LJUBLJANA – While usually thought of as an attractive tourist destination – with its gorgeous coastline, green hills and picturesque buildings – Slovenia would also like to make itself known as an appealing emerging market, and is looking for foreign investors to inject much-needed capital and new ideas into its economy.
“We were a star when I was first finance minister,” Slovenian Finance Minister Dušan Mramor tells Israeli journalists visiting the capital, Ljubljana, of his first stint in office between 2002 and 2004. “When I became finance minister now I didn’t feel this star feeling.”
Slovenia, a small country with a population only of 2 million people, is located on the shores of the Adriatic Sea between Italy and Croatia. Part of the Austro-Hungarian Empire until the end of the First World War, Slovenia was part of Yugoslavia until its independence in 1992. An EU member state since 2004, it adopted the euro in 2007 and became an OECD member country in 2010.
The Slovenian market was hit hard by the 2008 global financial crisis.
Housing prices rocketed, companies went bankrupt and the banking system was thoroughly shaken. It is now beginning to emerge from the crisis and is promoting itself as an attractive location for investments.
And attractive it may be. A blend of traditional industry and fast-growing new sectors, the Slovenian market seems to cater to all sorts of interests. Its strategic location as a meeting point between Central Europe and the Balkans gives it an edge, as does the fact that many Slovenes speak several languages and can conduct business across the region.
An Israeli connection is already firmly in place. According to Stanislav Raščan, the director-general for economic diplomacy in the Slovenian Foreign Ministry, relations are good. The Slovenian export to Israel stands at about €35 million, while Israel’s export to Slovenia stands at €20m., and despite the shift in European public opinion toward Israel, trade doesn’t seem to be affected at the moment.
Asked about the growing boycott initiatives against Israel in Europe, he replies that “in Slovenia, we don’t see a real impact on economic relations” related to the boycott calls. “I don’t see any impact on the economic cooperation,” he says. It “doesn’t impact the real situation of the ground, the figures.”
Another Israeli connection can be found in the Slovenian Israeli Business Club, which works to promote economic relations between business people in the two countries.
“We arranged several delegations from the Chamber of Commerce to Israel,” says club president Boštjan Kočar, and a delegation of Israeli business people is scheduled to arrive in Slovenia in April.
In Kočar’s opinion, an interesting arena for Israelis could be the agriculture sector that is going to benefit from a €1.1b. investment in the next years. “Agriculture is now the topic, because you will have support,” he says. “There is a place for Mekorot for sure.” Another possible sector is the defense industry.
According to Kočar, there is “long time cooperation in the field, but it can be increased.”
This is not to say that everything in Slovenia is rosy. Unemployment is still high – 12.6 percent last December – also among young graduates, and many companies are still fledging. Banks remain indebted and government reforms are still very much needed.
“We try to do our best to support growth,” says the finance minister of the situation. He acknowledges the difficulties facing Slovenia as the result of the global crisis and is determined to push the country forward. There is “a lot of room to grow through private expenditures,” he says, adding, “What we are not experiencing yet is consumer credit.”
However, this situation may be advantageous for outside investors, as the Slovenian government is looking for foreign money to boost its economy. A unique opportunity, for example, may be found in the government’s portfolio of the stateowned companies for sale.
These huge companies were badly hit as a result of the global financial crisis, and the government is looking for foreign investors to buy them. There are currently 12 such companies on offer, such as Adria Airways, the national airline; local communications giant Telekom Slovenije; and the Nova KBM bank.
Along with the privatization of state-owned companies and the efforts to increase spending, another major challenge is the non-performing loans in banks, which the government is tackling by transferring non-performing assets into a “bad bank” established to restore balance sheets, and by “putting a lot of pressure” on other banks to manage their loans, according to Mramor.
The government’s attempt at encouraging privatization isn’t well received all across Slovenia, however.
There is “a strong feeling that things should remain the way they are,” says Peter Frankl, the editor of Finance, Slovenia’s financial newspaper. “The economy is pulling away from these [traditional] values, which have not proved very efficient.” People, he adds, “look nostalgically toward the welfare state.”
In his opinion, Slovenia’s traditional financial environment contributed to the hardships that his country now faces. “Everyone knows everyone.
We are all cousins. Slovenia is a very nice kibbutz,” he quips. “That’s the biggest problem in Slovenia.” To rectify the situation, the local market must open itself up more. “It will get more and more internationalized,” he forecasts.
But it is not just big companies looking for foreign money that can prove lucrative. Other, more traditional business opportunities can also be found in the country. Because of its small population, most of the industry in Slovenia looks outward to neighboring countries and exports the majority of what it produces. In 2013, for example, the export-driven economy saw €21.6b. – about 61% of national GDP – in exports of goods and services. The main export market is Germany, followed by Italy, Austria and Croatia.
Slovenia’s location along the coast enables it to serve as a shipping hub, and the country’s Koper Port, or Luka Koper in Slovene, is the focal point for maritime trade. Opened in 1957, the port is comprised of 12 specialized terminals such as a fruit terminal, a livestock terminal and a cereal terminal.
The only products that do not pass the port are natural gas and fuels. Goods from Israeli companies, such as peppers from the Arava, are already reaching Koper Port, and its management would like to see even more traffic.
A growing, less traditional, industry is the hi-tech sector, which is steadily expanding. This expansion has involved change in the conventional Slovenian mindset, which until recently was firmly in favor of steadfastness and conservative business.
“We are not so risky. This is not something that is a characteristic of the nation,” says Iztok Lesjak, the general manager of the Ljubljana Technology Park, of innovation.
Rather, “we would like to be employed.” He explains: “The education system is producing people that will be employed, not ones that will employ.”
“In former Yugoslavia, entrepreneurship wasn’t considered very much,” adds Marta Turk, the director of the Ljubljana Regional Chamber of Commerce. Change, however, is on the horizon. The Ljubljana Technology Park, for example, plays a central role in encouraging young people to succeed in the entrepreneurial world.
The tech park was founded 20 years ago, soon after Slovenia became independent, and is home to 280 companies, with more than 20 new companies joining each year. These companies are very diverse, ranging from advanced biotech firm BIA Separations to ANIGMO, which developed no-touch lighting switches.
As for words of advice to foreign investors who are apprehensive of the state of things in Slovenia, Kočar of the business club says, “Don’t be afraid. We are not clear, but we are also not a country where there aren’t rules.” As for his country’s economic advantages, “Slovenia is not two million people, it’s a region that is profitable,” he maintains. “This is potential. Not a small country, [but] quite a good potential.”The writer was a guest of SPIRIT Slovenia.