Q: What is driving economic growth in Slovenia?

A: Slovenia is a small country with a territory of 20,000 square kilometers and a population of just two million people. Its language and identity have been around for centuries. We are proud that we were able to create an independent state 17 years ago. In 2004, the country joined the European Union and in January 2007 it was the first to introduce the Euro among the new 12 member states.

Slovenia was successful in its transition from socialism to a market economy. For the last 17 years, we have had a very hectic development. Slovenia as a part of former Yugoslavia was probably the only of all CEE countries, which opened its economy to the OECD markets in the sixties. That is what other countries like Czechoslovakia, Hungary or Poland were not able to, but Slovenia has built partnerships. That was our advantage in the beginning of the 1990s. And we also had a different model of reorganization and privatisation which for the time being proofed to be very successful, but has to be readopted to meet the challenge of the globalization. That is why we need to further encourage structural reforms and to implement a second wave of privatization in order to establish more effective ownership structure and become more open society. The value of being an entrepreneur or having your own companies was not common in the 80s, so we had to make a transition in how to prioritize our economy. Ten years ago most of our goods were sold to former Yugoslavia, so we had to find new markets.

Our GDP is above 33 billion euros with purchasing power per capita over 22,000 euros. Our GDP per capita is at 92% of the EU average. Last year our economy grew at 6.1%.

Q: What are the primary reasons to invest in Slovenia?

A: There are several reasons to invest in Slovenia. The first is quality workforce, welleducated and industrially minded. We believe Slovenia has the right balance between price and productivity. Today, 70% of the young generation is going into the higher education institutions and getting a higher education diploma. In the last few years, we have tripled the number of students in the higher education process, and we are working on the structuring of our higher education, since the higher education and businesses should get more connected.

The second reason is the quality infrastructure. In the past decade, Slovenia has made quite extensive investments in the infrastructure. We are particularly fond of the V. corridor from Lisbon to Moscow. And the corridor X. which goes from Hamburg to Istanbul also crosses Slovenia. So it is obvious that we have a really good position on East-West and North-South transport connections. Our transport connections are very good in all directions, and the Port of Koper plays significant role in providing shortest maritime transit route between the countries of one of the most competitive Central Europe and crucial markets of the Middle and Far East. We have every possibility of becoming Europe’s logistic and transport centre. Nevertheless, competition around us is great, so we need to specialize.

The next reason to invest in Slovenia would be the quality links to the regional markets. Seventeen years ago we were perceived as a small market, but after the Slovene EU accession, the potential is opening – our reachable market suddenly became much larger and we are no longer limited to a market of 2 million. Our capital, Ljubljana, is geographically located close to 500 million consumers in Europe in all directions. This makes Slovenia very central for foreign investment to serve the emerging markets on the balkans at reasonable overall business costs. So what I am saying is that Slovenia is not only in a good infrastructural position, but it is also surrounded by markets for which Slovenia can represent a useful hub. I even see Slovenia within its geographical neighbourhood as the most competitive country after Austria, taking Slovenia’s latest national standards into account, such as e-business or e-government.

The final motivation is the quality of life. Slovenia is easy and safe to live in. We have a very good system of healthcare and education. As a whole, living in Slovenia is less expensive than in the rest of Western Europe. And last but not least, business risk evaluations present Slovenia as the lowest risk country of the Central and Eastern European transition countries. So Slovenia’s open-minded business environment offers great opportunities for investment. Strong commercial contacts across Easter and Southeastern Europe, excellent infrastructure, a major Adriatic port, and a highly educated work force have attracted many foreign companies to enter Slovenia, for example Bosch Siemens, Danfoss, IBM, Microsoft, Sandoz Group (Novartis), Oracle, Renault – to mention just a few.

In the 90s, Slovenia was not attracting a lot of foreign investment. One of the reasons was that the privatization system focused on domestic ownership. The last government was very reform-oriented and we began to privatize more intensively.

Q: There were new tax reforms and the labor market is still being reformed. How has economy changed in the last five years?

A: Due to its traditions, Slovenia has an industrial society. A lot of industrial suppliers in Slovenia are positioned in the automotive, machinery, chemicals, manufacturing, and logistics sectors. They are major suppliers to the European car manufacturers. Then, there are also medium-sized companies that are niche players. Some of the production companies in Slovenia serve European, Brazilian, Asian, and North American markets. However, the share of the industry in our GDP is declining and the share of services is becoming more and more significant. The share of agriculture is approximately 2% in our GDP. Therefore, it is our policy to be a knowledge-based society. Still, we are aware that we have to become a service society.

Currently, we are working on the structure of tourism, high quality services, and attractive prices. Transport and logistics are very important for us because of the investments in infrastructure, the country’s strategic position, and the existence of a sea port. Another sector of primary importance for Slovenia is banking and finance.

Q: What are the potential problems for the foreign investor?

A: Some potential problems are ecological, energy, and labor intensive investments. Because we are a small nation, the employment of several thousand people would be a strain for our labor market. We could say that our workers are not so mobile as for example in USA, and we also have quite rigid labour law, that should be loosen. The fact is that our country has a quite high prices of land, and we do not have enough industrial sites – huge challenge are economic and logistic growth centers, which are part of long term Government strategy of economic development of Slovenia (Development Projects of Resolution 2007-2023). Foreign investors noticed also administrative barriers, regarding mostly opening companies in Slovenia, employing foreign labor force etc. that should be removed. And even though we have favorable tax law for foreign investors, we could probably stimulate them even more with tax relieves for investments with higher value.

By entering the EU, we would like to become a hub on the back of a developed infrastructure, the port of Koper, and the well-educated workforce. With the price of the workforce in place, we realize are not very labor-competitive, and consequently we focus on transport and logistics to meet the goal of being a hub in the region.

Slovenia has created its own national development resolution, already mentioned before, which is effective until 2023. In this resolution, we will co-finance nine business logistics zones with the EU structural money up to 40%. Our plan is to make a noneconomic zone that will have a production site, logistics, supported by governments that will build incubators, technological parks, and some higher education centers. We are searching for private investors who can run these zones because we want market forces to drive them and to turn them into a hub between Central Europe and North America, Brazil, Arabia, India, and China.

If people from Asia use the Southern route, it is five to six days shorter than the Northern route and it is cheaper too. However, those are global processes. It is not that easy to organize yourself to become appealing to trade and investment flows going into European countries. We would like to run this economic zone in a public/private partnership and prefer to have a company from Brazil, or Asia to run this zone. They will be better at attracting local companies to the zone. Out of these nine zones, our agency already started opening two earlier this year.

We have one instrument to attract foreign investors, Public Tender for FDI Cost- Sharing Grant Scheme. Foreign companies making direct investments in Slovenia may apply for financial grants. The purpose of the Invitation for Applications is to boost attractiveness of Slovenia as a location for foreign direct investment by lowering entry (start-up) costs to the investors an offering them financial incentives up to 30 percent of the investment.

However, if you make an investment of over 50 million euros, according to the EU regulation, you have to do it in a different way. In such cases, we summit a negotiating committee at the agency to prepare all the documents together with the investor. Then, this goes to the Cabinet of the Prime Minister, and the government meets for approval.