Books on Slovenia
% of GDP
Update No: 113 - (26/10/06)
Slovenia is a small, but successful country, where not much
happens. No news is generally good news, as here.
It is, nevertheless, highly active in one area, economic reform and back-up
projects to move the economy forward.
Government Adopts Lisbon Implementation Report
Slovenia has passed an important milestone in its integration into the EU, which
it joined in 2004. The government has adopted a report on the implementation of
the Lisbon Strategy in Slovenia, the first annual overview of the enactment of
priorities, goals and measures set down in the programme of reforms that was
adopted a year ago.
According to Janez Sustersic, the head of the government Institute for
Macroeconomic Analysis and Development (IMAD), crucial tax and welfare measures
were passed in the first year, foremost among them the phasing out of the
payroll tax. Speaking to the press after the government session 12th October,
Sustersic also said that the proposed tax reform package, which was adopted by
the government in September, would boost GDP growth by 0.3 percentage points in
2007 by reducing corporate and personal income tax.
The effects of the tax reform on employment will be further boosted by stricter
rules on when the unemployed or welfare recipients can reject work. Coupled with
the government's proposal that all social transfers be indexed solely to
consumer price growth, the measure will create additional incentives to activate
the least qualified people, Sustersic said. The government has also been making
efforts to create a better business environment, cutting red tape and making
progress in the reduction of court backlogs, he said.
Sustersic also sees noticeably fiercer competition in telecommunications, while
the government will have to put in place the necessary measures for full
electricity market liberalisation, which kicks in mid-2007. According to him,
structural reforms are being carried out in a favourable macroeconomic
environment, while the wage agreement for 2007 guarantees that wage growth will
lag productivity growth, boosting Slovenia's competitiveness as it enters the
eurozone next year.
PM Forecasts Zero Budget Deficit by 2011
Prime Minister Janez Jansa and Finance Minister Andrej Bajuk were upbeat
about Slovenia's prospects as they presented the amendments to the 2007-2008
budget memorandum and the 2008 budget bill to parliament on 9th October. The
amendments to the 2007 budget project revenues of SIT 1,860bn (7.76bn Euro) and
expenditures of SIT 1,937bn (EUR 8.08bn), which puts the deficit at 1.01% of
Compared to the estimates for the realisation of the 2006 budget, revenues and
expenditures will be lower by 0.5 and 0.6 percentage points respectively. In
2008 the revenues are projected to top 1,950bn (8.15bn Euro) with expenditures
at SIT 2,024bn (8.46bn Euro) and a budget deficit of 0.91% of GDP.
According to Jansa, the government would work towards sustainable economic
growth, greater employment and better welfare, whereby the main mid-term goal in
public finances is the reduction of the budget deficit to zero by 2011. The
budgets for 2007 and 2008 are realistically developmental, he said. They include
measures to improve the adaptability and flexibility of the economy, boost
budget growth and employment and make the welfare state cheaper and more
efficient. "Despite politically-motivated resistance against the necessary
reforms, the government has no intention of renouncing the commitment for a
society that is more developed and socially-just based on realistic
foundations," Jansa told the MPs.
Jansa pointed out that the proposed tax reforms would significantly reduce the
burden on the economy, which is why expenditures as well as the budget deficit
are being reduced. The economy is in good shape, which gives us more room for
the reduction of the structural deficit, he said.
According to Jansa, the shortfall from the tax reform measures, which are being
carried out to lift the tax burden on the economy, would be offset with savings
measures, the removal of red tape and a more prudent use of budget funds.
On the other hand, the government will continue to increase spending on research
and development, higher education, active employment policies and scholarships,
Finance Minister Bajuk meanwhile stressed that the budgets for the next two
years preserve macroeconomic stability in a period crucial due to the
introduction of the euro.
He pointed out that the budget memorandum for 2007 and 2008 has been drawn up
based on the national development strategy and the government's commitment to
economic reforms. Important steps towards reducing tax burdens were made in tax
reform measures last year, but even more important measures will be introduced
with the tax reform package that is already in parliament, he said.
According to Bajuk, the 2007 budget as well as the budgets of municipalities and
the Pension and Disability Insurance Institute (ZPIZ) and the Health Insurance
Institute (ZZZS) would reduce the general government deficit by 25% compared to
the original budget projections. In 2008 it will be reduced even further, to
0.8% of GDP.
In addition, the government's tax reform package will reduce taxes for the
citizens and companies, which would provide a boost to economic growth, increase
investment and employment and improve the well being of all income groups. The
budget for 2007 increases funding for the economy by 2.1% compared to the
original budget act. The figure will rise by another 22.7% in 2008, mostly
through higher spending on competitiveness and the promotion of foreign direct
investment and small enterprises.
A novelty that Bajuk pointed out is that the funding of municipalities will no
longer depend on income tax. Instead, there will be a fixed sum laid down in
each budget so they will know exactly how much they are entitled to.
Government Endorses Plan for Projects Worth 24bn Euro until 2023
The Slovenian government has adopted a resolution on national development
projects between 2007 and 2023 which includes 35 projects worth 24bn Euro
designed to boost growth and bring Slovenia's GDP on a par with the EU's average
within ten years.
These key projects will accelerate development and facilitate the achievement of
the main objectives of the National Development Strategy - catching up with the
EU's average in ten years, or even as early as 2013, Prime Minister Jansa told
the press on 12th October.
The main projects listed in the resolution involve the creation of a network of
business centres which would create 17,000 new jobs and foster the establishment
of some 2,000 small and mid-sized enterprises, Jansa said. The resolution also
includes projects on sustainable energy supply, the construction of road and
rail infrastructure and investment in the judiciary and health care, Jansa
The 24bn Euro needed for implementation would come from the budget (7bn Euro)
and European funds, but the bulk (14bn Euro) would be provided by private
investors. The launch of most of the projects is scheduled for the outset of the
EU's next budgetary period (2007-2013), but the funds will be equally
distributed until 2023 in order to ensure the sustainability of public finance,
The most expensive project will be the modernisation of the rail network, which
is estimated at EUR 8bn. The government expects half the money to come from
The implementation of all the projects is expected to increase purchasing power
by 3.3 percentage points until 2010 and a total of 6.8 percentage points until
2013. Some 12,000 new jobs are to be created by 2008 and up to 50,000 by 2013,
when the number of unemployed people would be 30,000 lower than it is now,
according to Jansa.
Montenegro Promised Slovenia's Assistance in EU Bid
President Janez Drnovsek has promised Slovenia's assistance in Montenegro's
efforts to join the EU as he held talks with his Montenegrin counterpart Filip
Vujanovic on 12th October.
The two countries have a long record of cooperation, political and economic
relations are good and they will remain so in the future as Slovenia supports
Montenegro on its path towards the EU, Drnovsek told the press. Drnovsek
believes that Montenegro should join the EU soon, however it is uncertain when
the EU will admit new members.
They almost certainly will have to wait and for how long no one can tell.
President of the European Commission Barroso made that clear at the end of
September. Montenogro is a great place, but has the Balkan vices as well,
corruption and crime, especially massive smuggling. Steps will be needed to
combat them before EU entry can be put on the agenda.
Meanwhile, Vujanovic pointed out that Montenegro fulfils all the conditions for
joining the Partnership for Peace and voiced his hope that Slovenia will support
its efforts at the NATO summit in Riga in November.
Discussing the economic cooperation between the countries, Vujanovic said that
Slovenian companies have a good name in Montenegro and a good chance to
participate in infrastructure projects that Montenegro is planning. Slovenian
companies represent an important share of foreign direct investments (FDI) in
Montenegro, which wants to build the reputation of a safe country, open for
Vujanovic moreover thanked Slovenia for recognising Montenegro's independence
and for establishing diplomatic relations quickly after the country declared its
independence on 3rd June 2006.
Slovenia recognised Montenegro's independence on 21st June, the two countries
formally established diplomatic relations on 22nd June, and on 23rd June the
Slovenian embassy was opened in Montenegro's capital Podgorica. However the
embassy is still headed by a charge d'affaires Branko Rakovec, and Drnovsek
expressed his hope that Slovenia's government will nominate an ambassador soon.
Vujanovic's first official visit to Slovenia since Montenegro declared
independence from Serbia was labelled by Drnovsek as "historical."
Drnovsek, being the first foreign statesman to do so, visited Podgorica only one
day after the 21st May referendum at which just over 55% of those that took part
voted for Montenegro's independence.
Montenegro's efforts to join the EU and NATO also topped Vujanovic's talks with
Prime Minister Jansa along with the situation in the Western Balkans and
bilateral relations. Jansa also congratulated Vujanovic on a peaceful and
democratic referendum on independence.
Slovenian Automotive Company Opens Plant in Serbia
Serb President, Boris Tadic, recently officially opened, near Kragujevec, an
auto parts plant built by Grah Automotive from Slovenia. The plant stretches
over 2,000 square metres and is to provide up to 250 jobs by the end of the
year, Slovenia News Reported.
The Slovenjske Konjice-based company started building the plant in Batocina at
the beginning of this year, with one of its owners, Robert Grah, assessing the
value of the investment at 1.5m Euro.
Interestingly, the Batocina municipality offered the land needed for the project
According to Grah, all products of Grah Automotive's Batocina plant will be
exported to EU countries, while buyers will include Mercedes, BMW, Volkswagen
Slovenia's Ambassador to Serbia Miroslav Luci, who also attended the opening
ceremony, took the opportunity to call on Slovenian investors to invest in
Serbia, which, according to him, is a politically and economically stable
country suitable for foreign investment.
According to reports by Serb media, President Tadic, on the other hand, said
that auto parts production had great prospects and pointed out that Serbia's
airports would soon get "too crowded for all the world's investors."
New Player on Energy Market Established in Joint Venture
Energy companies Gen energija and Istrabenz Gorenje energetski sistemi (IGES)
have established a 50:50 joint venture, GEN-I, which will sell electricity in
Slovenia and the EU, Slovenia News reported.
Under the deal, Gen Energija acquired a 50% stake in Istrabenz Gorenje, which
had previously been in sole ownership of IGES, and renamed Istrabenz Gorenje to
The two partners also signed an agreement whereby GEN-I would market electricity
produced by Gen energija, which is state-owned and manages Slovenia's 50% stake
in the Krsko Nuclear Power Plant.
GEN-I will sell 30% of Gen energija's output in 2007, 50% in 2008 and eventually
Martin Novsak, the director of Gen energija, told the press that the joint
venture was a part of the development of the company's marketing functions.
In addition, it will secure backup power in case of supply disruptions at Gen
energija and for periods when the N-plant is shut down for repairs.
Igor Salamun, the chief supervisor at Gen energija, said this would boost
competition on the energy market, which is in line with the government's
According to forecasts, GEN-I will have purchased and sold 1,900 GWh of
electricity this year, with the volume set to rise to 4,000 GWh a year over the
Igor Bavcar, the boss of the holding Istrabenz and chief supervisor at IGEN,
said this was a great step for Istrabenz.
This form of public-private partnership is a true indicator of future
cooperation on the electricity market, he said.
The chairman of IGES, Robert Golob, added that the establishment of the new
company means users now have the choice of a second electricity provider.
This is just the latest development on the Slovenian energy market after the
government adopted the blueprint for the privatisation of the energy sector in
To create competition on the market, the government decided it would curb the
power of the dominant player, HSE, by transferring the Brestanica thermal power
plant and the hydro plants on the Sava onto Gen energija.
HSE will remain the owner of hydro plants on the Drava and Soca rivers, the
Sostanj and Trbovlje thermal power plants and the Velenje coal mine.
According to plans, HSE will ultimately be privatised, while Gen energija will
remain in state ownership, as the state cannot sell it because of the stake it
holds in the Krsko N-plant.
MINERALS & METALS
Slovenian state sells stake in steel group
To preclude speculative bids, the commission overseeing the sale of the
state's stake in the Slovenian Steel Group has determined a rigorous procedure,
Slovene Press Agency STA reported on October 2nd.
Potential bidders will first pay 10,000 Euro for a memorandum, whereupon they
will sign a data confidentiality agreement. Only then will they be able to get
the data from the company's database and schedule due diligence and talks with
the management, the head of the commission, Marija Zagozen, said on September
27th. According to Zagozen, the stake has already been appraised, but the value
will not be disclosed. "The price is subject to negotiations. But the
commission decided that the entire content (of the offer), not only the price,
will be important," she said. The company needs a partner that will create
jobs, promote development and carry out all the planned investments, she said,
adding that any fear of layoffs is unjustified.
The state owns 80.35 per cent of the company and intends to keep 25 per cent
plus one share for the time being. However, other owners will also be called
upon to sell their shares, among them power grid operator Eles, which holds 6.2
per cent of the shares. Tibor Simonka, the chief executive of the Slovenian
Steel Group, said that close to 70 per cent of the company could be sold if the
other owners decide to offload their stakes. "We want a partner with all
the appropriate financial, development and technological potentials,"
Simonka said. However, he was quick to point out that a structure where the
Steel Group was merely a production point in a larger system would not be
appropriate. The group includes 14 companies, the core companies being Acroni
Jesenice, which makes high-end flat steel products, and Metal Ravne, which
specialises in the manufacturing of high-speed steels and certain special and
construction steels. The group saw revenues rise 6.7 per cent in the first half
of this year to 266.2 million Euro, while profits slumped 31 per cent to 11.5
million. This is a marked slow-down from 2005, when the company basked in
soaring steel prices on world markets and trebled profits to 39.23 million Euro
on sales of 471.64 million Euro.
Telekom Austria Group acquires UMTS frequencies in Slovenia
The Telekom Austria Group said on September 21st that Si.mobil, its Slovenian
wireless subsidiary, has acquired countrywide UMTS frequencies for Slovenia for
a total of 6.5 million Euro, Mobile Europe reported.
The use of UMTS frequencies is valid for a period of 15 years with the legal
option to extend the term, the newsletter said. "We are delighted that
Si.mobil has won this tender. The Telekom Austria Group was among the first
operators in Europe to promote 3G technologies. In the meantime customers in all
of our networks and in Southeast Europe are able to use comprehensive data
services based on high-speed UMTS technology across countries," said Boris
Nemsic, CEO Telekom Austria Group and CEO mobilkom Austria. The first UMTS
frequencies in Slovenia were sold in 2001 for a total amount of 92 million Euro.
Under these conditions Si.mobil did not participate in the tender. Since
December 2003, Si.mobil has offered 3G mobile communications solutions based on
EDGE technology. The acquisition of UMTS frequencies is a logical continuation
of this strategy.
National Telco and Tok Telekomunikacije Win FWS Licences
The national telco Telekom Slovenije and a Ljubljana-based telecommunications
company Tok telekomunikacije have been awarded 10-year licences to provide
broadband wireless Internet services, Slovenia's telecommunications watchdog
The other companies vying for the licences were Slovenia's Stelkom and Simobil,
Austria's Wimax Telecom and US company Nexcom Telecommunications, the Agency for
Post and Electronic Communications (APEK) said following the selection process.
The two selected bidders will have to cover the whole of Slovenia's territory
with broadband wireless Internet services. They were awarded free radio
frequencies for a fixed wireless access system.
The APEK says the licences were awarded in line with the government's strategy
to introduce fixed wireless systems (FWS) in the 3410 MHz-to-3600 MHz frequency
span throughout the country.
This means that the Internet will now become accessible to people in areas
lacking the necessary infrastructure, especially in rural areas. Moreover, the
agency expects this will give a further boost to competition in urban areas with
The invitation to tender put the lowest licence fee at SIT 40m (EUR 0.17m). The
highest offer was made by Stelkom (SIT 140m/EUR 0.59m), followed by Telekom
Slovenije (SIT 100m/EUR 0.42m) and Nexcom (SIT 76m/EUR 0.32m).
Tok telekomunikacije, which a report in an edition of business daily Finance
suggests is affiliated with Voljatel, a domestic Internet services provider,
offered SIT 40m plus one tolar. Simobil and Wimax Telecom offered SIT 40m each.
According to the requirements of the tender, the bidders will have to reach at
least 60% of the Slovenian population with FWS services within three years after
being awarded the licence. Moreover, at least a third of access points will have
to be in rural areas.
The bidders will also have to enable users to switch networks, hosting and
inter-networking with other providers.