Economy Minister: Internationalisation Is the Key To the Slovenian Economy

Republic of Slovenia
Latest facts & figures

GDP growth in Q4 2015 3.3%

GDP per capita €18,093

Government debt 83% of GDP

Inflation in March 2016 -0.1%

Population 2.06 million

Unemployment 8.4%

Average monthly gross salary €1,559.79

Average monthly net salary €1,015.85

Export orientation of companies 40%

Source: stat.si

According to the European Commission, the Slovenian economy grew by 3.0 and 2.5 per cent in 2014 and 2015 respectively. Slovenia also has 83 per cent of the EU average GDP per capita, making them, together with the Czechs, one of the most affluent nations in emerging Europe.

Emerging Europe spoke to Zdravko Počivalšek, Minister of Economic Development and Technology of the Republic of Slovenia, about the country’s plans for further growth, privatisation and their approach to foreign investors.

The FDI Summit Slovenia 2015, which was held last December, focussed on competitiveness in Slovenia. How can the country be seen as more competitive for foreign investors, and how can the Slovenian economy become more competitive in general? 

As concerns Slovenia’s competitiveness, as a destination for foreign investment, there are three significant factors: the country’s attractiveness, its business environment in a broad sense, and its specific policy regarding direct foreign investment. In order be more competitive, the country would have to improve the second factor specifically, i.e. the business environment, to make it beneficial for both Slovenian and foreign companies.

Research is conducted in Slovenia every year to determine how the country is viewed by foreign investors, in terms of its attractiveness to investment. The results for 2015 show that investors listed several important motivations for investing in Slovenia including: the quality of its workforce, its access to knowledge, its qualified workers and technology, and the cost of labour. They also mentioned the efficiency of services in Slovenia, its geographic position and infrastructural connections, and its efficient production. They also felt that the ease of access to the Slovenian market and consequent access to the markets of South Eastern Europe via Slovenia were noteworthy.

Zdravko Počivalšek, Minister of Economic Development and Technology of Slovenia (photo: Tamino Petelinsek, courtesy of MEDT)
Zdravko Počivalšek, Minister of Economic Development and Technology of Slovenia (photo: Tamino Petelinsek, courtesy of MEDT)

On the other hand, potential investors felt the greatest problems lay in how the labour market is burdened; with taxes and contributions, labour costs, and the taxation of profits or income. These are also the main priorities for our Ministry’s work, where we want to achieve the maximum improvement of the status quo.

The FDI summit, which took place in 2014, offered some guidelines for areas where the government could improve: clearer communication about priorities, better implementation of strategies, more transparent privatisation, more “user friendly” public administration, a better functioning banking sector and a better infrastructure. They also counselled less bureaucracy, lower tax burdens and lower labour costs, especially for the highly educated workforce.  Finally they advised the government implement a better coordinated and focussed promotion of the country- brand “Slovenia”. Which of these have remained the government’s priorities? 

Actually, all of these elements remain the priorities of this government. By stabilising public finances, we have created the first condition necessary for improving the business environment.  This is reflected in economic growth and lower unemployment, as well as in higher private-sector consumption. I believe that it is now time for us to take a step forward and begin to implement the other priorities, which you have summarised so effectively, on these stable foundations.

Let’s return to FDI. According to the World Investment Report 2015, foreign companies invested over $1.5 billion in Slovenia in 2014. The companies that regard the country as an attractive investment destination come from which countries and sectors?

The countries of Western Europe remain the traditional foreign investors in Slovenia, and are also our largest trading partners. Recently, we have had some investments from non-traditional investor countries, especially a group of countries that are traditional exporters of capital. They are the USA, Japan, and Israel. At the same time we have observed an increased level of investment from Eastern European countries, such as Poland and the Czech Republic. In terms of sectors, the most predominant sector is investments in industry, where we recorded a full third of FDI in 2014. Nearly one quarter of investments are made in trade and 15 percent in the financial/insurance sector.

Personally, I see a major unexploited opportunity in the tourism sector. Foreign investors cannot invest in tourist facilities and then move them elsewhere, so these investors are most welcome. At the same time, the entry of foreign investors, into tourism, will strongly increases the flow of foreign tourists, which is one of the key, and most ambitious, goals of the tourism sector for the next few years.

How is Slovenia positioning itself amongst other countries in the region as far as FDI is concerned? 

The best indicator, for comparing the presence of foreign direct investors in the country to surrounding region, is clearly FDI as a percentage of GDP. In the European Union, as a whole, this amounted to a figure of just slightly less than 50 percent in 2014, while in Slovenia it stood at less than 26 percent. In 2014 the annual inflows from foreign investments amounted to €1.5 billion, and provisional data for 2015 indicates that it will amount to around €1 billion in 2015. Slovenia is lagging behind other European countries, particularly newer EU Member States, in this regard. Therefore, this is an area in which there is enormous room for improvement.

What is the country’s strategy to attract FDI?

“The “Programme for Internationalisation of 2015-2020”, which includes attracting foreign direct investment, was approved by the Government of Slovenia in May 2015. Additionally the Ministry of Economy and Development has prepared an action plan, “International Challenges 2015-2016”, in cooperation with other partners.

Internationalisation is an inseparable part of Slovenia’s development strategy. Considering the fact that export represents over 75 percent of the Slovenian GDP, this is one of the priorities that require special attention. Due to the characteristic openness of the Slovenian economy, greater internationalisation will contribute significantly to faster growth in the economy. Internationalisation, is this context, means the wider sense of connecting companies; the transfer of knowledge, technologies and capital (inward and outward investments), and integration into global value chains.

At the highest level of internationalisation, foreign direct investments are one of the fastest growing, most common and most important forms of international cooperation. The Program for Internationalisation 2015-2020 provides an active, dynamic, efficient, modern and (in particular) individualised approach to attracting FDI, together with some new paths and tools.

As well as generalised promotional activities Slovenia will focus on the targeted promotion of FDI in specific groups, sectors and sub-sectors of the Slovenian economy. Measures to stimulate FDI are intended to encourage investors entering all phases of the Slovenian market. These measures are aimed at potential investors who are looking for sustainability and responsibility.

Slovenia will be promoted as an R&D hub and a Green and Logistic hub, while activities to promote FDI will be strengthened around three main areas. Firstly, the implementation of a “one stop shop” approach; secondly, the promotion of Slovenia as an interesting investment destination while promoting business and investment opportunities for Slovenian companies abroad, and, last but not least, we will strengthen our after-care facilities so we can provide help and support to existing foreign companies in Slovenia.

Which sectors are the key ones for the Slovenian economy and could be attractive for foreign investors? 

Slovenia’s reputation as the third country in Europe, after Finland and Sweden, with around 60 percent of its territory under forestation, explains why the woodworking industry has always been important.  This is why the Slovenian government has decided to nominate the woodworking industry as a key priority sector. The industry employs some 11,000 people in over 1,000 companies: it contains a bedrock of skills and technical expertise for investors to use. The industry covers branches comprising of milling, the manufacture of plywood and particle board, and the fabrication of furniture and timber components for the construction industry. The key priority in this sector is to increase its added value, by increasing the manufacture of wood domestically, from basic semi-manufactured products to high-tech products. Slovenia will put its efforts into increasing the competitiveness of this sector and will provide favourable conditions for the growth of the wood-processing sector. We intend to achieve this through the promotion of wood, nationally.

An important opportunity also exists in cohesion policy funds. Slovenia will assign €50 million of cohesion funds to the wood processing industry, of which €20 million will be non-refundable. Furthermore, we will encourage and support SMES to compete with the best projects for Horizon 2020 resources. With its heritage, knowledge and the capacities, as well as forestry wealth and mechanisation, the wood processing sector has a great potential for growth. For these reasons we believe that it presents an outstanding opportunity to foreign partners for cooperation.”

In June 2013, the Slovenian parliament approved the government’s privatisation plan to seek buyers for 15 state-owned companies. How has the programme been implemented? 

Firstly, I would like to point out that I am a strong advocate of well thought-out privatisation. This is one of the main reasons that I accepted my appointment as Minister. I strongly believe that privatisation must take place in such a way that both the state and the companies that we sell benefit from it. Therefore I think that we need to invest as much time as necessary to accomplish this objective.

At this point, six companies from the list of 15 SOEs listed for sale have been sold: Elan, d. d., Fotona, d. d., Helios, d. d., Aerodrom Ljubljana, d. d., Žito, d. d., and Adria Airways Tehnika, d. d.  Sale and Purchase Agreements are signed, in the cases of Nova KBM, d. d. and Adria Airways, d. d.. Additionally, Paloma’s shareholders confirmed a capital increase at the shareholders meeting. After acquiring Paloma shares in the capital increase process, the selected investor will be obliged to publish a mandatory takeover bid, in accordance with the relevant provisions of the Slovenian Takeover Act, on the basis of which the existing shareholders will have the possibility to sell their Paloma shares at the same price per share as offered by the investor in the capital increase process.

One company from the list, Aero, is in bankruptcy, while another, Terme Olimia Bazeni, was merged. Sale processes, for the three remaining companies, have been closed without a transaction. I am referring to Telekom, Cinkarna Celje and Gospodarsko razstavišče.

In 2014, Slovenia’s economy expanded at its fastest pace since 2008 and it is expected to maintain healthy, albeit slightly weaker, growth in 2015, 2016 and 2017. What growth do you expect in the following years and how does the government want to achieve that growth?

We are expecting continued economic growth in 2016, which will be lower, however, than last year. With regard to the autumn forecast for economic activity, GDP is expected to increase by 2.3 percent. Growth will continue to be crucially driven by exports, alongside increasing demand from our main trading partners, and also by the increased competitiveness of recent years. Private-sector consumption is becoming an increasingly important factor in economic recovery because of the growth in disposable income, along with improved conditions in the labour market since the beginning of 2014. This is also reflected in a higher level of disposable personal income, which is at one of its highest levels to date, and indicates higher buyer readiness.

We expect that consumption, which was the indicator that fell the most sharply during the crisis, will increase again this year, particularly for durable goods.  The consumption of other goods, which accounts for the majority of consumption, is also gradually increasing. Investment spending will decrease in the coming year as a result of the expected change  in public investment, following the expiry of opportunities to draw EU funds from the preceding financial period. On the other hand we are also expecting a gradual increase in private investment.

The level of exploitation, of production capacities is high and has already surpassed the pre-crisis level.  This will allow private investment higher profits in the private sector as well as improving the satisfaction indicators and making access to sources of finance easier. Because of increased trade in real estate and the improved position of household incomes, combined with the recovery of housing loans, we also expect the drop in housing investment to end.

At the same time I should mention, that expectations for annual economic activity are connected to certain risks coming out of the international economic environment. Although we have seen improvements in economic conditions and a stabilisation of the financial markets in the Euro area, in recent months, uncertainty has also appeared in respect to the growth of emerging economies. This could slow the economic recovery of our major trading partners and threaten the stability of the financial markets, because of the continuing reduction in the size of the global economy.

RELATED ARTICLES

EU Membership and Transition into Market Economies Have Helped CEE Achieve Social Progress

Investigations Into the Corrupt Ukrainian Fuel and Energy Sectors

Ukrainian money hryvnia. The national currency. Corruption in Ukraine

Business Standards Are High in SEE But Vary Widely

Aerial view of The Cathedral of the Assumption in Varna

Still Potential for Growth in CEE as Economies Stabilise

Larisa Manastirli: Where is Bulgaria After Ten Years in the EU?

Sarajevo Stock Exchange Connected to SEE Link

sarajevo stock exchange

Despite Public Anxieties, Migration is Playing a Key Role in ECA Growth

Bratislava city aerial panoramic view. Bratislava is the capital of Slovakia.

China Agrees to Build Hi Tech Business Park in Serbia

BELGRADE SERBIA - SEPTEMBER 29 2016: View on the city center and the junction of Rivers Sava and Danube in Belgrade Serbia.

Romanian Car Maker Dacia Sees Sales Boom

Sables d Olonne France - May 07 2017 : Dacia Tour 2017 is a commercial operation organized by the car builder in order to present its cars throughout France - Close-up on cars

Lviv Is the Pearl and the Soul of Ukraine

Baltics Seek Lockstep With High Tech States

Euro money: Macro view of euro coin and bill. Suitable for financial, monetary, euro or European Union concepts and ideas

Poland Is Set To Become a Large Economic Zone

Aerial view over the building materials processing factory. View from above.

World Bank: Brexit Hides Greater Challenges to the European Union and the CEE Region

SEE Link — Sharing SEE Europe’s Hopes for a Brighter Investment Future

Air Passenger Volumes Reach Record High in the Baltics

airbaltic

Polish Labour Market Deficits Are Impacting All

Construction site with crane and building. Construction site in western europe - in Poland.

CEE Tech Growth Continues: Poland and the Czech Republic Lead the Way

technology

Automotive and Transport Companies Dominate the CEE Region

Car bodies on the production line inside automobile factory

Poland’s Business Constitution Must Be Finalised

Front of finance ministry in Warsaw Poland with a fountain framing the entrance. Could be used for images about Euro currency problems

21st century Manufacturing Arrives at Great Stone

Great stone

Valga and Valka – Where Estonia and Latvia Work Together

Valga valka emerging europe

A Risky Evaluation of Croatia’s Economy?

ZAGREB, CROATIA - JULY 17, 2017: Square Ban Josip Jelacic with tourists and trams on a summer day in Zagreb. City of Zagreb is the capital of Croatia.

CEE Is Key to China’s Belt and Road Initiative

Shanghai skyline Panoramic view of shanghai skyline and huangpu river Shanghai China

Poland’s Q2 2017 Growth Is Stronger Than Expected

WARSAW, POLAND - MAY 07, 2016: Building Palace of Culture and Science among the modern buildings of the city

Growth Continues for State-Owned Azerbaijan Airlines

Azerbaijan Baku - September 16 2015: View of the Heydar Aliyev International Airport sign in Baku Azerbaijan. The airport is the home of Azerbaijan Airlines the national flag carrier.

Lithuania Handed Top Marks for Business Services

Beautiful panorama of Vilnius Old Town taken from Gediminas hill; Lithuania

Romania Cuts Income Tax, Introduces Solidarity Tax

CLUJ NAPOKA ROMANIA - OCT 2 2016: People on the central street of Cluj Napoka - the unofficial capital of Transylvania.

Lech Wałęsa: Hard Options Can Force Nations to Get Down to Work

Georgia’s Growth Continues

Batumi, Adjara, Georgia - May 27, 2016: Batumi, Adjara, Georgia. Gogebashvili Street Road And Marine Station Or Maritime Station Building Batumi On Background

Poland to Switch from Emerging to Developed Market by September 2018

warsaw stock exchange

Non-Financial Reporting No Longer a Secondary Consideration in CEE

CEE Nation Brands Still Behind Western Counterparts

TALLINN ESTONIA- JUNE 17: View of the modern high rise buildings on border with an old part of the city on June 17 2012 in Tallinn Estonia

Putin Urges Belarus to End Oil Transit Through Lithuania

Athens Greece - May 27 2016: Russian President Vladimir Putin delivers

EY: Belarus’ IT Scene Is Thriving

High tech park minsk

CEE Must Improve Infrastructure and Logistics

Aerial view of Gliwice Sosnica motorway junction. There are international traffic in four directions

Meghri Becomes Armenia’s Third FEZ

armenia emerging europe

Albania’s Economy Booms Despite Political Infighting

Panorama view to the city Tirana Albania

Estonia Leading CEE Country in WEF Competitiveness Index

pharmaceutical factory woman worker operating production line at pharmacy industry manufacture factory

Chickens Blamed for Romanian Budget Deficit

Two white chickens or hens inside a chicken coop or hen house seen through chicken wire.

World Bank’s Doing Business Report 2016 Resume For Emerging Europe

Romanian Cabinet Reshuffled as New Splits Emerge in Ruling Party

BUCHAREST ROMANIA - MAY 25 2014: The Victoria Palace. Victoria Square.

PE and VC Investment In CEE Is At an Eight-Year High

venture capital

Estonia Proposes Bill of Rights and Responsibilities for Robots

Robotic hand accessing on laptop the virtual world of information. Concept of artificial intelligence and replacement of humans by machines.

Doing Business Across Eurasia Could Be Easier

Eurasia emerging europe schneider group

Bosnia and Herzegovina: Focussing on Stability and Business Climate

Sarajevo Bosnia and Herzegovina - August 23 2015. View of Miljacka River in Sarajevo city

Western Ukraine Could Be an Entry Point into the Country

After Economic Shocks Armenia Plans for Macroeconomic Stability

yerevan armenia minister of finance

GE Inaugurates Its New Bucharest Software Centre

Asian Outsource Developer Team Sitting At Desk Working Laptop Computer Mobile Application Software Real Office

Poles Still Keen on German Jobs

Brandenburg Gate in Berlin in Germany. The Brandenburg Gate is a triumphal arch a city gate in the center of Berlin. It is one of the most known sites in Berlin.

IMF Increases Growth Forecast With Emerging Europe Prominent

Dambovita river and center of Bucharest at sunset time Romania.

Global Players Dash for Tempting CEE

dollar pound euro coin on euro background.

The Reality in Romania Exposes False Perceptions Of The Country

UK Economic Growth Slows as Brexit Uncertainty Bites

flags of UK and EU combined over icons of London - Brexit concept

Poland Stays Cool on Euro Adoption

Euro cash and Zloty on one photo.

EconMin: Bulgaria — Number One Outsourcing Destination And an Island of Stability in Europe

Bad Payers Still Causing Problems for Romanian Firms

Close up Romanian currency note, LEI or LEU, Romania

Beyond Borders: Immigration Within the EU

refugees immigrants

Ukraine to Restart Privatisation to Realise Profits

Pricatisation electricity ukraine

More EU Help for Belarus SMEs

GRODNO BELARUS - DECEMBER 13 2013: Seamstress in textile factory sewing with a industrial sewing machine .

Lithuania Gives Innovation a StartUp

MILAN ITALY - MAY 2: People visit Lithuania pavilion at Expo universal exposition on the theme of food on MAY 2 2015 in Milan.

Chris Lowney — What Jesuit Spirituality Can Teach Us About Global Leadership

CEE Emigrants Could Boost Their Countries’ Economies

Londoners walking through Millennium Bridge with St.Paul's Cathedral at the background after sunset - London, UK

Croatian Salaries Are Growing in Line With Other CEE Countries

Dubrovnik Croatia emerging europe

Prospering Czechia Still Needs a Bigger Workforce

prague emerging europe

Jadranka Joksimović: Serbia Takes Its Candidacy of the EU Seriously

bigstock-Joint-Press-Conference-Of-Serb-155400338.jpg

Mayor: Armenia And Its Capital Yerevan Offer Safe Investment And Tourism To a Growing World

Trans Adriatic Pipeline Will Fuel Albanian Growth

Xanthi. Greece - July 30 2017: aerial view of construction of gas pipeline Trans Adriatic Pipeline - TAP in north Greece. The pipeline starts from the Caspian sea and reaches the coast of southern Italy

Hungary Today: Potential and Challenge

Chain bridge on Danube river in Budapest city. Hungary. Urban landscape panorama with old buildings and domes of opera

Fitch And the World Bank: Economic Growth To Remain Solid Within CEE In 2016

Slovenia Sets Green Vehicle Deadline of 2030

ljubljana

Škoda too Strong for VW Group

MLADA BOLESLAV CZECH REPUBLIC - MAY 30: Skoda Octavia on conveyor line during Doors Open Day at Skoda Auto a.s. factory. Skoda auto celebrated 120 years since its founding on May 30 2015 in Mlada Boleslav.

Ukraine Is Offering Europe Unique Combat and Technological Experience

Estcoin: Estonia’s Own Digital Currency?

1 euro coin money (EUR) currency of European Union Estonia over blue background

Effective Policies Have Strengthened the Georgian Economy

TBILISI GEORGIA Jul. 18 2017: Bridge of Peace is a bow-shaped pedestrian bridge a steel and glass construction over the Kura River in downtown Tbilisi capital of Georgia

Belarus Introduces New Business-Friendly Auditing Procedures

MINSK, BELARUS - AUGUST 15, 2016: Aerial view of the southwestern part of the Minsk with Palace of Sport and old and new other buildings. Minsk is the capital and largest city of Belarus.

Albania’s Construction Sector Supports the Country’s Growth

SARANDA, ALBANIA - MAY 18: View of the city Saranda, most important tourist attraction of the Albanian Riviera on May 18, 2017 in Saranda, Albania.

Latvia Urged Not to Increase Expenditure As Economy Grows

Riga, Latvia - August, 2010: Panorama view from Riga cathedral on old town of Riga, Latvia

Macedonia — Stepping Out Of the Shadow Of the Balkans

GSA Names Ukraine as UK’s Offshoring Destination of the Year

map of ukraine emerging europe

Changes Are Making Ukrainian Banking More Aligned with International Standards

Serbia, Belarus and Ukraine Ranked Lowly by Wharton Business School

Kyiv Ukraine - April 172017: The postal square in Kiev on Podol the Dnipro river. view of the square from the river panorama

Lithuania Set to Streamline Competition Legislation

Industrial dock with cranes on the quay

Belarus’ Economy Is Slowly Recovering From Past Declines

Ukraine’s Q2 Growth Climbs

kyiv ukraine emerging europe

Nadiya Savchenko: I Dream of a Great Ukraine

Panorama of the top part of the Andrew's Descent from Castle Hill in springtime in Kiev Ukraine.

Do Your Homework First and Starting Business in Poland is Easier

Kosovo: A Population of Talented Young Entrepreneurs Waits at Europe’s Door

Romanian Economy Grows Fast in 2017

Brasov cityscape panoramic and aerial view over medieval architecture of Brasov town, in Transylvania Romania

More Brexit Fears As the UK Proves To Be A Needed Member

City of London view from Waterloo Bridge. This view includes: St. Paul`s Cathedral The Gherkin Tower 42 and Blackfriars Bridge.

Moldova Launches New e-Procurement System In Search For Positive Change

Photo team work process, holding contract hand, signs documents. Account managers young crew works with startup project.New idea presentation, analyze marketing reports.Blurred, film effect, horizontal.

High Real Estate Prices at Home Force Czech Investors Abroad

Construction of the Petrin lookout tower in Prague Czech Republic

Digital Business Space Gives All Businesses an Office in Sarajevo

Sarajevo Bosnia and Herzegovina - August 24 2015. View from Vraca Memorial Park with building of Avaz Twist Tower

Derek Chollet: There Is a Resurgence of Supporters of the Transatlantic Relationship

white house

Leave a Reply

Your email address will not be published. Required fields are marked *