SLOVENIA

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Area (sq.km) 
20,273

Population 
1,935,677

Capital 
Ljubljana 

Currency 
Tolar 

President 
Janez Drnovsek

Private sector 
% of GDP 
40% 

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Update No: 091 - (26/11/04)

Surprise new government
After consultations with party leaders and two representatives of national minorities, President Janez Drnovsek proposed to parliament that Janez Jansa, leader of the Slovene Democratic Party (SDS), be asked to form a government. Parliament ratified duly the new centre-right government at the end of November.
Jansa's elevation to the prime minister's seat was not in question since the parliamentary elections, which were held on 3 October. The SDS managed to overturn ten years of nearly unbroken dominance by the Liberal Democratic Party (LDS) by almost doubling its popularity in four years, from 15.8 per cent in 2000 to 29.0 per cent. 
The question, though, was with whom the SDS could partner. The SDS feared it would have to seek the support of the extreme right Slovene National Party (SNS) in order to form a majority government. 
Rather than do that, it chose at first to question whether the weakest party in parliament, the Pensioners Party (DeSUS), had barely crossed the 4 per cent threshold needed to gain seats. The party won only a few hundred more votes than it needed. If the DeSUS had not, the SDS and its likely centre-right partners--the Slovene People's Party (SLS) and New Slovenia (NSi)--would have had gained just enough extra seats to eke out a majority. 
Ultimately, after asking several electoral commissions for a recount, the SDS withdrew its challenge to the vote. Ironically, it was then the DeSUS that ensured the SDS could lead a majority coalition. Despite protests within its ranks, the DeSUS has decided to enter a coalition following an offer from Jansa that was, in the words of the DeSUS' leader Anton Rous, "too good to be true." 
The SDS, the SLS, and the NSi together hold 45 mandates, exactly half the number of seats in parliament. With the DeSUS, they have 49 or what Jansa calls a "minimal majority."

The prime minister-to-be
Janez Jansa first wrote himself into Slovenian political consciousness in the last years of the communist era. In 1988, he became a popular figure after the Yugoslav army arrested him with three other political dissidents, accusing them of divulging state secrets. The fact that the case (widely known in the former Yugoslavia as the JBTZ case) was heard in an army court and in Serbo-Croatian triggered the first mass demonstrations in Ljubljana in the communist era, showing in the process that the notion of an independent Slovenia was more popular than some in the communist leadership had realized.
In 1990, Jansa became defence minister in the first Slovenian independent government. He set up the Slovenian army, which in 1991 proved strong enough to withstand attack by the JLA, the ex-Yugoslav army. He was defence minister until 1994, when his career came to an abrupt end after army officials beat up an employee of the Interior Ministry. Even if the circumstances are still blurred, it was clear that the interior and defence ministries were surveying each other. Jansa was held responsible for the incident and dismissed by Drnovsek, who was prime minister at the time.

Shape of new government?
It is still unclear what Jansa's comeback might mean for Slovenia, particularly since the SDS changed its official name in September 2003 from the 'Social Democratic Party.' In the run-up to the elections, the centre-right SDS, SLS, and NSi--which like to be known collectively as the "spring parties" to signify the new life they offer after "a long, hard LDS winter"--promised to cut taxes and to lower public spending. Some therefore argue that the role of the welfare state might shrink. 
But it already appears to have gone against its promise of "smaller government" by indicating that it will increase the number of ministries from 14 to 15. There is also a question about the influence of the DeSUS. While a deal is not yet concluded, it looks likely to gain some important posts, including a ministry, and they are certain to try to link pensions to any rise in salaries.

Natural swing of the pendulum responsible for change; but other factors too
Many in the LDS have tried to soften their major defeat--the party's support fell from 36.3 percent in 2000 to just 22.8 percent--by stressing that Jansa's victory should be seen as a natural desire for change after more than a decade of LDS-led governments.
However, several other factors almost certainly helped Jansa. First, Drnovsek lost some of his influence over the party and the electorate after he became president.
Second, two big projects--gaining membership in the EU and NATO--had been successfully completed by the elections, and though the LDS sought to parade them as their achievements the electorate was already looking to other issues. 
Last but not least, the problem of "erased people" came to fore. This is a group of around 18,000 former Yugoslav citizens whom the state stripped of their right to permanent residence in Slovenia--illegally, in the view of the Constitutional Court. Jansa opposed the court's decision, cultivating a nationalist atmosphere that ultimately proved fertile for the "spring parties." 
This unsolved issue will probably be Jansa's most difficult challenge. The very possibility that the new government might have a different policy towards minorities was also the reason why the two parliamentary representatives of national minorities cautiously said, after Drnovsek consulted them, that "there are a lot of unanswered questions before we give Jansa our support."
Non-Slovenes, Roma, women's groups, and homosexuals are all concerned about the policies that Jansa might pursue. Jansa recently attended a demonstration against Roma in front of parliament at which he publicly stated that "we have problems between Slovenes and gypsies because gypsies have more rights than Slovenes."
Normally the prime minister and president--whose seats are protected by the constitution--stay out of party politics if the balance of power in parliament is at stake. Now, though, it seems that the constitutional assurances are not enough for them. 

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BANKING

Banking sector flourishing

An Austrian bank is scheduled to enter the Slovenian banking market with a branch office opened in Ljubljana in November. A universal bank for households and companies, Bank fuer Kaernten and Steiermark (BKS Bank) is a regional bank established in 1922 by industrialists from the Austrian province of Carinthia, Slovene press agency reported.
Its majority shareholders are two banks - Oberbank and Bank fuer Tirol in Voralerberg - which jointly hold a 37% stake in BKS Bank. The 3 form group "3 Banken Gruppe," the 7th largest bank in Austria. The group is present in Austria and its neighbours.
Each of the 3 banks operates under its own name, board member Heimo Penker told a news conference in Klagenfurt. By using the synergy resulting from the cooperation, however, they can operate on the market as one large bank. BKS Bank's total assets amounted to €4.2bn at the end of 2003, which gave the bank a 10% market share in Carinthia. In terms of loans to businesses, on the other hand, the bank held a 15% share. Its 2003 revenues were €107.1m and profit €41.2m.
The bank, which has 54 branch offices and employs 742 workers, has been present in Slovenia since 1998 through BKS Leasing, a company whose annual revenues are around €50m. The bank's new branch office in Ljubljana will initially focus on loans, companies will be offered long-term and short-term investment loans as well as credit for current assets and guarantees. Its retail banking is expected to be centred on long-term mortgage loans, and short-repayment consumer loans.
BKS Bank had expected the volume of loans in Slovenia to reach €30m in the first year. The bank will examine next year the possibility to introduce savings accounts, investments and investments to funds; some of the services could be introduced in 2006. When Slovenia introduces the Euro, the Austrian bank is planning to undertake payment transactions. Another branch office could be opened in Slovenia after 2007.

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ENERGY

OMV becomes owner of OMV Istrabenz

Austrian oil trader OMV Marketing & Refining has officially become the owner of the other 50% of OMV Istrabenz after striking a deal worth €95m with its partner in the joint venture, Slovenia's Istrabenz, in June, STA reported on October 10th. According to the news agency, OMV has already paid the first instalment of €55m and is due to pay the second instalment - €40m - within 15 working days. While Istrabenz has dropped its oil derivative business, it has decided to continue cooperation with OMV in liquefied petroleum gas, oil derivatives storage and information technology. As Istrabenz said in a statement, it will remain active in the energy business and would continue to pursue a strategy aimed at boosting its three core businesses of energy, tourism and investment. When Istrabenz withdrew from OMV Istrabenz, the Vienna-based OMV agreed to sell its 25% stake in Istrabenz for €40m.

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FOREIGN ECONOMIC RELATIONS

Romania and Slovenia to enhance business ties

The standing Romanian-Slovenian commission on business ties held a session on October 15th in Ljubljana. Economics Minister State Secretary, Renata Vitez, headed the Slovenian delegation at the talks while Economics and Trade Ministry State Secretary, Georgeta Molosaga, led the Romanian delegation, Slovene press agency reported.
Both countries examined ways to boost cooperation in finance, regional cooperation, clustering, agriculture, tourism and competition promotion. The two delegations even exchanged information on the current economic trends in the respective countries and took the opportunity to review the progress in business ties since the commission's last session in October 2003. Romania is an important potential market for Slovenian companies. Also, the country is expected to join the EU in the near future, the Slovenian Economics ministry said. Trade between the two countries is not great given their proximity, amounting to 161.33m Euro in 2003, of which 91.1m Euro were Slovenian exports.

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FOREIGN INVESTMENT

Austria and Switzerland biggest investors in Slovenia 

Companies from the EU and Switzerland are the biggest foreign investors in Slovenia, according to a report on foreign direct investment (FDI) between 1994 and 2003 that the Bank of Slovenia confirmed recently. Slovenian firms, on the other hand, invest mostly in countries of the former Yugoslavia, Slovenia News reported.
Foreigners have invested in 5 per cent of all Slovenian companies. At the end of 2003, they held 18.5 per cent of the total capital, according to the report. 
Investors from the EU accounted for 68.5 per cent of all investment. Austria has the biggest share of FDI, worth 1.18bn euro. 
Switzerland is at second place with 1.12bn euro, a value roughly corresponding the takeover price of drug maker Lek, which was acquired by Novartis in 2002. 
Germany is in third place and France in fourth, the Bank of Slovenia said in a news release after a meeting of the board of governors. 
Slovenian enterprises also invested heftily, mostly in Southeast Europe, with cumulative outward FDI topping 1.85bn euro. 
Croatia tops the list of outward FDI with investments worth 609.8m euro. Although the value of investments in Croatia has been increasing, Croatia's share in overall outward FDI dropped to 33 per cent by the end of 2003. 
The second most important FDI destination was Bosnia, which had an 11.2 per cent share, followed by Serbia-Montenegro. 
Broken down by industries, most outward FDI ended up in manufacturing (58.5 per cent), chemical industry (18.3 per cent), engineering and machinery industries (6.8 per cent) and food industry (6.1 per cent).

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PHARMACEUTICALS

Lek opens new production unit in Ljubljana

The Ljubljana-based drugmaker Lek, which is part of Swiss pharmaceutical Novartis and its generic group Sandoz, opened on October 6th its first unit of organic synthesis in Slovenia in an investment worth 2bn tolars (€8.33m), according to STA. Located at Menges near Ljubljana, the unit would produce ingredients for the drugs used in the treatment of high blood pressure and cholesterol, which the company decided to sell on the most demanding markets of the European Union, the United States and Japan. The plant boasts European environmental standards, high safety standards for its employees and high level of automation, Igor Bosevski, director of the Menges Production unit, said at the opening ceremony. The unit makes part of the production facility for manufacturing biopharmaceuticals, which was opened back in February in an investment of €18m. Stretching over 2,800spm, the facility is the first production unit of its kind in central and eastern Europe.

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TELECOMMUNICATIONS

Mobitel signs licence contract in Kosovo

Mobitel, Slovenia's largest mobile services provider, became the second mobile operator in Kosovo after months of dispute came to an end with the signing of a licence contract on October 21st, Slovene press agency reported. 
Mobitel and its local partner Mobikos signed the €6.5m worth agreement with the Director of the Kosovo Agency for Telecommunications, Anton Berisha, Mobitel said in a statement. Under the contract, Mobitel and Mobikos will invest €200m in the first 18 months. By the end of this period, they have to cover 40% of Kosovo with their signal.

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TOURISM

More and more foreigners visiting Slovenia

Slovenia recorded up to a 9% increase in the number of tourists visiting the country in the first 9 months of the year, the Slovenian Tourist Board (STO) said on October 22nd, Slovene press agency reported. 
STO noted that Italian tourists were up 7% year-on-year, while Spaniards were up between 30 and 40%, Britons between 30 to 50% and Americans between 26 and 28%. The figures for the first three quarters suggest that the summer season is no longer crucial, as tourists are visiting Slovenia throughout the year, the STO officials told a news conference held as part of the annual tourism forum dubbed the Slovenian Incoming Workshop.
In order to boost this trend, the STO plans to base its 2005 strategy on attracting foreign tourists by promoting no-frill airlines, online advertising and individualised packages, STO Director General Bojan Meden announced. He pointed out that the number of tourists flying in with budget airlines has risen considerably, although the lack of low-cost routes remains one of the biggest setbacks for Slovenian tourism.
The insufficient number of routes is particularly evident in the case of Italian tourists. While around 770,000 Italians are expected to visit Slovenia this year, the STO would like to see the annual figure amount to one million, Boris Bajzelj of the STO office in Italy said.
Moreover, the STO planned to strengthen its marketing next year on the French, Spanish, British and Scandinavian markets, and promote congress, business and fitness tourism. The Slovenia Incoming Workshop, the largest tourism exchange in Slovenia, gathered some 185 foreign tour operators, notably from Germany, Italy and Austria, in the seaside resort of Portoroz.

Ljubljana Sees Number of Tourists Soar from 1997 

The number of overnight stays in Ljubljana increased by 42.4 per cent between 1997 and 2003. This puts the Slovenian capital on top of a list of 35 major European cities surveyed by the European Cities Tourism network, Slovenia News reported.
Berlin came in second with a 41.8 per cent increase and Reykjavik third with a jump of 40 per cent.
Ljubljana had a 6 per cent average annual increase of overnight stays in this period, as opposed to 2.5 per cent for all 99 cities that make up the network. 
European Cities Tourism is a professional tourism network promoting and linking the tourism interests of European cities. The network connects major cities from 30 countries.

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TRANSPORT

Cargo train service opens between Turkey and Slovenia

A cargo train service was launched between Turkey and Slovenia on October 21st as the train "East Express" left Istanbul's Sirkeci train station. During the ceremony held at the train station, Talat aydin, acting director general of Turkish State Railways (TCDD), said this train service would increase trade volume with Slovenia and other surrounding countries, Slovene press agency reported.
On the other hand, Blaz Miklavcic, the director general of Slovenian Railways, stressed the importance of boosting economic relations in their region.

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