Responsible Body

Ministry of the Economy (Ministrstvo za gospodarstvo) Kotnikova 5 SI-1000 Ljubljana, Slovenia  Phone: +386 1 400 33 11 Fax: +386 1 400 10 31 E-mail: info.mg@gov.si Web Page: http://www.mg.gov.si/en/ Organization Chart

Policy Overview

A concept of quality economic growth, based on ideas, knowledge, information and new technology was adopted and included in the Slovenia’s Development Strategy, a strategic document issued by the Government in 2005.
The Ministry of the Economy approves state aid to companies that are adapting slowly or with difficulty to global competition in line with EU guidelines and the provisions of the Decree on the Allocation of State Aid.
Entrepreneurship and competitiveness policy of the Ministry of the Economy is oriented:
towards strengthening key performance factors such as knowledge, innovation, technology and entrepreneurship,
towards legal framework that ensures a sustainable and balanced development for all market players, and
towards strengthening the competitive capacity of Slovenian companies through exports, direct foreign investment and the inflow of quality direct foreign investment into Slovenia.
The Ministry strengthens key performance factors through three interrelated programmes:
knowledge for development: aimed at strengthening the capacity to keep up with technological advances which is considered the main source of increased labour productivity and national competitiveness on the global level;
increasing companies' competitive capacity and promoting entrepreneurship: aimed at strengthening key factors that offer competitive advantage;
utilising entrepreneurial opportunities: aimed at creating an environment conducive to entrepreneurship and the establishment of new companies.
In the field of legislation, the Ministry focuses on forming an environment conducive to entrepreneurship and innovation, as well as on providing sustainable and balanced development for all market players. All this will strengthen competition on the domestic market, develop the market for corporate control, improve consumer protection and update legislation to provide the most effective patent protection possible, in terms of both, cost and speed of service.
The measures implemented to strengthen the competitive capacity of Slovenian companies through exports and outward investment and the inflow of quality direct foreign investment into Slovenia are aimed at creating favourable conditions for Slovenian companies to expand their exports, at the promotion of exports - anything from making agreements to seeking synergy between different institutions and organisations at the national and international levels - and at the more effective internationalisation of small and medium sized businesses, inviting strategic foreign investment and promoting outward investments by Slovenian companies. By participating in the Stability Pact as a donator country Slovenia supports the transfer of knowledge and promotes the development of entrepreneurship and investment. Tourism policy is an essential element of our enterprise and competition policy.

Milestones

International Cooperation

Membership of international organisations:

• the United Nations and its organisations,
• the Organization for Security and Co-operation in Europe[1],
• the International Monetary Fund,
• the International Bank for Reconstruction and Development and International Development Association[2] (IBRD and IDA = the "World Bank"),
• the European Bank for Reconstruction and Development,
• the Inter American Development Bank,
• an active participant in NATOs Partnership for Peace Programme[3],
• World Trade Organisation.

Membership in groups of states: full member of the European Union[4].

Country risk: DB2c  (Dun and Bradstreet)

Major Investors

Major foreign investors in Slovenia
Manufacturers	Novartis, Danfoss, Bosch, Siemens, Gruppo Bonazzi, Meyr Melnhof, Brigl and Bergmeister, EGO, Kirkwood Industries, Pfleiderer, Henkel, Goodyear, Safilo Group, Renault, Johnson’s Control, Securidev, Lafarge Perlmooser, Interbrew, Hella, Sun Roller
Retailers	Leclerc, Spar, Rutar, ÖMV, MOL
Financial services	Societe Generale, Bank Austria CA, SanPaolo IMI, Hypo-Alpe-Adria-Bank, KBC, Reiffeisen Bank
Other services	Ernst&Young, DHL, Deloitte&Touche, KPMG, PriceWaterhouseCoopers, AC Nielsen, Gfk, Western Wireless International, Debitel, Mobilkom, McDonalds, ISS Servisystem, IBM, Microsoft, Oracle, Sodexho Alliance

Main Investing Countries

Main Documents

• Slovenia’s Development Strategy
• Slovenia's Strategy of Economic Development
• National Development Programme 2000-2006

Legislation Pertinent to foreign investors in Slovenia

• Act implementing the customs regulations of the European Community (Official Gazette of RS, No. 25/04)
• Act on Value-added Tax (Official Gazette of RS, No. 89/98, 30/01, 67/02, 101/03, 45/04)
• Foreign Exchange Act (Official Gazette of RS, No. 23/99, 76/03, 110/03)
• Act on the Employment and Work of Aliens (Official Gazette of RS, No. 66/00)
• Corporate Income Tax Act (Official Gazette of RS, No.40/04, 70/04)
• Companies act (Official Gazette of RS, No.30/93, 29/94, 82/94, 20/98, 84/98, 6/99, 45/2001, 57/04)

Slovenia vs. EU

Foreign direct investment

The share of inward FDI stock in GDP climbed from 9.5% to 21.2% (EUR 5,556.7 m) in the 1995-2004 period while the share of outward FDI in GDP rose from 2.6% to 8.5% (EUR 2,230.8 m). The current level of FDI in Slovenia is largely the result of the increased inflows recorded since 2000, although they have been highly uneven. Following the record-high level seen in 2002 (totalling EUR 1,700.2 m[1]), the inflows dropped in 2003 to total EUR 300.3 m while they amounted to EUR 662.1 m in 2004. In 2005 the annual FDI inflows were lower again, amounting to EUR 426.6 m. Outward FDI is increasing steadily and rapidly – it rose from the meagre EUR 71.7 m recorded in 2000 to EUR 441.5 m in 2004 and EUR 453.3 in 2005. Slovenia thus registered net FDI outflows of EUR 26.7 m in 2005.

Slovenia has one of the lowest proportions of inward FDI stock to GDP in the EU. Among old EU members, only Germany, Italy and Greece had lower ratios of inward FDI to GDP, while among the new members Slovenia had the lowest ratio. The highest FDI/GDP ratios in the new member states group were recorded in Estonia (85.1%), Malta (66.0%), Hungary (60.7%), Cyprus (52.7%) and the Czech Republic (52.7%). The analysed countries generally substantially increased their ratios of FDI stock to GDP in 2000-2004: this ratio rose by 5.3 p.p. in the EU-25 as a whole, by an average of 12 p.p. in the new member states, and by 6.1 p.p. in Slovenia (UNCTAD 2005).

In outward FDI Slovenia performs better when compared with other new EU members. According to this indicator, only Estonia outperformed Slovenia in 2004. As expected, however, Slovenia was far behind the old EU member states (except Greece) in terms of its outward FDI as a share of GDP.

The internationalisation of the Slovenian economy is mostly accomplished through external trade flows and less through FDI. The analysis of the Slovenian economy's rate of internationalisation also enables a look at Slovenia’s shares in various global macroeconomic aggregates which may be of interest. In 2004, these shares were as follows: (i) global FDI inflows (2001-2004): 0.1400% (an increase of 0.0236 over the year before); (ii) global inward FDI stock: 0.0850% (an increase of 0.0081); (iii) global FDI outflows (2002-2004): 0.0585% (an increase of 0.0185); (iv) global outward FDI stock: 0.0312% (an increase of 0.003); (v) global GDP: 0.0799% (an increase of 0.0034); and (vi) global exports: 0.1767% (an increase of 0.0068). Particularly notable is the large differential between Slovenia’s high share in exports and its substantially lower share in inward and outward FDI. It should be noted, however, that Slovenia increased its shares in all indicators in 2004 compared to the year before. The rising trend has been steady since 2000.

Slovenia’s performance in attracting FDI is far below its potential. The performance of a country in attracting FDI is measured by how successfully the country uses its potential to attract FDI. This is seen from a comparison between the FDI potential index and the FDI performance index[2]. In 2004 Slovenia was ranked in a high 28th place among 140 countries according to the FDI potential index while it was ranked much lower, 60th, according to the FDI performance index. Without the high one-off FDI inflows in 2002 Slovenia’s ranking according to actual performance would be even lower. This hints at the poor investment climate in Slovenia and the low efficiency of policies aimed at attracting FDI. Slovenia does much better according to the outward FDI performance index, where it was ranked 28th in 2004, climbing up from the 61st place it achieved in 2000. The latter reflects the increasing internationalisation of Slovenian firms through outward investment.

 Table 1:  Flows and stocks of inward and outward FDI1 in Slovenia2, EUR m

	1995	2000	2001	2002	2003	2004	2005
Inward FDI
Year-end stock	1,376.0	3,109.8	2,952.4	3,922.9	5,131.0	5,556.7	n. p.
Annual inflow *	117.4	149.1	412.4	1.700.2	300.3	662.1	426.6
Stock as a % of GDP	9.5	15.1	13.5	16.6	20.6	21.2	n.p.
Outward FDI
Year-end stock	382.3	825.3	1,139.2	1,472.8	1,901.5	2,230.8	n. p.
Annual outflow **	7.8	-71.7	-161.2	-162.1	-418.0	-441.5	-453.3
Stock as a % of GDP	2.6	4.0	5.2	6.2	7.6	8.5

Source: Bank of Slovenia. Bulletin (1995-2005). Ljubljana: Bank of Slovenia; various issues and volumes. Notes: 1 FDI whereby a foreign investor holds a 10% or higher capital share in a company; 2 Since 1996 foreign direct investment of companies in second affiliation are included.

*Inflows are generally lower than changes in stock because international payment transactions cover only part of the changes in stock. The main difference is that inflows do not cover changes in net liabilities to a foreign investor, and also do not include data on companies in second affiliation. From 1995 onwards data on reinvested earnings are included in inflows and thus in the balance of payments.

**A minus sign denotes an outflow.ž

Table 2: Inward and outward FDI stock relative to GDP, %

Sources: (i) For the EU: UNCTAD World Investment Report 2004. (2004). New York and Geneva: United Nations; (ii) for Slovenia: Bank of Slovenia. Bulletin (1995-2005). Ljubljana: Bank of Slovenia, various issues and volumes.

Notes: 1EU-15 for 1995 and EU-25 for 2000 and 2004.

[1] The high FDI inflows in 2002 were underpinned by some major foreign acquisitions, primarily that of Lek, a pharmaceuticals company, by the Swiss Novartis, and the purchase of a 34% share in the NLB bank by the Belgian KBC.

[2] For the definition of these indices see UNCTAD, 2004.

Basic Indicators

Foreign investors pick up Slovenia for a great variety of reasons. The most important are high business ethics and commitment to quality work, good ties with markets in Western and South-eastern Europe, a central position in Europe and excellent infrastructure, and last but not least quality of life.

The legislation in line with EU standards, simple setting up a business, low taxes, the unrestricted transfer of profit and capital repatriation, the Government's pro-investment stance etc. have created a pro-business climate.

Clusters of related industries and ready-made network of suppliers available in Slovenia are behind many investment choices.

Slovenia offers a Right mix of qualities - so called 4Qs4U: Quality workforce, Quality link to regional markets, Quality infrastructure and Quality of life.

Quality workforce

Foreign investors recognise innovative spirit and readiness to embrace technological changes as the result of long industrial tradition. Focus on vocational education and on-job training provides labour for a variety of sectors and market niches. Some 100,000 students study at different faculties a year and 16% of active labour force has a university degree and 62% of the population have completed secondary education. The number of Slovenian people with good command of English and German is high and rising. Italian is the second language in the coastal region and Hungarian is spoken also on the Slovenian side of the border.  Slovenian employees are widely appreciated for their high work ethic and corporate loyalty.

Quality link to regional markets

Slovenia has been generally regarded as the best-prepared country for the enlarged European Union. The country’s most important trade partners come from the EU and account for 68% of Slovenia’s exports and imports. Business and personal ties with investors from the neighbouring countries have always been strong and explain why parent companies of so many businesses in Slovenia are from Austria or Italy. Recent democratic changes in SE Europe have revitalized economic links with the countries in the region. Slovenia is sharing experience gained through transition with all Balkan states and is involved with reconstruction and development in these countries. Substantial outward investment in emerging economies in the region proves its commitment.

Quality infrastructure

Lying at the heart of Europe, Slovenia is well served by international flights, rail links, and highway network. The Adriatic town of Koper is best known for its cargo port that wedges deep into Europe’s mainland. Infrastructure in general and information and communication technology (ICT) in particular is well developed. Nevertheless, there are continued investments in modernisation. Thanks to Slovenia’s pivotal position, it has all the attributes of a trade hub and a unique logistics base. Fully serviced industrial sites are widely available at competitive terms and industrial parks are growing close to trunk roads and rail links.

Quality of life

Local people and expatriates alike agree that Slovenia is a country where quality of life is high, health care system excellent, opportunities for going into sports great (skiing, water sports, golf courses open year-round), while entertainment, art and cultural events are at a high level. One can hardly resist delicious food and fine wine served in many restaurants and local pubs where a meal is value for money. Slovenia’s landscapes are breathtaking, its natural and historical heritage rich, and short distances between places of interest make it all easy to reach. There is a stretch of the Adriatic Sea and the peaks of the Alps, the underground world of Karst caves, hillsides nurturing vineyards, large corn fields and dense forests.

Investment Flows

FDI inflows in Slovenia, in million EUR, 1997-2003

Source: Bank of Slovenia, September 2004

The low levels of FDI flows in the past indicate that Slovenia was not widely recognised as an attractive location for mobile investment. The main reasons are generally associated with the following:

• Slovenia was a young country starting the transition to a market economy; it had a small domestic market and bordered on an unstable region.
• The privatisation model (decentralised, voucher-based) in the first half of the 1990s left less room for foreign investors than in other countries in the region.
• The domestic services sector (financial services, trade, tourism, infrastructure) was ahead of other countries in the region. The fact that there were some competitive domestic enterprises with a firm foothold in the small domestic market was a clear signal that foreign companies had to make greater efforts than in other countries in the region to win the same market share.

Rise in FDI inflows in 2001-2004

It is expected that more foreign investors will look to Slovenia either to make their debut in the region or to strengthen their presence, resulting in FDI inflows from the following sources:

• Inflows deriving from the planned privatisation of state property.
• Post-privatisation acquisitions of already privatised companies. These companies will continue to work on the concentration of ownership. By tying the knot with a strategic partner such companies will have the advantage necessary to maintain their share of the domestic market and to expand into cross-border markets.
• The authorised privatisation funds and other state-run funds will continue to consolidate their portfolios with the aim of increasing the liquidity of their property.
• New entries. Based on the increased demand for information about Slovenia as an inward investment location a rise in the number of greenfield investments is expected.
• Expansion of existing foreign-owned companies. This has been the largest source of new jobs in the manufacturing sector.

It is estimated that in the coming years new FDI inflows will reach 3% of GDP, around US$600 million annually (compared to 1% of GDP in the past).

FDI stock in Slovenia, in million EUR, 1997-2003

Source: Bank of Slovenia, September 2004.

Contact Persons

National Contact Points

Useful Links

• Ministry of the Economy
• Institute of Macroeconomic Analysis and Development
• Ljubljana Stock Exchange
• Bank of Slovenia (Central Bank)
• Chamber of Commerce and Industry of Slovenia
• Slovenian Export Corporation
• Slovenia Partner
• Business Directory

Legal Information:

• The Constitutional Court of the Republic of Slovenia
• Ministry of Finance

Employment

• Employment Service of Slovenia