Books on Slovenia
% of GDP
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
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
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
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
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
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
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
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
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.
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.
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
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
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
Energopetrol, which has a network of petrol stations, has been experiencing
serious financial problems within the last few years.
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.
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.
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
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
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.
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%).