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SLOVENIA


 

 

In-depth Business Intelligence

Key Economic Data 
 
  2003 2002 2001 Ranking(2003)
GDP
Millions of US $ 26,284 21,108 18,800 63
         
GNI per capita
 US $ 11,830 9,810 9,760 51
Ranking is given out of 208 nations - (data from the World Bank)

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REPUBLICAN REFERENCE

Area (sq.km) 
20,273

Population 
2,011,473

Capital 
Ljubljana 

Currency 
Tolar 

President 
Janez Drnovsek

Private sector 
% of GDP 
40% 



 
Update No: 094 - (24/02/05)

Parliament ratifies EU Constitution
The Slovenian Parliament has voted overwhelmingly to adopt the European Constitution, there were 79 votes in favour and 4 against. A two thirds majority was required for the motion to pass. Slovenia is the third country to ratify the constitutional treaty. Lithuania and Hungary have already voted in favour with parliamentary votes.
Before the vote, Slovenian Prime Minister Janez Jansa told legislators that his country had a chance to help lead the ratification process in the EU. "By voting for ratification, you will allow Slovenia to push the EU Constitution a step closer to its implementation," Jansa said. His words were echoed by the foreign minister, Dimitrij Rupel. "An early ratification of the European Constitution serves both the interest of Slovenia and the wider European interest," Rupel said. In recent comments, he had insisted that Slovenia's approval of the Constitution would pave the way to ratification in the remaining EU countries. 
The Constitution was signed by all 25 EU members in Rome on October 29. European governments have until October 2006 to ratify the Constitution either by parliamentary vote or by national referendum. The real test countries like France and the UK will be holding national referenda and there are genuine fears that the Constitution may be rejected. All of the 25 member states have to approve the text for it to be adopted by the EU as a whole.
Slovenia joined the EU last year after 90 per cent of voters had backed EU membership in a referendum. An opinion poll by Ljubljana's Social Sciences Faculty in January showed that 54 per cent of Slovenians supported ratification of the EU Constitution, while 10 per cent opposed it and 36 per cent had no opinion on the matter. A sufficient measure of public support existed for parliament's ratification to be justified.
As in many EU countries the level of public awareness of the issues is not high. A total of 30 per cent of Slovenians admit that they do not know the Constitution at all, while 43 per cent say they know it a little, 21 per cent consider themselves well informed and three percent say they know the document very well, according to the survey. 
Several opposition lawmakers criticized the government's "rush" for an early ratification. "Our country is giving priority to speed rather than to content... for democracy's sake we should open a public debate (before ratifying the constitution)," nationalist Slovenian National Party lawmaker Jozef Jerovsek said at the end of January. 
But the main centre-right ruling coalition party and the opposition centre-left groupings approved immediate ratification. It was inconceivable that Slovenia would rock the boat by refusing to ratify, having only been let into the EU last year. 

Economic success story of the region
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.
Its 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, enabling it to qualify for membership of the Euroland club. This development would put a cap on its successful performance and encourage one thing lacking - abundant foreign direct investment (FDI). FDI is barely over US$2bn to date, a poor showing for such a promising place.
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.

The target date is now 2025 for parity with the EU
Slovenia is still not well-off by EU standards, trailing all but two of the established member states on joining in May last year in terms of GDP per capita. It was after all under communism for fifty years, a sure way to blight enterprise and individual initiative.
Growth statistics depend overwhelmingly on the base from which you start off. Slovenia's base line is high, indeed the highest in the former communist world.
Nevertheless, a leading Slovenian economic institute has concluded that Slovenia is unlikely to catch up to the average GDP per person in the European Union before the year 2025. This is 12 years later than predicted in the current national development strategy. 
At the moment, Slovenia's GDP amounts to around 76 per cent of the EU average, which means that the country's economy would have to grow annually by 4.9 per cent between 2002 and 2013 if it is to catch up to the average EU GDP by 2013. 
However, the Institute for Macroeconomic Analysis and Development (IMAD) predicts that economic growth in Slovenia until 2013 is to amount to around 3.6 per cent annually. This means that Slovenia will need at least 12 additional years to catch up to the average GDP in the EU. 
According to IMAD's Economic Mirror publication, Slovenia's economy grew at an average pace of 4.1 per cent annually between 1993 and 2002. Contributing most to growth was a rise in physical capital, whereas human capital contributed little. 
Human capital is expected to continue to make only a minor contribution to GDP growth until 2013, IMAD believes, while the effect of the rise in physical capital is expected to fall in this period. 
The study also points out that differences between the trends in human and physical capital in Slovenia and the rest of the EU are not such as to warrant a 24 per cent developmental gap. The main reason for the difference lies in technological progress, IMAD says. 

Ljubljana targets more FDI and less red tape
The new Slovenian government has decided to reduce the involvement of the state in the economy and to promote FDI - two of its economic priorities - for the next term.
In the coalition's programme on the economy, the four coalition partners have set down the withdrawal of the state as an owner of companies as one of the main priorities. The withdrawal will involve the sell-off of assets owned by the state-run Restitution Fund and Pension Management Fund, as well as the sale of state-held stakes in companies such as the national telecom, Telekom Slovenije.
The privatisation of Telekom is dealt with in detail in the programme, with the government aiming to establish competition on the telecommunications market before launching the gradual sale of Telekom and its subsidiaries. The government also hopes to make Slovenia one of the most developed countries in terms of information technology.
Under the coalition's agreement, information technology is a crucial field for the future development of Slovenia. Another economic priority of the new government is the promotion of entrepreneurship. Measures will be undertaken that will facilitate the establishment of companies by cutting red tape and costs associated with this. 
The coalition intends to promote foreign direct investment, with one of the objectives being the establishment of a level playing field for local and foreign investors. The coalition also reaffirms Slovenia's commitment to adopt the Euro in 2007. According to the programme, the adoption of the Euro is associated with a number of benefits. However, in the opinion of the coalition the adoption of the single currency also brings with it a number of challenges, which require that the Slovenian economy becomes more competitive in the future.
The new government also hopes to increase discipline in the payment of taxes, while promising to offer tax breaks to companies, which invest in research and development. It also aims to improve the current tax system, among others by adopting changes to the already adopted income tax act. The basic tax policy goal will be to reduce the income tax burden. In the area of banking, the government intends to promote "healthy competition" that will benefit consumers. The government also intends to promote mortgages as a form of bank-issued loans.
As regards the privatisation of state-owned banks, the coalition intends to select strategic partners, which will promise to promote entrepreneurship in the country. One of the priorities of the new government in transport policies will be to reduce the burden on the environment as well as reinstating the status of the fifth and tenth pan-European routes as the priorities of transport policy in the country.

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AGRICULTURE

233.6m Euro available for Agriculture subsidies this year 


The Agriculture Ministry recently presented a set of 12 regulations adopted by the government which provide the framework for the distribution of direct payments in agriculture and rural development aid worth a total of SIT 56bn (233.6m Euro) this year, Slovenia News reported.
According to Marija Lukacic, the minister of agriculture, forestry and food, direct payments for 2005 amount to 90 per cent of farm subsidies in old EU member states, except for almonds, walnuts and olive oil production, where the level is 60 per cent. The EU will provide 30 per cent of the funds, while the rest will be funded from the state budget. 
Out of the total of SIT 24.3bn (101.45m Euro) worth of direct farm payments, SIT 8.8bn (36.84m Euro) is allocated for field crops, SIT 14.5bn (60.48m Euro) for cattle breeding, SIT 512m (2.14m Euro) for sheep and goats, and SIT 439m (1.83m Euro) for other crops (seeds, hops, almonds, walnuts, olive oil and pumpkin seed oil). 
For the first time this year, farmers will be entitled to payments for suckler cows. Slovenia has been awarded 86,384 credits that it must distribute among farmers by 1 May, with a reserve of 2 per cent of all credits. Each farmer must use at least 90 per cent of the allocated credits to remain eligible next year. 
As of 1 April, Slovenia will also introduce the entire milk quota system, which should remain in place at least until 2015 in line with the EU's common agriculture policy reform. The national quota amounts to 467,063 tonnes of milk, with 93,361 tonnes for milk that is sold directly at farms. The national reserve is 3 per cent and will be used for the elimination of potential mistakes in quota distribution. 
Milk producers will be free to trade in quotas. According to Lukacic, the state will not interfere in the quota market. Producers who exceed their quota will only have to pay a duty if the national quota is exceeded as well, and only for the amount of milk in excess of the national quota. The duty has been set at 30.91 Euro per 100 kilo of milk for 2005 and 2006. 
This year milk producers are also entitled to a special milk premium of SIT 3,513 (15 Euro) per tonne. Only producers who obtain their milk quotas until 31 May are eligible for the premium, and only for the amount of milk specified in their respective quotas. 
Slovenia is a much smaller producer of olive oil than Spain or Greece, but it must still adhere to the EU regulation on olive oil market. Oil producers can receive a subsidy of SIT 189,250 (789 Euro) per tonne of oil, but oil factories must report on a monthly basis on the amount of oil received from each individual olive producers. 
The government earmarked SIT 28.4bn (118.5m Euro) for rural development this year in line with the 2004-2006 rural development programme. The money will be used for countervailing measures for areas with limited farming potential, agri-environmental measures, early retirement, support for introduction of EU standards at farms and technical assistance.

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CONSTRUCTION

Salonit Anhovo gains 55% stake in Kema Puconci

Cement manufacturer Salonit Anhovo recently acquired a 54.93% stake in its domestic rival Kema Puconci. Salonit acquired the 119,382 shares by December 30th but the bid to acquire all shares was open until January 17th, Slovene Press Agency reported. 
Even before publishing an offer for the acquisition of all shares, Salonit Anhovo had purchased 24.97% stake in Kema.
In the bid published on December 18th, the company offered 7,250 tolars (30.24 Euro) per share. The management of Kema Puconci said earlier that it did not oppose Salonit Anhovo's plans to buy all of its shares.
It said the takeover would facilitate the company's development and growth. According to Salonit, the offer would be successful.
Their goal is to integrate companies manufacturing mineral construction materials and improve their competitive ability.

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ECONOMY

Higher economic growth coming

International rating firm Dun&Bradstreet (D&B) said it expects Slovenia's economic growth in 2006 to stand at 3.9%, which is 0.1% points higher than in 2005, Slovene Press Agency reported. 
In its report for January, D&B maintained Slovenia's risk rating as the highest in the Eastern European region. The latest risk report reflects that Slovenia's rating could be upgraded in the coming months. Based on the 2005 economic forecasts and factoring in the strong private consumption which it said would continue to be the largest component of growth, D&B believes that economic growth is expected to remain at just under 4% next year. The report also said that inflation in 2006 should be 2.7% that is 0.3% points lower than in 2005.

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ENERGY

Electricity consumption swells

Electricity consumption in Slovenia reached 12.37bn kilo watt hour (kwh) in 2004, an increase of 2.1% over the previous year, New Europe reported.
The consumption of five main electricity users went down by 0.9& year-on-year while the consumption of the five distribution companies was up 3%, the national power grid operator, Elektro-Slovenija (Eles) said in a statement.
The company stated that despite the increased demand, supply was never threatened last year. Power plants generated 13.40bn kwh of electricity last year, increasing their output by 9.5% year-on-year. Annual plans were exceeded by 6.8%. Hydroelectric power plants, generating (up 6.3%) for a smooth power supply while exports amounted to 5.18bn kwh, up 30%. About half of the electricity produced at the Krsko Nuclear Power Plant was exported to Croatia, while the rest was shipped to Italy.

Slovene companies interested in buying majority share in Bosnian oil distributor

Petrol and OMV, Adriatik from Koper, are interested in buying Sarajevo Energopetrol which used to be the biggest oil distributor in BiH [Bosnia-Herzegovina], Television Slovenia web site reported.
The state commission for choosing the company's strategic partner will look into non-binding letters of intent and then decide which company will be officially invited to make a bid. Apart from the two Slovene companies, Croatian Ina, Hungarian MOL, Bulgarian Prista Oil, British S&A Capital and Tuzla Euro Inzenjering are also interested in buying the state-owned majority share in the company.
Energopetrol, which has a network of petrol stations, has been experiencing serious financial problems within the last few years.

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ENVIRONMENT

Largest environment project so far gets 1m Euro from the EU 

The Environment Protection Institute recently inaugurated a new management model and information system, the first phase of the largest environmental project so far in Slovenia, the Slovenia News website reported.
This signals the launch of the EU's Nature 2000 programme, which has been awarded one million Euros by the EU's LIFE environmental programme. 
The official inauguration of the project was attended by Erwan Fouere, the head of the European Commission Representation Office in Slovenia, and Environment Minister Janez Podobnik. 
Since 2001, the European Commission has awarded Slovenia 6.8m Euro for environmental projects from the LIFE - Nature environmental funding programme.

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FOOD & DRINK

Perutnina Ptuj in the black despite tough 2004

Slovenian food company, Perutnina Ptuj, faced numerous difficulties last year, making business tougher; this was especially true for higher customs duties in southeast Europe following Slovenia's entry to the European Union and expensive raw materials, New Europe reported recently. 
In spite of these problems, the company ended 2004 with a profit of 350m tolars (1.4m Euro). The company also inked a new contract with fast-food chain McDonald's for the supply of ready-meals, making it the fourth biggest supplier of McDonald's Europe.
Perutnina Ptuj Chairman Roman Glaser told Slovene press agency that the company generated sales of 145.3m Euro last year and produced 65,000 tonnes of chicken meat and meat products. It is expected that revenues are to increase by 10-15% this year. The main problem for the company last year was EU entry. Not only did customs duties increase in countries of the former Yugoslavia as free-trade agreements were phased out, but competition increased as well.
Additionally, Perutnina spent 1.2bn tolars (5m Euro) more on raw materials such as corn and soy than it did last year. The company also suffered in Croatia when GM soy was discovered in the salami Poli, the company's flagship product.
"The scandal was targeted at our trademark, as Poli was the only one of the 19 products with excessive presence of genetically modified organisms that was publicly named," Glaser remarked.

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FOREIGN ECONOMIC COOPERATION

Ljubljana and Bratislava eye stronger business ties

The Foreign Ministers of Slovenia and Slovakia, Dimitrij Rupel and Eduard Kukan, met in Ljubljana on January 21st, New Europe reported recently. 
After the meeting they said that Slovenian-Slovak relations are excellent and amicable. Before meeting Rupel, Kukan met with Slovenian Prime Minister Janez Jansa and President of the National Council Janez Susnik. Slovenian President Janez Drnovsek also received him.
Slovenia and Slovakia have solid cooperation in all areas, and there is potential to deepen it especially in trade, said Kukan as he concluded the two-day official visit to Slovenia. Rupel said the two countries have a balanced bilateral trade, adding that Slovenia would like to increase business ties further via its port of Koper.
The two officials also discussed the cooperation within NATO and the European Union, focusing on the EU's next financial perspective and ratification of the EU constitution. They highlighted that the agreement on financial perspective was of major importance for the two countries and should be adopted during the Luxembourg presidency in order not to hinder the EU constitution ratification process.
Neither of the two countries plans to hold a referendum on the constitution.
As Kukan explained, the Slovakian parliament is scheduled to ratify the treaty in May. Slovenia's OSCE presidency in 2005 was another topic they discussed. Kukan pledged Slovakia would actively cooperate with the chair of the OSCE, an organisation faced with a "difficult situation."
Commenting on the future relations between the US and the EU during the second term of US President George W Bush, Rupel said he expected the relations to improve. Kukan and Drnovsek discussed the EU constitution, the Euro adoption and the situation in Ukraine among other things, the president's office said in a statement.

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TELECOMMUNICATIONS

Telekom beats 2004 target

Telekom Slovenije increased its operating revenues by 10% to 87.4bn tolars (€364.5m) last year, exceeding the target by 7.6%, the company announced in a recent statement. The estimated net profit for 2004 amounts to 12.16bn tolars (€50.7m), up 18% over 2003. This is 15.9% above the target, Telekom Slovenije said, the Slovene Press Agency has reported. 
The telco's performance was reviewed by the company's supervisory board. It established that the 2004 results testified to the company's growth as well as confirmed that the management's development strategy was correct. The supervisory board also adopted the business plan for 2005. Despite growing competition on the telecommunications market, Telekom Slovenije expects to consolidate its position by introducing new services, a technological platform and modern organisation. The company is to shift its attention to users and their satisfaction as well as the introduction of new services. Telekom's major strategic goals for 2005 are: a regional expansion that will allow its further growth and the construction and marketing of broad-band network and services.

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TOURISM

Spa resort visits up

Last year the number of foreign visitors to Slovenia was up by 12%, with spas recording a 3.2% increase among domestic guests, the Slovenian Spa Resorts Association said recently, Slovene Press Agency reported. 
The year 2004 was one of the most successful years for local spa resorts. The number of visits was up by 6.9% to 529,940, with 56.4% of the guests coming from abroad. Spas generate one third of the turnover in Slovenian tourism. Last year they accounted for over 2,500 overnight visits, up 2.8% from 2003. Overnights by foreigners were up by 6.8%, while their share in overall overnights rose from 38.9-40.5%. While visitor numbers increased across all markets, overnights were up among the Italians and Russians (16% each), Croatians (11%), Israelis (183%), the Dutch (47%), the Swiss (30%).

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