Books on Slovenia
% of GDP
Update No: 098 - (01/07/05)
Economic success story
During the accession process into the EU last year, Slovenia and its highly
educated officials (like the bulk of the population in fact) won high praise
from the European Commission for its reforms, many of which took place back in
the 1990s. When it entered the Union, it did so with the highest standard of
living of the 10 new member states.
A year later, it has built on that success, with a 12 percent increase in
exports and growth at 4 percent of gross domestic product (GDP). Slovenia has by
far the best economy in the entire former communist world, with a higher GDP per
capita than Greece and Portugal, who both joined the EU in the 1980s.
IMF forecasts 4% growth for Slovenia this year
The Slovenian economy will expand by 4% annually in 2005 and 2006, according to
the World Economic Outlook, a report released by the International Monetary Fund
(IMF). The IMF believes inflation will stand at 2.6% this year and 2% in 2006.
According to the report, Slovenia entered the ERM II exchange rate mechanism in
June 2004 (not the same thing as full membership of the euro, but a prelude to
it), reducing inflation to the Maastricht criterion level and maintaining
competitiveness. Other matters, including labour market reforms and wage
policies, present a continuing policy challenge.
For what it calls "emerging European markets", the report says that
they face two main challenges: the continuing economic gridlock in Western
Europe and appreciation of the euro. IMF warns that those countries that are
awaiting the euro must push through with structural reforms and carry out fiscal
Compared to other EU newcomers, Slovenia's expected growth is solid. Only Baltic
economies, which are set to grow at a rate of 6.9%, and Slovakia with 4.8%, will
grow faster, the report suggests.
Other reports, however, aver that GDP is expected to grow by 3.8% this year and
3.9% in 2006, while its inflation rate is due to fall from 3% this year to 2.7%
next year, justifying its membership of the Euroland club. This development
should put a cap on its successful performance and encourage one thing lacking -
abundant foreign direct investment (FDI). FDI is barely over $2bn to date, a
poor showing for such a promising place.
Catching up with the EU
Not content to stay at No. 16 among the 25 members of the expanded Union,
Slovenia's government has set an ambitious target: to reach the EU's average
standard of living within eight years, for which more FDI is essential.
Actually, there are of course other things lacking too. A new tax code came into
force in the New Year on January 1st. But it is proving opaque and cumbersome
for business. It needs to be simplified. A look at Estonia and Russia would not
be amiss here, both with buoyant economies, albeit from considerably lower bases
than Slovenia's, after adoption of greatly simplified tax regimes.
The government economic panel, an inter-ministerial body, has advocated a
re-think of the whole matter. It advised the setting-up of a task force to
deliberate the best way forward to fiscal soundness and probity.
Slovenia is also one of just three former Eastern-bloc states - the others are
Estonia and Lithuania - seeking to adopt the euro in 2007.
Both these choices could prompt sharp changes in a country that has prided
itself in the gradual nature of its transition, and the political and social
consensus that has accompanied it.
The historical roots of success
It is generally acknowledged that the roots of Slovenia's current success were
laid down well before the country decided to opt for EU membership. Yugoslavia's
softer brand of socialism had exposed Slovene companies to market economics,
indeed, well before the country declared independence in 1991.
With its proximity to Western Europe and a well-educated work force, Slovenia
was the hub of Yugoslav exports to the West. With just 8 percent of Yugoslavia's
population, Slovenia generated 20 percent of the socialist federation's gross
domestic product. Slovene efficiency, attributed by some to 600 years of
Hapsburg rule, was a source of admiration, jealousy and humour in neighbouring
Yugoslav states. "Laws are drafted in Belgrade, read in Zagreb and
implemented in Slovenia," ran one joke.
"Slovenia was the most developed area of Yugoslavia," said Anton Rop,
Slovenia's prime minister at the time of EU accession. "It wasn't so
dramatic for us to open our borders in the 1990s. We were in a favourable
position" and had a strong service sector and less 'rust-belt' heavy
industry to reform compared with other former Communist-bloc states, he said in
The crossroads of the region
It is not only history that is marking out Slovenia for a great destiny; so
is geography, or rather a new historical geography and geopolitical status
Slovenia now sees itself as a bridge between East and West, particularly for the
former Yugoslav states, which at one time shared the same legal framework as
Slovenia. Slovene civil servants have been seconded to other former Yugoslav
states, including Serbia, to help implement reforms. With Serbia, Croatia and
other ex-Yugoslav states still outside the European Union, Slovenia has also set
up a Centre for EU Integration Support in Ljubljana that offers short-term
programmes to help applicants adopt EU reforms.
Two Slovenes are currently playing a prominent role in the shaping of European
policy. Janez Potocnik is the EU's commissioner for science and research,
responsible for one of the commission's largest budgets. Slovenia's foreign
minister, Dimitrij Rupel, is also chairman of the Organization for Security and
Cooperation in Europe, which is not part of the EU but is one of the main
instruments of encouraging democratic development in areas such as former Soviet
Central Asia and the Balkans. Almost everything is looking good for the
Banka Koper to sell 14.5% stake in Cimos
Banka Koper intends to sell its 14.5% stake in Cimos, the Koper-based supplier
of the automotive industry, because the bank does not function as a strategic
partner in the company and its stake cannot be considered a portfolio investment
either, it was reported recently.
The daily Delo reported in April that the bank is preparing a due diligence and
a valuation of Cimos. Cimos Chairman, Franc Krasovec, said that the company is
worth between 300m Euro and 450m Euro. Krasovec noted that there is no single
owner in Slovenia who is capable of acquiring the shares. He added that Banka
Koper would not allow a hostile takeover that would undermine its operations.
"We have become a well-known development supplier, ranking in the world's
first league of producers," Krasovec was quoted as saying. Currently, the
Cimos group employs around 6,800 people. It plans to set up a new development
strategy to be based on four divisions: automotive production, energy, farming
machines and machine construction. The group is expected to generate 2bn Euro in
annual revenues within the next 10 years.
FOOD & DRINK
Pivovarna Lasko halves Q1 loss
Slovenian brewer Pivovarna Lasko cut its first-quarter net loss to 114.6m tolars
(478,000 Euros) despite sales of only 3bn tolars (12.5m Euro), down 12.4%
year-on-year, Slovene Press Agency reported.
The supervisory board decided that shareholders will get dividends of 50 tolars
(0.21 Euro) per share, only half as much as in 2004. Lasko announced that a net
loss is typical for the beverage industry in the first quarter of the year. Even
volume sales were also down. The brewery sold 188,151 hectolitres of beer and
water in the first three months of 2005, 13.2% less than the year before. This
is 15.8% of the total volume planned for the year. The supervisory board has
also decided that the annual general meeting will be held on June 17th.
Shareholders are expected to back the distribution of distributable profit
whereby dividends would be at 50 tolars per share while 5.3bn tolars (22.1m
Euro) will remain intact.
Ljubljana, Bratislava discuss improved cooperation
Slovenian Transport Minister, Janez Bozic, met his Slovak counterpart, Pavol
Prokopovic in Bratislava on May 19th to discuss ways of boosting bilateral
cooperation in road, rail and air transport. During the talks, both sides
established that the only Slovenian commercial port was one of the main ports
for Slovak companies. Bozic said that last year the port of Koper transhipped
300,000 tonnes of cargo for Slovakia, Slovene press Agency reported.
Meanwhile, Prokopovic was eager to learn about progress in the construction of
the pan-European transport corridor, which links the Adriatic and Eastern
Bozic told him that Slovenia was concluding the construction of the first part
of the route, between Koper in the SW and Sentilj in the NE. The pair agreed
that there were no problems between their countries in road transport. Both
ministers also established that the volume of cargo transported by rail between
the two countries almost tripled after the opening of a direct railway link
between Slovenia and Hungary at Hodos in 2001. Other issues discussed public
procurement procedures for the construction of road infrastructure in Slovakia
and shared air control between eight Central European countries under the
Central European air Traffic Services (CEATS) agreement. Slovakia wants the
project to continue but Bozic elucidated that Slovenia would like to establish
special partnership among the participating countries. Austria, Slovakia and
Hungary are the most fervent advocates of the agreement while Italy, Croatia and
Slovenia have not ratified it yet.
Bozic has recently said Slovenia would not ratify the deal until it was
guaranteed an equal role in the plans.
Engrotus posts higher revenues and sales in 2004
Engrotus, the third major retailer in Slovenia, raised revenues by 35% to 374.2m
Euro last year, while net profit reached 11.2m Euro, an increment of 16.6%
compared to the year before, Engrotus Director, Alexander Svetelsek, said on May
27th, the Slovene press agency reported.
Tus group, which includes the retailing business as well as restaurants, cinemas
and gas stations, generated revenues of 439.5m Euro, up 50% on an annual basis
and net profit went up by 67% to 6.3m Euro. Tus is a privately owned non-listed
limited liability company based in Celje. According to Svetelsek, the company
held 18.3% of the retail market last year compared to only 5% four years ago. He
stated that the aim of the company is to become the most successful European
retailer. Last year the company owned three retail chains (Vele, Preskrba,
Izbira Lasko) and invested 64.6m Euro. This figure made Tus the leading domestic
investor in the country, Svetelsek said, adding that this year investments would
reach 70m Euro. In the next few months, Tus, which currently boasts 65,000
square metres of store space, plans to open five new supermarkets.
In the coming months it also plans to boost the number of gas stations from four
to 25 or 30. Svetelsek remarked that once the company reaches 25% market share
in 2007 then the company would no longer make any investments. It will only
refurbish old stores and intends to extend to Serbia and Macedonia. The first
store is expected to be launched in Serbia in 2006.
Svetelsek said the company has no other plans for Croatia as it has one
supermarket in the coastal city of Rijeka. He underlined that the retail market
is inhumane there and all foreign retailers are facing loss. The main objective
of the company for this year is to streamline costs and business processes and
the flow of information that will improve efficiency and increase returns.
Italian tourists prefer Slovenia, survey shows
A recent survey of an Italian tourism and transport market research agency has
shown that Slovenia is one of the popular destinations among Italian tourists,
Slovene press Agency reported.
Citing the results of the TMT Pragma survey, the Slovenian Tourist Board (STO)
said Slovenia ranks first in the business sector, second in family tourism and
fourth in traditional tourism. The results indicated that in business tourism
Slovenia was preferred by most tourists, followed by Spain, the Czech Republic,
Austria, Egypt, France and Croatia. In family tourism, Slovenia placed after
Mexico and ahead of Austria, Morocco and Spain. In the category dubbed
traditional tourism, Slovenia placed fourth after Mexico, Belgium and Austria.
STO stated that Pragma carried out a comprehensive survey at most of Italy's
road, rail, port and airport border crossings. The importance of the Italian
market for Slovenia's tourist industry is also reflected in the 2004 data of the
national statistics office. Italians were the biggest group of tourists visiting
the country with 786,130 overnights (up 8% on 2003 figures), and 313,296
arrivals (up 9%). Italians accounted for 18% of the total of overnights by