% 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: 082 - (01/03/04)
Slovenia the star
Slovenia is unique in Central Europe, indeed among all the former communist states entering the EU IN May. 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. By comparison the other seven former communist 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 of 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, although it has reached over $2bn.
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.
Business ready for the EU
Slovenian managers are not concerned about the upcoming European Union accession, a meeting of managers in Celje showed recently. "With the right approach nothing is difficult," Etol manager, Ivan Ferme, said, noting however, that he expects to face great challenges. Gorazd Korosec, the manager of the hand tool maker Unior, believes that the common European market will bring benefits in terms of supplies, which is very important for an export-orientated company such as Unior.
CEO of the retailer Mercator, Zoran Jankovic, said his company is ready for May 1st. He believes that only three retailers will survive on the Slovenian market in the coming two years. Ferme criticised the state for doing nothing for Slovenian exporters, while it is always quick to collect taxes. He believes that there are high hurdles in foreign trade and that the state is too rigid. Pouring more criticism on the state, Janez Skrabec, the manager of Riko Hise, which specialises in the construction of eco-houses, said that the state is too busy healing the "patients" without perspectives. Riko Hise, which managed to penetrate the Russian market with the assistance of the Slovenian Export Corp, will launch a construction of a hotel in the centre of Moscow this year, a project involving several Slovenian companies worth $100m.
The China connection
The Chinese 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
Mazda 3 named Slovenian car of the year
The Mazda 3 was declared Slovenian car of the year for 2004 at an award ceremony hosted by the national TV Slovenia network, the Slovenian News reported.
Readers and listeners of eight Slovenian media outlets submitted the votes. The participating media - the national radio Val 202 and seven newspapers and magazines, including all three leading Slovenian dailies - received over 55,000 votes. Making it into the final selection with readers' votes along with the Mazda were: the Renault Scenic, Audi A3, BMW 5 and VW Touran. Points awarded by the readers were then supplemented by a jury of the participating media, which based its decisions on the cars' looks, efficiency, functionality, economy, safety and suitability for the Slovenian market. This is Mazda's second title in two years - the Mazda 6 was winner last year.
Accession Treaty gets nod of parliamentary committee
The parliamentary foreign policy committee unanimously confirmed the bill on the ratification of the EU Accession Treaty, and urged the parliament to adopt it, the Slovenia News reported.
Committee members agreed that a lot of work has been accomplished, but the task is by no means over, since Slovenia will now have to affirm itself in the enlarged EU. Foreign Minister, Dimitrij Rupel, labelled the document the "result of years of negotiations." Jelko Kacin, the chairman of the foreign policy committee, stressed that the ratification of the treaty will be a "national success that deserves respect, pride and even some self-praise." This is no ordinary ratification procedure, but "certainly the most important ratification of this mandate and this century," he added. Minister Rupel noted that the Treaty has so far been ratified by 8 current members and 7 newcomers. The bill on the ratification of the EU Accession Treaty was also confirmed unanimously by the parliamentary European affairs commission.
Slovenian electricity consumption up 4.7%
Slovenia's grid electricity consumption rose by 4.7% last year, amounting to 12.12bn kWh, reported New Europe recently.
As the national grid manager, Elektro Slovenije said in a press release, "this means that Slovenia's dependence on power imports is rising and that Slovenian electricity producers operate almost at their maximum capacities." Greater consumption was noticed both on the part of immediate consumers, which used 2.76bn kWh last year - an increase of 75%, and distribution companies, which took over 9.36bn kWh - up 3.9%. Slovenian producers last year provided 12.25bn kWh, which is 6% less than the year before. Lower production figures are a result of unfavourable weather conditions, since hydro-electric power plants depend on precipitation.
FOOD & DRINK
Ljubljanske Mlekarne wins 50% + of Bosnian dairy
Slovenian leading dairy Ljubljanske Mlekarne has announced that it has bought a majority stake in a Tuzla-based dairy in Bosnia and Herzegovina, the Reporter News said.
The purchase is part of the company's integration process which is especially important with Slovenia's upcoming entry to the EU, the company said. As part of the process, it has already incorporated the Kranj and Maribor-based dairies and the Tuzla dairy is a step in this direction as Bosnia is another very important market for Ljubljanske
FOREIGN ECONOMIC RELATIONS
FM attends his first OSCE troika meeting
The Foreign Minister, Dimitrij Rupel, attended the first ministerial of the new troika heading the Organisation for Security and Cooperation in Europe (OSCE) with heads of OSCE institutions, the Slovenia News reported.
The troika includes Slovenia, which will take over the OSCE presidency next year, Bulgaria, the current presiding country, and the Netherlands, which was at the helm last year. The officials discussed the priorities of Bulgaria's 2004 presidency, as well as the situation in Georgia and Moldova. After meeting with Bulgarian counterpart Solomon Pasi, and head of the OSCE project group at the Dutch Foreign Ministry, Ambassador Daan Everts, Rupel said that one of the chief tasks of the OSCE would be to integrate the operations of various organisations in conflicting areas like Georgia. The OSCE is the organisation with reliable data, trained experts and the reputation and stability of an international institution, he stressed, adding that only OSCE can therefore integrate the projects of the various organisations to make the resolution of problems faster.
Slovenia at the helm of CEI
Slovenia has assumed the presidency of the Central European Initiative (CEI), the Slovenia News reported.
Given that seven CEI members will become EU members in 2004, Slovenia plans the 17-member forum to focus on the states that will stay outside the EU, as well as to the cooperation with other initiatives in the region. As Slovenian PM, Anton Rop, said at the last CEI summit in Warsaw, new borders should not create new divides, which is why Europe should use all means available to diminish the development gap between the EU member states and the countries outside the EU. During its spell at the helm of the CEI, Slovenia will shift the centre of activities to the countries of East and SE Europe, which are still making efforts to join the Union, Rop stressed.
Higher turnout in spa resorts
Slovenian Health spas have seen their business increase by 3% in 2003, as 495,416 visitors took a dip in their pools and enjoyed their other amenities, the Slovenia News reported.
An especially encouraging sign is that the increase was actually caused by foreign tourists, who turned out in greater numbers than ever before: their number in 2003 increased by 5.8% to almost 206,000. The number of Slovenian visitors grew by 1% to about 290,000 in the previous year, the Association of Slovenian Health Spas reported. The number of overnight stays in spa resorts increased by 0.8% to 2,423,886. The lion's share of foreign tourists came from Austria, Italy, Germany, Croatia, and Russia.
Direct freight train to run between Ljubljana and Bologna
A freight train called "East-West Rail Shuttle" is to start running between Ljubljana and the Italian city of Bologna, Slovenia News reported recently.
The train - operated jointly by the Slovenian Railways and Italy's Trenitalia - will run five times a week, the Slovenian rail operator announced. The 550m long shuttle is to complete the 400km journey without stops in ten hours, carrying up to 1,000 tonnes of cargo. Initially, ceramics and household appliances will be hauled from Italy to Slovenia, while steel products originating from Croatia, Hungary and Serbia-Montenegro will be the main cargo the opposite way. In Ljubljana - Slovenia's main railway hub - the shuttle connects to an international rail network leading to eastern and Southeastern Europe. The Bologna terminal, meanwhile, will serve as the starting point for the distribution of goods throughout Italy. According to Slovenian Railways chairman, Blaz Miklavcic, East-West Rail Shuttle is merely the first product developed in conjunction with Trenitalia. It is expected that the two rail operators will sign an agreement on the establishment of a direct link between Ljubljana and Milan
Luka Koper injects fresh capital into Trieste Terminal
Luka Koper, the manager of the Slovenian port of Koper, has become the 100% owner of the Trieste International Container Terminal (TICT), after having injected €700,000 of fresh capital into the company that manages the seventh terminal of the Trieste port, reported Slovenia News recently.
It has been agreed that a 30% stake in TICT would be taken over by the Italian company TO Delta of Livorno, Luka Koper said. The agreement still needs the seal of approval by the Trieste Port Authority. The decision to supply TICT with fresh capital was made by the company's shareholders. The other two TICT shareholders, Udine's Midolini Flli and Trieste's Adria Distripark, refused to take part in the capital increase. In 2003, TICT recorded revenues of €8m and losses of €500,000. TO Delta is expected to bring increased traffic, which should rise from the current 80,000 units to 120,000 units of cargo.
Transport ministers discuss future of 5th pan-European transport route
The four countries of the Quadrilateral partnership are well aware of the importance of their infrastructure in the fifth pan-European transport route for the future Europe, Transport Minister, Jakob Presecnik, has said after hosting a meeting of his counterparts from Croatia, Italy and Hungary, STA News Agency reported.
The meeting of the transport ministers from the four-nation partnership, which took place on Monday [26th January] at Brdo pri Kranju, paid special attention to the fifth pan-European transport corridor that runs from Barcelona to Kiev.
Coming out of the meeting, Presecnik stressed that the countries will check the possibilities for intensifying the modernization process of transport infrastructure that makes up the fifth corridor.
Slovenia, he said, views a rail connection between the Slovene port city of Koper and the Italian port city of Trieste as a project of special importance, he explained. Presecnik and his Italian counterpart, Pietro Lunardi, agreed that the Koper-Trieste rail line should be included among the priority projects on the fifth pan-European route.
Several potential transport connections between Slovenia and Italy exist, which is why we must first decide on the priorities, Presecnik added. The rail connection Koper-Trieste would also depend on future cooperation between these two ports, the minister added.
The Slovene minister underscored that closer cooperation was needed in coordinating the construction of infrastructure of the fifth corridor, which is why he proposed that bilateral meetings are held so that the construction of the missing links in the corridor may be carried out more effectively.
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