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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)

Books on Slovenia

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: 104 - (01/01/06)

The Slovenes protest at last
Slovenia is seen by outsiders as a placid, successful country on a par with fellow Alpine Switzerland. This is rather misleading. Its GDP per capita is still under one-third of the Swiss level here. There is a lot of hardship around. 
The country saw the largest demonstration in recent history at the end of November, as tens of thousands turned out in protest against the government's current economic reform plans, which are more radical than anything so far attempted since achieving independence in 1991. Around 40,000 people crowded into the central square of Ljubljana, the Slovenian capital, on 26th November to demonstrate against economic reform plans recently announced by the government. 
It was the biggest demonstration since the country's independence from Yugoslavia in 1991. The reform package consists of 70 new regulations the government plans to pass in the course of 2006 in a bid to improve the economic climate in Slovenia.
Among the most controversial measures, an idea first initiated in Estonia, is a flat tax that is likely to hit those with lower incomes hardest. Trade unions claim the plans would mean the end of the welfare state while the government deems them necessary for maintaining the country's competitiveness in a globalised economic environment.
Despite heavy snowfall, around thousands of Slovenes flocked to Ljubljana on 26th November from all parts of the country, most of them mobilized by various labour unions. Angry workers, students, unemployed and pensioners, all of whom critics say would be hit by the proposed reforms, flooded the city's Congress Square and shouted anti-government slogans. 
Joze, one of the thousands of protesters, told TOL: "Believe me, I would have come even if the sky was falling. I'm working 10 hours a day in a steel-processing factory. In this hard job I barely earn enough to get my family and me through the month. If the government introduces new taxes, I really cannot imagine how we are going to live even just a decent life," he added. 
The leader of the Federation of Free Labour Unions of Slovenia (ZSSS), Dusan Semolic, told the crowd, "The course offered by the government to boost our economy is not the right course, this is not a course for workers, students, or pensioners." 
Drago Lombar, another union leader, stressed that the workers had already been victims once, during the transition, and strongly rejected any measures that would further depress their standard of living. The head of Slovenia's student union, Miha Ulcar, told the cheering crowd, "If the government goes on with all the reforms, we will surely spice up their governing. We will go all the way!" 
The rally was backed by several trade unions from other European countries as well as by the European Trade Union Confederation, whose secretary, Joel Decaillon, urged the preservation of a Europe based on social rights. 
The run-up to the demonstration was dominated by the question whether opponents of the reforms were too heavily influenced by the opposition. Sources close to the government claimed the opposition was using the workers only as a tool against the government. The organizers rejected such accusations and pointed to several big social protests in the past that were held under different governments.
Two small unions, however, refused to join the protest since they support the reform efforts of the centre-right government of Prime Minister, Janez Jansa. 

The turning point
If the rally was a show of force, meant to be a clear signal to the government that a compromise solution would have to be found between the unions, employers, and the government, it was also an indication that Slovenia - the most developed and economically successful new member state of the European Union - is at an economic crossroads. 
Slovenia's unemployment rate currently stands at around 10 per cent; the average net salary is 735 euros. But Slovenia's pole position is increasingly under threat by booming Estonia. With a highly liberalized economy, a flexible labour market, and a flat tax, the Baltic republic has - together with Denmark - become a role model for the government's push to implement its ambitious reform agenda. Part of that agenda is to free Slovenia's labour market from all sorts of restrictions and regulations. Employers will be able to fire workers more easily. 
A standard wage supplement for lunch and transfer to work might be scrapped. Workers on sick leave might get less money than the current 80 per cent of their salary. Students might have to pay higher income taxes and new tuition fees. Another plank in the reform platform is the privatisation of state hospitals, raising concerns that good medical treatment would only be available to those on higher incomes.
The government also wants to introduce a new tax system based on the highly controversial flat tax. According to Finance Minister, Andrej Bajuk, the flat tax would be combined with measures to ensure social sustainability, to ease the tax burden on workers, and to eliminate the payroll tax. Bajuk's ministry will have to prepare around 40 per cent of the required legislation, and the implementation of the reform package will be coordinated by a new minister for reforms. 
How the new tax system would affect the population is the subject of heated debate in Slovenia. While the government plans to prepare a study on the effects of the proposed changes, the unions are already warning of its negative consequences for those on lower incomes. Dusan Semolic of the ZSSS expects prices of food, transport, and medicines to increase. Semolic says that 70 per cent of Slovenes would see their living standards drop. "The flat tax rate favours the rich," Semolic said.
Data from the Pension and Disability Insurance Institute shows that almost 250,000 pensioners receive a monthly pension of less than 420 euros while another 410,000 receive 625 euros. Estimates by the vice-president of the Pensioners' Trade Union, Branko Pintar, suggest that under the new system, retired people with a 420-euro pension would need an additional 200 euros every month to keep their current standards of living.
Prime Minister Jansa, by contrast, pleads for speedy reform: "If we don't tackle reforms in time, we would risk having to introduce them under the next government in more difficult circumstances, which would imply more severe consequences."
The government's blueprint was welcomed by the Central Bank of Slovenia, but the bank's board of governors warned that in cutting public spending the government would need to take into account the overall economic effects as well as the impact on the people that might feel the pinch worst.
The unions aren't flat-out opposed to the reforms. They are willing to maintain a social dialogue with the government. Opposition parties also support reform in principle, but are strictly against the flat tax. 
Several prominent economists cautiously welcomed the reform. Former finance minister Dusan Mramor warned that Slovenia's competitiveness could only be increased if curbs in public spending and a tough wage deal also came into the mix. "Easing the tax burden on labour while simultaneously raising taxes on consumption and property, plus the complexity of administering wages and social transfers, certainly doesn't' provide the right framework," Mramor told the Slovenian Press Agency. 

Privatisation drive
A final element in the reform process is the privatisation of state-owned companies. According to a recently released report on corporate governance in companies listed on the Ljubljana Stock Exchange found that the role of the state in governance is still too strong, both directly or through the state-controlled Restitution Fund (SOD) or Pension Fund Management (KAD). 
On average the state had a share of 24 per cent in the 28 companies quoted on the stock exchange, with stakes as high as 30 per cent in 10 of these companies. The state has effective control and the opportunity to influence the business and strategic decisions of these companies, an "inherently unhealthy relationship, which gives the people in power direct control and opens the door to political manipulation in the majority of big Slovenian companies," the report says. 
The report urges the government to urgently withdraw from company ownership. "In addition to the fact that the state is a sub-optimal owner, [the current system] leads to untransparent cross-ownership under the patronage of politics and general meddling of the state in corporate affairs.
The state should define which investments are strategic and turn these into transparent, direct ownership shares," the report proposes. Among the paper's authors is Joze P. Damijan, who chairs the government's reform committee. Damijan is the most likely candidate to be minister for reforms, which suggests that big sell-offs of state property might be on the agenda for 2006. 
Although Slovenian society is still pretty stable, the protest has already become the first real challenge for the new chief, Prime Minister Jansa, whose government has been in power for about a year. In the coming months, the government will need to prove it can run a persuasive social dialogue with the labour unions and at the same time preserve the main elements of its reform plan. 
Some supporters of a liberal economy fear that Slovenia's labour unions are too strong and that the government will in the end have to give in to some of their demands. It is unavoidable that some sort of compromise will have to be found. Already, the labour unions are threatening to demand referenda on each law that might substantially affect established social benefits. But Premier Jansa is kicking the ball right back into the unions' court: "If this happens, whoever does it will have to take responsibility that Slovenia has failed to implement reforms in time."

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PHARMACEUTICAL

Slovenian drug company Krka on London Stock
 

Slovenian drug company, Krka, plans to list around 15 per cent of its shares on The London Stock Exchange, reported business daily Finance. 
Listing in London would "bring the company closer to sources of financing," Chief Executive, Joze Colaric, said in an interview. The percentage of foreign shareholders in the company has grown to 5.6 per cent from 2.9 per cent in the last two years. 
"In the next few years, a lot of patents will expire, and we'll be able to market new, profitable products. Also, our markets still have room for growth, since the use of drugs in Eastern Europe isn't as widespread as in Western Europe," Colaric said. The company is also gearing up to enter the markets of South and Central America, Colaric explained, hoping to widen its market and grab a bigger share of business in those countries.

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RETAIL

Slovenian largest retailer Mercator invests in Serbia
 

Mercator opened a shopping mall, its fourth in Bosnia and Herzegovina, in the capital Sarajevo. Mercator said it expects its 2005 sales in Bosnia to rise by 31% on the year to 48.4 million Euro. It has a 2% share of the Bosnian retail market, New Europe reported.
Mercator will open a mall in western Serbia, and another one in Central Serbia. Currently, the Slovenian retailer has only one mall in Serbia, in the capital Belgrade. Mercator's competitors in the Serbian market are German Metro, French Cora, Greek Veropoulos and Serbia's three largest retail chains: Maxi, C-Market and Pekabeta. Mercator consolidated 9-month net profit went up 135.3 per cent.

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TELECOMMUNICATIONS

Telekom Austria buys rest of Slovenia unit 


A subsidiary of Telekom Austria has struck a new deal to acquire the remaining 25-per cent stake in its Slovenian unit, New Europe reported.
The deal will see Mobilkom Austria speed up acquisition of the outstanding interest in Si.mobil, wrapping up a process that began in 2001 when Telekom Austria Group bought a 75 per cent interest in the Slovenian company. "Through our concerted efforts we have been able to achieve a turnaround and materially improve the financial performance of Si.mobil," said Telekom Group COO Boris Nemsic. "By increasing our shareholding in Si.mobil we are demonstrating our commitment in the country." The purchase of outstanding shares from six stakeholders will cost the Austrians about US$46 million, which is a more than a five-percent discount from the original purchase price agreed upon in 2002 when Mobilkom agreed to buy the entire company.

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