% 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: 081 - (01/02/04)
Slovenia the star
Slovenia is very much the odd-man out in Central Europe, indeed among all the former communist states. On a purchasing power parity basis, it actually has a GDP per capita higher than that of Greece or Portugal, already both in the EU, which it is joining in May. It is here in the same boat as another entrant, Cyprus. By comparison the other eight newcomers in the current enlargement have a per capita income barely 40% of the EU average.
Its GDP per capita came in at $16,000 in 2001 and has reached nearly $18,000 by now after growth of 2.5-3.5% in GDP since then. Inflation is still a problem, but Slovenia can certainly aspire to be the first of the entrants to join Greece in Euroland, ahead of Poland the Czech Republic and Hungary.
Although Slovenia enjoys this GDP per capita advantage over the other transition economies of Central Europe, it needs to speed up the privatisation process and the dismantling of restrictions on foreign investment. About 45% of the economy remains in state hands, and the level of foreign direct investment inflows as a percent of GDP is the lowest in the region.
Foreign investment has not been encouraged because the Slovenians fear, not without reason, that mafia elements from Italy and the Southern Balkans, notably Albania and Montenegro, would rapidly move in if restrictions on foreigners owning land and property were relaxed. Indeed, they would have reason to beware of Serbian gangsters too, implicated in many a scam in the region and not a few assassinations, as of Premier Zoran Djindjic of Serbia in March.
It is not only gangsters, however, who appreciate Slovenia's superb location as the gateway to the Balkans. So do legitimate businessmen. From May the republic will, moreover, be a Balkan gateway to the EU for other Balkan businesses and for those from further afield.
The China connection
The Chinese are a pertinent partner here. They are always on the look-out for a reverse Hong Kong, with which to establish a bridgehead in foreign regions. They have hit on Slovenia as the ideal entrepot for the Balkans and Central Europe. The port of Koper is becoming a good entry point for Chinese goods into these regions.
Slovenian companies are also very interested in the Chinese market. The Ljubljana-based International Centre for the Promotion of Enterprises is the favoured forum for planning for future cooperation between the two sides. The Slovenian Export Corp. is to sign an agreement with a kindred organization in China, after a visit late last year to the Balkans, and notably Slovenia, by the Deputy Minister for Chinese Development and Reform Commission, Zhu Zhixiang.
He met Slovenia's Economics Minister, Tea Petrin, who said: "Now that Slovenian companies are already present on the Chinese market with exports or even their own production facilities, there is the question of where to find additional opportunities for cooperation."
Zhixiang replied that there are opportunities in environmental technologies and the automotive industry. The bulk of trade is conducted in Pharmaceuticals, engineering and electric components. Both countries see the largest window of opportunity in the knowledge-based industries. The one thing that communism has done is give their populations an excellent education in the exact sciences and mathematics. Their 14 year-olds do very well in international comparisons of literacy and numeracy, so prized on the world-wide web and the new industries emerging on the internet.
Slovenia now enjoys not only geopolitical, but financial, autonomy. GDP growth of 2.9% in 2001 and again in 2002 has been steady if not spectacular, sufficient to finance return of debt.
Slovenia is going to be financially independent by next year, says the central bank chairman, Mitja Gaspari. "Slovenia has become independent of international sources of finance and is therefore indirectly making a transition to the group of developed countries that finance the less developed," he said recently at the annual meeting of the IMF and the World Bank.
Its credit rating with Moody's Investors Service is excellent at Aa3 for foreign currency bank deposits and bonds. It has a strong record of prudent fiscal and debt management, including the use of the proceeds of privatisation to pay back debt.
The latest annual report by Moody's on the republic is positive. "The credit ratings are also supported by the performance of public and private sector managers with decades of experience in EU markets, and consensus views across the political spectrum on economic issues," said Jonathan Schiffer, Moody's vice president and senior credit officer, and author of the report.
According to Schiffer, the ratings of the country are constrained "by moderate but stubborn inflation, public sector and social welfare spending that needs to be reduced, and an inflexible labour market in which wages and other labour costs are not sufficiently contained."
The report noted that the recent upgrading of Slovenia's foreign currency ceiling to Aa3 from A2, bringing it in line with the Aa3 domestic currency rating, "reflects the advanced economic and financial integration of the country with the European Union, as is evident by the recent invitation to join the EU by 2004."
Schiffer highlighted in the report that the risk of a foreign currency crisis that "could lead to systemic interruption in foreign currency debt servicing by issuers domiciled in this country" is continuously and significantly "reduced." The author stressed that elimination of all foreign currency transfer risk would occur only at the time of entry into EMU.
Foreign investment and acquisitions
The sale of state assets to private investors has gathered pace in the 2000s. In 2002 Slovenia's leading Nova Lubljanska Banka was acquired by KBC Bank, while the Swiss giant Novartis bought up the leading drugmaker, Lek. These two deals nearly doubled the amount of FDI in the country, modest to date at $2bn.
Lek is doing brilliantly under its new management. It is becoming the regional centre for Novartis, from which foreign acquisitions in other countries are being made, as well as a big export drive.
This year's sales figures will not yet show the effect of additional products made for the new owner, Swiss pharma group Novartis. "These effects will be visible next year, when we take over the marketing of Novartis products for central and eastern Europe," a spokesman said.
The company's profits are in line with plans, outperforming sales growth. Yet profits are also heavily affected by considerable provisions that Lek has to make to tackle risk management. The release of provisions depends on the course of patent disputes and procedures related to intellectual property rights.
Lek will have invested heavily this year, earmarking 84.8m Euro for investment spending. The two largest investments are production facilities abroad, in Poland's Styrkow and Romania's Targu Mures, through which Lek will supply the local markets.
The company is also undertaking extensive works in all of its facilities in Slovenia, including a new plant for the production of pills in Ljubljana, the expansion of Lek's sodium clavulanate production of several smaller facilities in Menges, near Ljubljana.
The spokesman also mentioned legal proceedings that certain companies have launched against Lek, most notably in the US, which is rapidly becoming Lek's largest market with sales expected at 170m Euro this year. "Lawsuits against generic-drug makers are nothing unusual in the US," he said, "but they are expensive and take a lot of energy."
Slovene agriculture minister warns of trade difficulties after EU admission
Upon being admitted to the European Union in five months' time, Slovenia's agriculture and food-processing industry might encounter major difficulties due to the country's ties to the former Yugoslav markets, Agriculture Minister, Franci But, has said, adding that goods from Croatia and Macedonia might threaten Slovene production on the domestic market due to lower customs duties, HINA News Agency reported.
"We expect the European Commission to put in agreements it has with Croatia and Macedonia the quotas we have with them on the basis of free trade agreements," But said. He explained that the prices of Croatian and Macedonian produce might threaten Slovene manufacturers due to the stabilization and association agreements they have with Brussels.
But added that owing to its familiarity with the markets, Slovenia might get a heftier share of the European export quota to Macedonia and Croatia.
Prevent Group Posts 500m Euro in Revenues
Despite lower than anticipated revenues, the Slovenj Gradec-based Prevent group is pleased with its operations in 2003, which brought it some €500m, Slovenia News reported recently.
The group, which has expanded its operations from its core car-seat cover production to construction, wood and metal industries, and logistics, generated €6m in profits, about the same as the previous year. Employing some 9,000 people worldwide, the group's exports amounted to €300m, and that is also the amount of revenues posted by the car-seat cover production. General manager Joze Kozmus expects to increase output, exports and profits by 10%. The group last year achieved the strategic goal to generate 30% of revenues in sectors other than the automobile industry. "We have proven that our guidelines and investments in these sectors were correct," Kozmus said.
Abanka Vipa Largest Broker of 2003
The bank Abanka Vipa was the biggest broker on the Ljublijana Stock Exchange (LJSE) in 2003 for the third year running. The bank generated a turnover of €400m on the official market, grabbing a market share of 13.94%. The bank reported that turnover exceeds last year's by merely 1.3%. Yet since the overall turnover on the market was much lower, its market share increased from 9.74% in 2002 to almost 14% the Slovenia News reported recently.
Slovenia to get over 426m euros from EU structural funds
In the next three years, the EU is going to earmark altogether just over 22bn Euros of funds from the structural and cohesion funds for the 10 new members. Slovenia is expected to get 426.5m euros, Radio Slovenia has reported.
With this, the EU Commission confirmed in Brussels that the negotiations on the strategy for the acceding countries to draw from the structural funds had been completed successfully.
Simobil launches 3G EDGE technology
Simobil, Slovenia's second mobile operator, is to upgrade its GSM/GPRS network with EDGE technology (Enhanced Data Rates for Global Evolution), which noticeably enhances the capacities of the GSM/GPRS network and enables four times the data capacity of GPRS, Simobil CEO Bojan Dremelj told a recent press conference, SBW reported.
According to Dremelj, the first 100 Simobil base stations were to be upgraded in the second half of January 2004 in Ljubljana and Maribor, while EDGE is to be commercially launched in mid-March. Simobil's investment into the new technology is to amount to 3.5m Euro for the upgrade of the first base stations, while another 4.5m Euro will be needed for Simobil to cover entire Slovenia with the new mobile telephony technology.
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