Moscow on 30th September by Prime Minister Anton Rop and general manager of pharmaceuticals Krka, Milos Kovacic. Krka-Rus is Krka's biggest investment abroad, worth US$45m. The plant will produce solid medicines, STA News Agency has reported.
Kovacic said on this occasion that Krka generates over US$70m of sales revenues on the Russian market. The new plant will raise that stake by an additional US$20m to US$30m.
The investment will help Krka - Slovenia's leading exporter to Russia - preserve a place among the leading pharmaceuticals in this part of the world and grant them a status of domestic producer in Russia.
The plan is to make 600 million pills and 240 million capsules a year for the Russian and surrounding markets. Krka-Rus is also the first drug factory in Russia with its own customs facility.
So far the Slovene drug maker has had six branch offices in Moscow, St.Petersburg, Rostov on Don, Novosibirsk, Ekaterinburg and Vladivostok.
The Russian market, where Krka has been present for over 40 years, represents an important share of Krka's total sales. 120 Krka drugs are registered in Russia, the majority of them medicines for cardio-vascular diseases.
In the coming years, the Novo mesto-based [southeastern Slovenia] company intends to add a new research and development centre to the Russian plant. It would employ Russian experts developing new products, announced
Slovenian telco says it's ready for EU
The quality and range of the telecommunication services in Slovenia, as well as the coverage and price competitiveness of those services, are at the very top of the EU accession countries said Peter Grasek, chairman of the Slovenian telco, Telekom Slovenije. Moreover, in some telecommunication services Slovenia even surpasses some of the EU countries, he said, Slovenia News reported. He added that Telekom is well prepared for the upcoming EU accession, a fact important both for the owners of the company and the Slovenian economy as a whole. The landline telephony operator is in majority ownership of the state.
Port of Koper expects state licence fee not to exceed 1m euro
Information that the Port of Koper will soon sign a licence contract with the state has attracted a lot of attention from investors, which has helped the company's shares gain 30% in the past two months, Slovenia News reported. The Port of Koper said in a press release that it does not expect the concession fee to exceed 1m annually. Talks with the government about the licence have been underway since 1996, and a provisional contract was signed in 2000, regulating the lease of the land which houses facilities owned by the company.
The Port of Koper will also consider purchasing the state's ownership stake; the state now owns all preference shares, which is almost half of the company. According to the business daily Finance, the state is to keep 25%, plus one share in the company.
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