Slovenia Business Week no. 14, April 3rd, 2006 Table of Contents: HEADLINES ............................................................................................................................. 3 Annual Inflation Rate Down to 1.9% ..................................................................................... 3 Slovenia's Current Deficit at 1.8% of GDP in 2005 ............................................................... 3 Futura DDB Chosen Best Advertising Agency of the Year Again ........................................ 4 INTERNATIONAL COOPERATION ...................................................................................... 5 Slovenia and France Sign Agreement on Cooperation in Energy .......................................... 5 FM Rupel and Illy Discuss Topical Bilateral Issues .............................................................. 5 Slovenia Signs Agreement on Protection of River Sava ........................................................ 5 Slovenia and Macedonia Facing Similar Issues in Local Government .................................. 6 French Businesses Say Slovenia Must Open Up to FDI ........................................................ 6 EUROPEAN UNION ................................................................................................................. 8 EU Transport Ministers Confirm Uniform Driver's Licence ................................................. 8 PM Jansa Sets Slovenia as Positive Example in the EU ........................................................ 8 MPs Pass Government's Declaration on Slovenia's EU Activities ........................................ 9 Slovenia's Desire for Two Cohesion Regions Nears Satisfaction .......................................... 9 Zagar and Huebner Discuss Fund Phasing, Regions ............................................................ 10 LEGISLATION ........................................................................................................................ 11 Parliament Passes Amendments to the Central Bank Act .................................................... 11 STATISTICS/FORECASTS .................................................................................................... 12 Slovenia Slips in Global ICT Rankings ............................................................................... 12 Business Sentiment Slightly Up Again ................................................................................ 12 Industrial Output Up 6.6% Year-on-Year ............................................................................ 13 FINANCE................................................................................................................................. 14 Maribor-based Insurer Doubles Profit in 2005 .................................................................... 14 IMF Warns Slovenia about Long-Term Challenges ............................................................ 14 Austrian Bank Wants 10% of Banking Market in Mid-Term .............................................. 15 Insurer Zavarovalnica Triglav Posts Record Profit .............................................................. 15 Slovenia Surprised at Croatia's Position on LB Issue .......................................................... 16 Ljubljana Stock Exchange .................................................................................................... 16 Foreign Exchange ................................................................................................................. 17 REGIONAL INFORMATION ................................................................................................ 18 Funicular to Ljubljana Castle Ready This Summer ............................................................. 18 PM Jansa Says Posavje's Importance Exceeds Its Size ........................................................ 18 BRANCH INFORMATION .................................................................................................... 20 Slovenia Considering Dual Track Divaca-Koper Railway Line .......................................... 20 Poultry Sales, Production Drops Because of Bird Flu ......................................................... 21 Energy Agency Facing Opening Up of the Energy Market ................................................. 21 Red-Capped Boy Most Original Illustrated Children's Book ............................................... 22 COMPANIES ........................................................................................................................... 23 PM Claims Government On Track With Privatisation Roadmap ........................................ 23 SRC.SI Group Ramps Up Profits by 50% in 2005 .............................................................. 23 Editor-In-Chief to Take Over as CEO at Daily Finance ...................................................... 24 Mura Boss Elected New Head of Employers' Association .................................................. 24 Finance Minister Wants to Speed Up Hydro Plant Construction......................................... 25 Profits at Autocommerce More than Double in 2005 .......................................................... 25 Mobile Operator Simobil Gets Advertiser of the Year Award ............................................ 25 Sceptical, Managers Underline the Need for Reforms ......................................................... 26 Sava Group Profits Down 21% Y-Y in 2005 ....................................................................... 27 Sava Offloads Entire Stake in NFD Holding ....................................................................... 27 Drinks Group Pivovarna Lasko Posts 3.5-Fold Profit Rise in 2005 .................................... 27 Iskra Avtoelektrika Misses Profits Targets .......................................................................... 28 Terme Catez Posts Bumper Profit ........................................................................................ 28 Food and Tourism Drag Down Profits at Istrabenz ............................................................. 28 Privatisation of Steel Group Could Start in June ................................................................. 28 SLOVENIA IN BRIEF ............................................................................................................ 30 Drnovsek and Papadopoulos Express Support to EU Constitution...................................... 30 Macedonia and Slovenia Sign Agreement on Fight Against Crime .................................... 30 Parliament Formally Halts Re-incorporation of Vzajemna .................................................. 30 Bogdan Benko Appointed to Senior Foreign Ministry Post ................................................ 30 Government Relieves Three Ambassadors .......................................................................... 30 Government Delegation and Trade Unions to Visit Sweden ............................................... 30 Government Adopts Changes to Legislation on Phone Line Compensation ....................... 30 Minister Mate Discusses EU Membership Preparations in Macedonia ............................... 31 2 HEADLINES Annual Inflation Rate Down to 1.9% Slovenia's annual inflation rate edged 0.3 percentage points lower in March to 1.9% despite a monthly increase of 0.8%, the National Statistical Office has said Slovenia's annual inflation rate edged 0.3 percentage points lower in March to 1.9% despite a monthly increase of 0.8%, the National Statistical Office has said. Prices of goods as well as services increased significantly in March. Measured with the harmonised index of consumer prices, which is used for comparisons with consumer price growth in the EU, the rate was 0.7%. However, the 12-month average price growth measured with the EMU convergence price index fell to 2.3%. According to the latest data for February 2006, the EMU convergence criterion for inflation was 2.6%, which means that Slovenia was 0.2 percentage point below the criterion. Prices of goods increased by an average of 0.9% on a monthly basis, with services up 0.7%, boosted by an 11.2% surge in health insurance. Health services were dearer because of the transition to a new system of supplementary health insurance, thus pushing up prices in the group miscellaneous goods and services by 1.8%. Higher prices of clothing and footwear added most to the total price growth, as they soared by 11.6% and 9.7% respectively after the end of the winter sales, accounting for 0.8 percentage points of the monthly inflation rate. Household equipment was up 1.4%, restaurants and hotels 0.6%, education 0.3%, health 0.2% and alcoholic beverages and tobacco edged 0.1% higher. In March, lower prices were registered in the groups transport (0.8%), communications, and recreation and culture (0.2%) and housing, water, electricity, gas and other (0.1%). Lower prices of cars pushed the monthly rate down 0.2 percentage points, while cheaper vegetables lowered the monthly rate by 0.1 percentage point. On an annual comparison, prices increased the most in housing, water, electricity, gas and other (7.8%), education (4.8%), miscellaneous goods and services (4.6%) and furnishing, household equipment and maintenance (4.4%). Slovenia's Current Deficit at 1.8% of GDP in 2005 Meanwhile, the general government debt amounted to 29.1% of GDP, down 0.4 percentage points year-on-year Slovenia's general government deficit stood at 1.8% of GDP in 2005, down 0.5 percentage points over the year before. Meanwhile, the general government debt amounted to 29.1% of GDP, down 0.4 percentage points year-on-year, according to early data released by the National Statistical Office. The statisticians estimate that the deficit would remain level this year at 1.8% of GDP, whereas the debt is projected to increase marginally to 29.8% of GDP, according to the data, which was released on Friday. This means Slovenia is well within the framework set by the Maastricht criteria for eurozone entry, which set the deficit ceiling at 3% of GDP and debt ceiling at 60% of GDP. Andrej Flajs, the head of the department for national accounts at the Statistical Office, told the press today that last year was extraordinary in that the budget took on the debt of the social security funds. That way, the state assumed an extra SIT 46bn (EUR 192m) of debt. Consequently, the social security funds showed a surplus of SIT 52bn (EUR 217m) or 0.8% of GDP. Without the debt assumption, the deficit of the central government would have amounted to 2.1% of GDP instead of the 2.8%. 3 Another extraordinary development last year was the surplus of the local government: particularly due to disposals of land, the local government level last year generated a surplus of 0.2% of GDP. The Statistical Office also presented revised figures for the 2000-2004. On average, the deficit was 0.2 percentage points higher over that period. The biggest revision was carried out for 2001, namely from 3.9% to 4.3% of GDP. Flajs also pointed to the primary deficit, which excludes interest expenditures. It was at 1.2% of GDP in 2000, rising to 1.6% of GDP in 2002 and then plummeting to 0.2% of GDP in 2004. It stood at 0.1% of GDP last year. According to Fajs, the public finances can be considered as healthy or manageable when primary deficit becomes primary surplus. If the surplus stood at between 0.3% and 0.4% of GDP, it would be easier to counter cyclical trends and stay well clear of the eurozone deficit ceiling. Futura DDB Chosen Best Advertising Agency of the Year Again The advertising agency Futura DDB scored a hat-trick, becoming Best Agency at the 15th Festival of Slovenian Advertising (SOF) for the third year in a row The advertising agency Futura DDB scored a hat-trick, becoming Best Agency at the 15th Festival of Slovenian Advertising (SOF) for the third year in a row, as SOF closed in Portoroz on Friday, 1 April. Futura also won the best TV ad prize for two ads for ISP Siol, namely for the "Modri ADSL ribic" (Blue ADSL Fisherman) and "Modri ADSL tus" (Blue ADSL Shower). Meanwhile, the "Advertiser of the Year" award went to Simobil, Slovenia's second largest mobile operator, for its long-term awareness of the importance of trademark management. This award is given out by the Advertising Chamber of Slovenia, which praised Simobil for its targeting clients aged from 15 to 30 with an interesting choice of music in their ads. Gordana Petek Ivandic became "the Advertising Personality of the Year" for many years of her successful promotion of the Belinka trademark. Belinka is a manufacturer of paints and coatings. The Mayer McCann agency won best printed ad award for "Brisace" (Towels) for the Vale Novak bookshop, while Saatchi & Saatchi was given the award for best radio ad. The Mediamix agency won the best Internet ad award for its Internet presentation of the film production house Arkadena Film. The best ad campaign meanwhile went to Formitas BBDO for its Electrolux laundry ad at the Rock Otocec rock music festival. According to SOF president Dejan Turk, this year's SOF saw a record number of over 800 competing ads. Designed to promote Slovenian production, SOF originates in the Yugoslav advertising film festival from the 1970s. It is seen as an opportunity to look back at the past year and as an incentive to improve the quality of advertising. This year it tried to address the challenges faced by advertisers in a world plagued by information overload by focusing on trends, the future and dialogue. 4 INTERNATIONAL COOPERATION Slovenia and France Sign Agreement on Cooperation in Energy Minister of Higher Education, Science and Technology Jure Zupan and the vice-chairman of the French Atomic Energy Commission (CEA), Jean-Pierre Le Roux, signed an agreement on cooperation between the Slovenian ministry and the CEA Minister of Higher Education, Science and Technology Jure Zupan and the vice-chairman of the French Atomic Energy Commission (CEA), Jean-Pierre Le Roux, signed on Monday, 27 March an agreement on cooperation between the Slovenian ministry and the CEA. "The agreement is a result of years of cooperation between Slovenian and French researchers, which will now be taken to an even higher level," Zupan said, adding that the two countries cooperate in 30 to 50 science and technology projects a year. Slovenian institutions which have been successfully cooperating with the French institutes include Slovenia's main research institute, Institut Jozef Stefan, the Ljubljana Medical Faculty, the Chemistry Institute, the National Biology Institute, and the Agency for Radwaste Management. The two countries are also working together in 103 joint projects within the EU, such as Cost, Eureka and the 5th and 6th Framework Programme, while Zupan and Le Roux expressed hope that the 7th Framework Programme will also be included soon. Furthermore, Slovenia cooperates in the construction of the international experimental fusion reactor ITER. In Le Roux's view, it is important that the two countries have a positive approach toward nuclear energy. He also pointed to the problem of new energy sources, which would replace fossil energy sources, and to environmental issues. He stressed that Europe must follow the goal of a sustainable and efficient energy policy. FM Rupel and Illy Discuss Topical Bilateral Issues Foreign Minister Dimitrij Rupel held working talks with Friuli-Venezia Giulia governor Riccardo Illy, with current bilateral issues topping the agenda Foreign Minister Dimitrij Rupel held working talks on Monday, 27 March with FriuliVenezia Giulia governor Riccardo Illy, with current bilateral issues topping the agenda. Rupel said prior to the meeting that Italian plans to build a terminal for liquefied natural gas near Trieste, just off the maritime border with Slovenia, would top the agenda. Illy explained that Italy was keeping Slovenia posted about all activities regarding the project. He added that a project such as the terminal requires the cooperation of local communities. Talks also touched on a disputed law that the Italian parliament has recently past, which gives descendants of Italians living in Slovenia and Croatia the right to obtain Italian citizenship. Rupel assessed that his Italian counterpart, Gianfranco Fini, has already moderated his position on the act, and noted that the act has made headlines in particular due to the ongoing election campaign in Italy. Slovenia Signs Agreement on Protection of River Sava Slovenia, Croatia, Bosnia-Herzegovina and Serbia-Montenegro signed an agreement on the plan for the protection of the lower Sava basin, the UN Development Programme said Slovenia, Croatia, Bosnia-Herzegovina and Serbia-Montenegro signed in Vienna on Tuesday, 28 March an agreement on the plan for the protection of the lower Sava basin, the UN Development Programme said. The Sava River Basin Management Plan, which is to be developed by the four countries sharing Sava and its basin, includes an assessment of the Sava environment and of human activities affecting the river. 5 In line with the plan, the signatories will take joint action in solving the problems affecting the river, such as agricultural water pollution, waste waters and industry, as well as the construction of hydro plants. In the first year, the parties to the agreement are to implement the plan in cooperation with the Danube Regional Project and the International Commission for the Protection of the Danube River. The commission is to review the plan by 2009, the deadline which the European Commission has set for member states to develop national and regional plans for the protection of water resources in line with the EU Water Framework Directive. Slovenia and Macedonia Facing Similar Issues in Local Government Slovenian Local Government and Regional Policy Minister Ivan Zagar met his Macedonian counterpart Rizvan Sulejmani in Ljubljana "Slovenia and Macedonia are facing similar problems in the field of local government," Local Government and Regional Policy Minister Ivan Zagar told the press after meeting his Macedonian counterpart Rizvan Sulejmani in Ljubljana on Tuesday, 28 March. Zagar briefed his guest on Slovenia's activities in enhancing general and financial independence of municipalities, the goal in decentralisation with the introduction of provinces, on regional development and drawing EU funds. The Slovenian minister was in turn acquainted with the decentralisation model in Macedonia, which is according to Sulejmani a good precondition for regional development, and was also assessed as good by the European Commission. "It is a sort of a political product which can be marketed as a good basis for a multiethnic country," said Sulejmani, and added that Macedonia's experiences could be useful for other multinational societies. Sulejmani, who also invited his host to visit Macedonia, hopes for a long-term cooperation between the two countries, on the local as well as state level, which could also be made more formal with a special memorandum. They moreover agreed that the meeting was very useful with regard to the exchange of information, and called for a stronger cooperation between the two countries. French Businesses Say Slovenia Must Open Up to FDI Members of MEDEF, a French business association, who met with representatives of Slovenian businesses in Ljubljana, said that Slovenia should do more to open to foreign investments and increase the added value of its businesses Members of MEDEF, a French business association, who met with representatives of Slovenian businesses in Ljubljana on Wednesday, 29 March, said that Slovenia should do more to open to foreign investments and increase the added value of its businesses. Slovenian Employers' Association secretary Samo Hribar Milic claimed that Slovenia is insufficiently open even to home investments. He ascribed the situation to an excessive presence of the state. "The situation has to change radically and quickly, this is why reforms are necessary," Hribar Milic said. Deniel le Cogui of the French company Bull noted that Slovenia has a favourable geographic position, but added that the country should also increasingly start turning to EU markets. He also called for tighter cooperation between industry and research institutions. Franc Hoffmann of the Slovenian Public Agency for Entrepreneurship and Foreign Investment meanwhile claimed that the government was pushing for an increase of foreign investments. 6 He underlined Slovenia's highly educated work force, several benefits for investors and a developed infrastructure as the main attributes that could arouse French investors' interests. According to Chamber of Commerce and Industry of Slovenia (CCIS) president Jozko Cuk, France is the fourth largest foreign investor in Slovenia, with investment in 2004 totalling EUR 440.2. France is also one of Slovenia's most important trading partners, figuring fifth in exports and fourth in imports. 7 EUROPEAN UNION EU Transport Ministers Confirm Uniform Driver's Licence The uniform driver's license for cars and motorcycles directive which was backed by the EU transport ministers will confront Slovenian citizens with a number of changes, the most prominent being the limitation of the license's validity to a maximum of 15 years The uniform driver's license for cars and motorcycles directive which was backed by the EU transport ministers on Monday, 27 March will confront Slovenian citizens with a number of changes, the most prominent being the limitation of the license's validity to a maximum of 15 years. Slovenian Transport minister Janez Bozic told STA that the validity of the driver's license for cars would be limited to 10 years with the possibility of an extension to 15 years if members states opt for this possibility. "Considering the current provisions in Slovenia, which allow for the license not to be replaced before the holder reaches 80 years of age, I expect us to use the 15 years option," Bozic explained, adding that licences for trucks and buses will expire after five years. He also announced some changes will be made in terms of vehicle classes and age limits for obtaining individual licences - in the future no one under 24 will get to drive the most powerful motorcycles, up from 21 today. The age limit for truck drivers will also be upped, from 18 to 21. "The new rules will contribute to improving road security," Bozic said, while adding that the costs of the changeover were difficult to predict precisely, "but are expected to be manageable". The directive sets 2012 as the final year for the member states to start issuing the new creditcard form licences, and 2032 as the date when all the licences are to be replaced. Meanwhile, the ministers also officially confirmed the directive on a single European toll service for trucks and coaches, the eurovignette, which minister Bozic welcomed. According to him the directive will not have a significant impact on tolls in Slovenia. PM Jansa Sets Slovenia as Positive Example in the EU Slovenia's EU presidency in the first half of 2008 will therefore be a crucial piece in the mosaic of regaining the trust which the EU needs for decisions that will facilitate growth, job creation and enlargement, Jansa stressed Slovenia is a positive example in the EU, which the bloc badly needs to rebuild confidence, Prime Minister Janez Jansa told lawmakers on Tuesday, 28 March as he presented a declaration and guidelines on Slovenia's EU policies for this year. Slovenia's EU presidency in the first half of 2008 will therefore be a crucial piece in the mosaic of regaining the trust which the EU needs for decisions that will facilitate growth, job creation and enlargement, Jansa stressed. According to the prime minister, Slovenia is meeting eurozone entry requirements and plans to enter the Schengen system in October next year. It can round off this positive picture with the EU chairmanship, thereby leaving the ranks of newcomers and joining the circle of established member states. This way, Slovenia can join the inner, more integrated core of the Union, which brings new opportunities that the country can use if it is appropriately prepared, he emphasised. Moreover, he said the EU's failure to regain trust precludes subsequent steps and the re-start of the ratification of the constitutional treaty. The latter, he noted, is unlikely to happen at this year's EU summit or the one after that. 8 According to him, trust will be regained only if new jobs are created, if the young get job opportunities earlier in life and if the EU manages to transpose examples of best practice from countries that have succeeded in this field. Moreover, the EU cannot embark on enlargement until it has resolved the institutional crisis, he said, adding that the EU membership of countries in the Western Balkans was Slovenia's priority. The importance of enlargement was also highlighted by Foreign Minister Dimitrij Rupel, who said the issue has to remain high on the EU agenda. Rupel also reiterated that Slovenia sees Croatia's membership talks as the framework in which solutions to open bilateral issues can be found. The pace of negotiations will depend on Croatia's ability to transpose and implement European standards; Croatia will be able to show its credibility by consistently honouring agreements, he said. Rupel also said that Slovenia would take an active part in strengthening the bloc's foreign and security policy, which will contribute to the resolution of crisis situations worldwide. In the framework of our European mission, we shall also deal with the neighbourhood policy and carry out thorough preparations for EU presidency, he said. MPs Pass Government's Declaration on Slovenia's EU Activities The declaration mainly deals with the country's preparations for its stint at the EU's helm in the first half of 2008, the 1 January 2007 euro changeover and efficient drawing of EU funds The government-sponsored declaration on Slovenia's priorities in EU institutions in 2006 was passed in parliament on Tuesday, 28 March. The declaration mainly deals with the country's preparations for its stint at the EU's helm in the first half of 2008, the 1 January 2007 euro changeover and efficient drawing of EU funds. Presenting the document to the MPs earlier in the day, Prime Minister Janez Jansa said that Slovenia was a positive example in the EU which the bloc badly needs to rebuilt confidence. Jansa also stressed that Slovenia's EU presidency in the first half of 2008 will therefore be a crucial piece in the mosaic of regaining the trust which the EU needs for decisions that will facilitate growth, job creation and enlargement. Among the priorities of the declaration, adopted by the government in February, are the EU's external border, the amended Lisbon Strategy, the 2007-2013 spending plan and the bloc's sustainable development. In line with the declaration, Slovenia will also focus on the EU's next enlargement, the European prospects for the countries in the Western Balkans, and the strengthening of the bloc's role in the world. Slovenia's Desire for Two Cohesion Regions Nears Satisfaction The EU's preliminary assessment of Slovenia's request that it be divided into two cohesion regions is favourable The EU's preliminary assessment of Slovenia's request that it be divided into two cohesion regions is favourable. "We have received the preliminary opinion of the Eurostat which is positive and says that the request...is in line with the regulations," European Regional Policy Commissioner Danuta Huebner has told STA. "The request for the division into two regions at the NUTS 2 level, which the Slovenian government submitted in November, has been checked and is OK...the proposal could officially enter into force in 2008," Huebner said in an interview for STA prior to her visit to Slovenia on Friday. 9 According to her, Slovenia has achieved the best possible outcome: it will be treated as one region in the 2007-2013 period and thus remain fully eligible for convergence funding; after that it will be divided into the west and the east, which will help the less developed region. Huebner outright rejected the three-region option, which had been considered by the government. She said three regions would not meet the criteria of the relevant regulation, which is very strict and would not be changed. "I believe that this is the best option," she said. Slovenia had made the request under considerable time pressure last year and after prolonged debates at home. It was not clear at the time whether the 2007-2013 budget would be adopted - if it had not been confirmed, Slovenia would get less money in this period as one region, as it would lose eligibility for certain funding due to its level of development. Although the confirmation looks certain, sources at the European Commission have pointed out that the fate of the 2007-2013 spending plan still depends on a final agreement between the Council, the Commission and the European Parliament. If the outcome is not favourable in April, things may get complicated again. Zagar and Huebner Discuss Fund Phasing, Regions Slovenia's performance in the phasing of EU funds and the division to two statistical regions topped the agenda of talks as Local Government and Regional Policy Minister Ivan Zagar received European Regional Policy Commissioner Danuta Huebner Slovenia's performance in the phasing of EU funds and the division to two statistical regions topped the agenda of talks on Friday, 31 March as Local Government and Regional Policy Minister Ivan Zagar received European Regional Policy Commissioner Danuta Huebner. Zagar told the press he had briefed Huebner on the current situation in the phasing of EU funds, and stressed that Slovenia would use this experience to be even more successful in the next budget period, between 2007 and 2013. Commissioner Huebner stressed she was satisfied with how much structural funding Slovenia has managed to secure so far. She pointed out that much more money would be available in the next seven-year period. The pair moreover discussed Slovenia's request to be divided to two statistical regions at the NUTS-2 level after Huebner confirmed that Eurostat's preliminary opinion about the request was positive. Zagar said that the proposal, which had prompted a heated political debate, was good and in line with the principle of balanced regional development. The commissioner pointed out that the procedure was very long, and the European Commission cannot officially confirm it before the second half of 2006, so that it enters into force in 2008. That way Slovenia will be ready for the new regional division by the next budget period, said Huebner, who added that the division to two regions was smart for the country. Moreover, Zagar said, a step forward has been taken regarding the establishment of provinces, as a debate on the relevant constitutional changes has already been launched in parliament. Zagar believes that the necessary preparations could be completed by the end of this year or early in 2007. Huebner explained that the country's internal division is a home policy matter. Commissioner Huebner met Zagar after she addressed the URBAN conference on urban development, which started in Austria's Graz yesterday and concluded in Maribor. She concluded her visit in Celje, where she attended a ceremony marking the beginning of the next phase in the upgrading of the Celje waste treatment plant, which is co-funded by the EU. 10 LEGISLATION Parliament Passes Amendments to the Central Bank Act The parliament has unanimously passed amendments to the central bank act, whose implementation is one of the preconditions for the adoption of the euro alongside the compliance with the Maastricht convergence criteria The parliament has unanimously passed amendments to the central bank act, whose implementation is one of the preconditions for the adoption of the euro alongside the compliance with the Maastricht convergence criteria. The main purpose of the amendments, which were confirmed on Thursday, 30 March, is harmonisation with the provision of the Treaty of the European Communities, and the statutes of the European System of Central Banks and the European Central Bank. Based on the 2004 EU convergence report on Slovenia, the amendments abolish certain unclarities regarding the central bank's independence to legally integrate it into the European System of Central Banks. In addition, they clearly define the relationship between the central bank's primary objective (price stability) and the secondary objectives of support for economic policy and stewardship of the stability of the financial system. The amendments take into account the demand for greater financial independence in the management of foreign exchange reserves, and delineate the powers of the central bank and the European System of Central Banks after the euro changeover. 11 STATISTICS/FORECASTS Slovenia Slips in Global ICT Rankings The global ICT rankings report, published for the fifth year running, has been compiled by the World Economic Forum, in collaboration with the INSEAD business school While the US has climbed four positions to top a global index ranking access to information and communication technology (ICT), the list, published on Tuesday, 28 March by the World Economic Forum, is less upbeat for Slovenia, which lost three positions in 2005 to place 35th. The US is followed by last-year's leader Singapore and Denmark, which moved one spot up since 2004. Iceland, Finland, Canada, Taiwan, Sweden, Switzerland and Great Britain complete the top 10 of the 115-country list. Among countries bordering Slovenia, Austria is far ahead at 18th place, whereas the rest of the neighbours have placed behind it: Hungary is 38th, Italy 42nd and Croatia 57th. The global ICT rankings report uses the Networked Readiness Index (NRI) to measure the degree of preparation of a nation or community to participate in and benefit from ICT developments. The NRI is composed of three component indexes which assess: the environment for ICT offered by a given country or community, the readiness of the community's key stakeholders individuals, business and governments, and the usage of ICT among these stakeholders. Slovenia ranks 31st in the readiness of key stakeholders and 33rd in the actual usage of ICT. Yet it is far behind in the environment for ICT, where it ranks 45th. At the level of readiness, Slovenia scored well in the availability of Internet access in schools and in science articles (20th), but the importance of ICT in the government's vision of the future is far too low (75th). At the level of actual ICT usage, Slovenia received top grades for mobile phones (18th) and scored poorly for ICT productivity (69th). Its worst ranking comes at the level of the ICT environment, as the effectiveness of taxation places if at the bottom of the rankings, at 94th, while enrolment in higher education places it at 13th. The global ICT rankings report, published for the fifth year running, has been compiled by the World Economic Forum, in collaboration with the INSEAD business school. Business Sentiment Slightly Up Again Business sentiment increased 1 percentage point in March Business sentiment increased 1 percentage point in March, with improvements in retail and manufacturing confidence making up for a continuing drop in consumer confidence, the Statistics Office has said. In its business sentiment index data, the Statistics Office pointed out that despite the March fall in consumer confidence, the overall sentiment index was still 6 percentage points higher than in the same month of 2005. A 1 percentage point monthly increase was recorded both in the manufacturing and the retail sector, with manufacturing sentiment surging 9 percentage points in comparison to March 2005 and retail beating last-year's March data by 5 percentage points. Consumer confidence has seen a fall of 3 percentage points, but remained 1 percentage point above the long-term average. Worries persist among consumers about the general economic situation in the country for the next year. 12 Industrial Output Up 6.6% Year-on-Year Slovenia's industrial output grew by 2.2% in January over December last year and 6.6% year-on-year, according to the latest report by the National Statistical Office Slovenia's industrial output grew by 2.2% in January over December last year and 6.6% yearon-year, according to the latest report by the National Statistical Office. Compared to January 2005, production in the mining sector increased by 9.2% and the manufacturing sector upped its output by 6.8%. Volumes in electricity, gas and water supply were up 4.3%. Year-on-year, January also saw a 23.8% increase in the output of capital goods industries, a 7.5% increase in the output of raw materials and a 6.8% growth in intermediate goods. 13 FINANCE Maribor-based Insurer Doubles Profit in 2005 Zavarovalnica Maribor, one of Slovenia's leading insurers, posted net profits of SIT 2.57bn (EUR 10.7m) in 2005 Zavarovalnica Maribor, one of Slovenia's leading insurers, posted net profits of SIT 2.57bn (EUR 10.7m) in 2005, which is more than double what it generated a year earlier, according to unaudited data published by the insurer on Tuesday, 28 March. CEO Drago Cotar emphasised that a lot of effort has been put into improving the level of services, restructuring the portfolio and covering the losses incurred in past years due to legislative provisions concerning capital adequacy. According to the Maribor-based insurer, total premiums rose by 7% to SIT 45,1bn (EUR 188.2m), while payouts totalled SIT 27.1bn (EUR 113.1m), which represents a drop of 7.1%. The positive premiums trend is expected to continue in 2006, as a 16.2% increase compared to the same period in 2005 was already recorded in the first two months of the new year. For 2006 the company is targeting a 4.4% growth in premiums totalling SIT 47.1bn (EUR 196.5m). It also expects a 3.7% rise in payouts that would reach SIT 28.1bn (EUR 117.3m). IMF Warns Slovenia about Long-Term Challenges The International Monetary Fund (IMF) is optimistic about Slovenia's short-term outlook, as it is at the threshold of adopting the euro The International Monetary Fund (IMF) is optimistic about Slovenia's short-term outlook, as it is at the threshold of adopting the euro. However, Slovenia will have to tackle a number of long-term challenges, an IMF delegation said after completing a routine mission to Slovenia on Tuesday, 28 March. Slovenia needs to improve the efficiency of public spending, carry out pension reform and a structural reform of public finances, and create conditions for a more flexible labour market to increase labour participation, the head of the IMF mission, Juan Jose Fernandez-Ansola, told the press in Ljubljana. Fernandez-Ansola said that the two-week mission has shown the government is aware of the long-term challenges, which have been included in the government-sponsored reform package. He said Slovenia was making progress "very fast, so the key is to maintain fiscal and wage policies that are balanced with the expansion." This is why the IMF mission focused this year on long-term challenges, he said. Meanwhile, Finance Minister Andrej Bajuk stressed that Slovenia has to achieve long-term sustainability and progress in the key areas, so "long-term problems must be tackled in time and reforms carried out." The head of the IMF mission moreover emphasised that Slovenia would enter a more competitive environment after it adopts the euro, so it has to improve the efficiency of public spending. "Minister Bajuk agreed with me on the structural reforms of the fiscal policy, which are not easy but are needed." The Slovenian government also realises, according to Fernandez-Ansola, the threats to its pension system 30 or 40 years from now. "Demographic changes represent special demands for fiscal policy and the labour market," he said, adding that the labour market must become more flexible. According to Bajuk, Slovenia must "clean up the pension system...and at the same time make sure it is sustainable in the long term." So in the second half of the year the government will put forward changes to legislation on voluntary pension contributions. 14 To rise to the challenge of fiercer competition, Slovenia will also have to take advantage of foreign direct investment, said Fernandez-Ansola. According to him, red tape is still the biggest obstacle for foreign investors, a statement which Bajuk agreed with. Addressing specific challenges to the financial sector, Fernandez-Ansola said there will be changes in the balance sheets of banks: they will have to restructure their portfolios, which are currently heavy on Bank of Slovenia bills, with other assets with smaller returns. Bozo Jasovic of the Bank of Slovenia said the central bank was already making technical adaptations that will allow the banks to gradually phase in changes that will allow them to restructure their portfolios, starting in the second half of this year. Austrian Bank Wants 10% of Banking Market in Mid-Term According to Arhar, BA-CA increased its market share to 6.5% in 2005 The Austrian Bank Austria Creditanstalt Ljubljana (BA-CA) is on track to reach its mid-term goal, a 10% market share in Slovenia, BA-CA's CEO France Arhar told the press in Ljubljana on Tuesday, 28 March. According to Arhar, BA-CA increased its market share to 6.5% in 2005, 1.1 percentage points more than in 2004, and is aiming for 7% by the end of the year. The bank also increased its total assets by 50% to SIT 451.1bn (EUR 1.88bn) in 2005, thus becoming Slovenia's 5th largest bank, added Arhar, former governor of the Slovenian central bank. The Austrian bank increased its net profit to SIT 2.6bn (EUR 10.85m) in 2005, 17% more than in 2004, he revealed. BA-CA recorded its highest growth in the area of loans with 32%, while the extent of loans to households alone grew by 36%, Arhar pointed out. While it currently holds 11% of the mortgage market, the bank wants to reach a 15% share. Management board member Stefan Vavti added that the bank wants to reach a 15% share in the area of residential loans in 2006 as well as double its investments into mutual funds to SIT 15bn (EUR 62.6m). Arhar added that the bank's assets have increased by another 4.5% in the first two months of 2006. Insurer Zavarovalnica Triglav Posts Record Profit Slovenia's largest insurer, Zavarovalnica Triglav, posted net profits of SIT 5.86bn (EUR 24.5m) in 2005 Slovenia's largest insurer, Zavarovalnica Triglav, posted net profits of SIT 5.86bn (EUR 24.5m) in 2005, up 113% over the year before, 42% above the target and a record in the history of independent Slovenia, its chairman Andrej Kocic said on Wednesday, 29 March. Speaking about plans for 2006, Kocic announced a steady profit growth and a preservation of the company's market share, which stands at an optimal 42.8% and makes a further increase unrealistic. Kocic, who took over as the new CEO in June, added that in particular over the past two years the company has extended its reach beyond Slovenian borders, mostly to Southeastern Europe but also the EU. The Zavarovalnica Triglav group, which includes subsidiaries in Croatia, BosniaHerzegovina, Montenegro and the Czech Republic, reinsurer Pozavarovalnica Triglav RE and health insurer Zdravstvena zavarovalnica Triglav, collected just under EUR 700m in insurance premiums last year. Zavarovalnica Triglav's share in collected premiums amounted to SIT 147.6bn (615.9m), which is an increase of 8% over the previous year. Payouts, on the other hand, dropped 4% to SIT 77.4bn (EUR 322.9m). 15 The biggest growth was posted in life insurance, where premiums grew by 12% to SIT 42.5bn (EUR 177.3m). Property insurance premiums were up 8% to SIT 105.1bn (EUR 438.6m). The subsidiaries accounted for 12% of the total premiums, which "makes us the leading insurer in Southeastern Europe and we intend to stay on top," Kocic told the press Ljubljana. He announced Zavarovalnica Triglav would try to secure at least a 10% market share in all of its markets abroad, with the exception of the Czech Republic. In 2006 the company also plans to establish a foothold in Serbia where an acquisition of insurer Kopaonik is already underway. Slovenia Surprised at Croatia's Position on LB Issue Slovenia is drafting an extensive response to Croatia's position on the Ljubljanska banka (LB) issue, of which Zagreb has recently notified European Enlargement Commissioner Olli Rehn, Pogacnik told the press Slovenia is surprised that Croatia denies that the issue of Croatian foreign-currency deposits at the defunct Slovenian bank LB is subject to the Yugoslavia succession agreement, Slovenia's high representative for succession Miha Pogacnik has said. Slovenia is drafting an extensive response to Croatia's position on the Ljubljanska banka (LB) issue, of which Zagreb has recently notified European Enlargement Commissioner Olli Rehn, Pogacnik told the press in Ljubljana on Wednesday, 29 March. The succession agreement, ratified by all successor states, clearly defines the procedures to resolve the LB problem, the talks on which have been conducted under the auspices of the Bank for International Settlements (BIS). According to Pogacnik, Croatia at first attended these talks, but has recently started claiming that this is not a succession issue, and has as the only succession country not responded to BIS's 2002 call for the continuation of the talks. LB chairman Borut Ozura, who organised the press conference, meanwhile said that the standpoints which Croatian PM Ivo Sanader gave to Rehn on 23 March are full of fabricated facts and false information. He rejected Zagreb's stance that the LB's Croatian foreign-currency account holders should be reimbursed by the LB from Ljubljana or by Slovenia, which is in outright contradiction to annex C to the succession agreement. Ljubljana Stock Exchange New index introduced Trading on the Ljubljana Stock Exchange in the Monday-to-Friday period was marked by falling prices, which pushed the SBI benchmark index 8.86 points lower to 4,438.97, down 0.2% week-on-week. Stock brokers closed a total of 5,450 deals worth SIT 10.7bn (EUR 44.65m), of which 64% came from block deals. The busiest stock of the week, drug company Krka was one of a few exceptions among the loses. It gained 2.36%, closing at SIT 125,921 (EUR 525,57) on a turnover of SIT 1.6bn (EUR 6.68m), of which SIT 118m (EUR 492,511) was made in block deals. Its upward streak was propelled, according to stock market analyst Matjaz Bernik of Ilirika, by the recent publication of consolidated results for 2005 and buoyant early 2006 sales, which made it exceed the SIT 125,000 (EUR 521,73) ceiling. Grocer Mercator was another rising star, gaining 2.38% to close at SIT 36,542 (EUR 152,52), most likely also as a result of unofficial reports that the company is a target of a Russian-Serb takeover. The Serbs were reported by daily Dnevnik to be offering SIT 50,000 (EUR 208,69) per share. 16 On a turnover of SIT 1.33bn (EUR 5.5m), of which SIT 1.1bn (EUR 4.6m) was made in block deals, fuel trader Petrol was the second busiest stock this week, gaining 0.06% to SIT 70,045 (EUR 292,36). The third most heavily traded share was chemical and tourism company Sava Kranj, which however plummeted 2.76% to SIT 39,063 (EUR 163,04) on a turnover of SIT 321m (EUR 1.33m), with nearly 93% of the sum coming from block trading. Sava sold its entire 14.7% stake in asset management firm NFD Holding for SIT 3.3bn (EUR 13.7m) in order to secure funds for the recent acquisition of a stake in hardware trader Merkur. The stake was sold in a block deal on Friday, 31 March at a price of SIT 700 (EUR 2.92) per share, much above its weekly closing price of SIT 617 (EUR 2.58). The PIX investment fund gained 126.89 points or 3.3% to close at 3,872.81, while the BIO bond index lost 0.14 points or 0.12% to 119.65. TOday, the Stock Exchange introduced a new blue chip index featuring five of the biggest and most active shares from the official market. The SBI TOP index includes Krka, Petrol, Mercator, home appliances maker Gorenje and beverages group Pivovarna Lasko. Meanwhile, the old SBI 20 benchmark index will be transformed into a general market index that will include 15 of the biggest shares from the official and free markets. As of 1 April, shares of daily Delo and food companies Droga Kolinska and Zito (all official market) will be replaced by chemicals group Helios, floor coverings maker Juteks and chemicals company Cinkarna Celje (all free market) in the make up of the SBI 20. Foreign Exchange Mean exchange rate of the Bank of Slovenia Euro (EUR) - SIT 239.58 (+0.00) U.S. dollar (USD) - SIT 198.09 (-2.16) Swiss franc (CHF) - SIT 151.71 (-0.17) British pound (GBP) - SIT 343.64 (-3.27) 17 REGIONAL INFORMATION Funicular to Ljubljana Castle Ready This Summer The funicular will ascend 70 vertical metres on a 118 metre track With the arrival of spring, building sites have sprung up around Ljubljana and one of them is where a funicular railway to Ljubljana Castle will hopefully carry visitors already this summer. The funicular will ascend 70 vertical metres on a 118 metre track. It will carry 500 persons in one direction every hour, which should be enough to bring the average number of people attending an event (250) from the city to the castle within one hour. The value of the project, which dates back to 2001, has been estimated at SIT 1.5bn (EUR 6.3m), the company which organises the Festival Ljubljana explained for STA. Festival Ljubljana was granted a 40 year concession on managing the funicular in 2005. When the old centre of Ljubljana was declared a cultural and historical monument five years ago, the city authorities foresaw the construction of a funicular on the castle hill that would be up and running in June 2002. After doubts about the project with problems including unsuccessful tenders, reproaches about its purpose and cost, Mayor Danica Simsic considered annulling the contract, but it turned out that calling off the project would be more expensive than completing it. The Ljubljana City Council estimated in 2003 that the investment would be paid off in 20 years time. If every person visiting the castle in 2002 paid one euro to travel with the funicular, this would bring in EUR 3m in 10 years. Two years later it was estimated the project could be paid off in 15 years. The lower station of the funicular will be based at the Krekov trg square at the foot of castle hill. The cabin will be relatively large, taking up to 33 passengers. Although the castle hill has been declared a natural heritage site, the construction of the funicular has been deemed acceptable by the responsible authorities. The city authorities believe that as a tourist attraction the funicular will contribute to the identity of the Slovenian capital. It should be a welcome addition to the tour of the city as many tourists find the walk up to the castle too strenuous. PM Jansa Says Posavje's Importance Exceeds Its Size The importance of Posavje far exceeds its size, as the region is one of the key energy centres in Slovenia and its significance will increase with the construction of hydro plants on the lower Sava river, Prime Minister Janez Jansa said as the government visited the region The importance of Posavje far exceeds its size, as the region is one of the key energy centres in Slovenia and its significance will increase with the construction of hydro plants on the lower Sava river, Prime Minister Janez Jansa said as the government visited the region on Wednesday, 29 March. Posavje is home to the Krsko Nuclear Power Plant (NEK), one of the key power generation facilities in the country, the Brestanica thermal power plant and soon the chain of five hydro plants on the lower part of the river Sava. Jansa said that Slovenia as well as the EU would discuss the future of nuclear power, which will include a "decision about the fate of the Krsko N-plant, the extension of its operating life and a possible construction of a new bloc." According to him, the current priority is the search for a site for the repository of radioactive waste, which is already underway. 18 In addition to energy, the region has great potential in tourism, he said, underlining the role of spa operator Terme Catez, which accounts for a significant portion of overnight stays in Slovenia. He said the region was also ideally placed as a logistics hub. The development of this segment has already started and will be co-funded in part by the state, which will further boost the region's status. There is also plenty of room for the development of small and mid-sized enterprises. In addition to tourism and logistics, this segment will have to create the necessary jobs for young people and those left jobless by the decline in traditional industries. To achieve all this it is crucial to invest in knowledge, said Jansa, who noted that a number of agreements on investments in secondary and tertiary education were signed today. Government representatives and mayors of several municipalities from Posavje signed memorandums of understanding on establishing a faculty of trade and tourism and a faculty of energy. 19 BRANCH INFORMATION Slovenia Considering Dual Track Divaca-Koper Railway Line Slovenia is seriously considering a dual track railway line between its only port of Koper and the Divaca transport hub: a dual track would not be much more expensive than the already adopted plan to build a single track, but it would bring many more benefits, a government official has told STA Slovenia is seriously considering a dual track railway line between its only port of Koper and the Divaca transport hub: a dual track would not be much more expensive than the already adopted plan to build a single track, but it would bring many more benefits, a government official has told STA. According to some calculations, the dual track line would increase the cost of the investment by some 20% to 30%, explained Jelka Sinkovec Funduk, the acting head of the Railways Directorate at the Transport Ministry. A bill on some SIT 131bn (EUR 546.8m) in state guarantees which would secure matching funds for the projected EU funding is ready and should be passed in emergency procedure, Sinkovec Funduk added. "We came across some issues in inter-departmental coordination, especially regarding the source of the money needed to repay the loans, but we expect no problems in the parliamentary procedure," she added. A regulation on the spatial plan for the second rail between Koper and Divaca in the southwest was adopted by the cabinet in April 2005, with works on a single track line scheduled to begin in 2008 and to be completed by 2015. Over 27 kilometres of the single track line which would mostly run through tunnels and not alongside the existing Koper-Divaca line would cost EUR 700m. However, the current spatial plan envisages a service tunnel alongside the single line tunnel, meaning that the track's planners see a future for a dual track line, the chairman of the Public Agency for Rail Transport Rajko Satler said. The Koper-Divaca section was moreover listed among EU priority projects on the 5th panEuropean transport route between France's Lyon and the Ukrainian border. The EU has already allocated EUR 5.47m for technical and environmental impact studies of the second line. Slovenia has not yet used the funds, as their spending is linked with the state guarantees bill, the ministry explained. Transport Ministry State Secretary Peter Verlic told STA that the EU is ready to allocate 50% instead of 20% of the necessary funds in its 2007-2013 budget for "well-prepared and important projects". The remaining half would be allocated by the state, with private-public partnership also contributing a small portion of the money, Verlic added. Luka Koper also stressed the importance of the second line for the entire Slovenian economy. The company will have to adjust its infrastructure to a second line by building a new container terminal and a distribution centre. The need to upgrade the Koper-Divaca line emerged, according to Luka Koper, a decade ago. Meanwhile, the country also adopted plans to modernise the existing Divaca-Koper line. According to the government, the project is set to begin in 2006 and should be completed by 2010. By modernising the line, the number of daily trains could increase from 53 to 81 and the tonnage to 14 million tonnes, which would suffice until a second line is build by 2015. 20 Slovenian Railways noted that while some 13,000 transport and passenger trains used the line in 1996, their number increased to 29,000 in 2005, while the amount of transported cargo increased from 4.5 million tonnes to 7.5 million tonnes in the same period. According to the national railway company, the maximum amount of trains that can pass the route on any given day was reached already in 1999. The existing 50-kilometre Koper-Divaca line was built in two stages: first to Presnica as part of the Istrian National Railways from Croatia's Pula to Divaca in 1876 and then to Koper in 1967. It was electrified in 1976. Poultry Sales, Production Drops Because of Bird Flu Poultry-processing companies have reported a 20% drop in sales of poultry meat in February and, according to preliminary data, a 15% drop in March in comparison with 2005 Poultry-processing companies have reported a 20% drop in sales of poultry meat in February and, according to preliminary data, a 15% drop in March in comparison with 2005, after bird flu was first confirmed in Slovenia in early February. According to data from the Chamber of Commerce's food industry association, production of poultry meat was 25% below plans in February and on a par year-on-year, while it was 18% down in March in comparison with March 2005. Slovenia's largest poultry producer, Perutnina Ptuj, coped with a decrease in sales by reducing the number of its employees, however, only laid off workers with fixed-term employment contracts, which have ran out lately, the company said. Redundancies will also happen in the country's second largest poultry company, Pivka perutninarstvo, CEO Janez Rebec told STA. While no major dismissals are planned at the moment, the company will "be forced to adjust to the [market] situation", he added. The company's production is currently 15% below its 2005 levels, Rebec revealed. Energy Agency Facing Opening Up of the Energy Market "After five years in operation we are faced with our most important task - the whole-scale opening up of the energy market in the middle of next year," the director of the Energy Agency Irena Glavic said at a press conference "After five years in operation we are faced with our most important task - the whole-scale opening up of the energy market in the middle of next year," the director of the Energy Agency Irena Glavic said at a press conference marking the agency's fifth anniversary on Friday, 31 March. "From 1 July 2007 onwards we will all be able to choose our energy provider. This means new rights for 760,000 household consumers of electrical energy and 97,000 household consumers of natural gas," she added. These consumers are least well-informed about the market, so the agency is faced with much work, said Glavic, and stressed the importance of the cooperation of all present on the market. The Slovenian electrical energy market is 75% liberalised and the natural gas market 90%, according to the head of the agency, which employs 36 people, the figure to increase to 39 in 2007. Glavic explained that the agency began operating as energy watchdog in 2001 in connection with Slovenia's efforts to enter the EU. Its main tasks are connected with setting up an environment fit for the development of competitive energy markets and supervision. "Slovenia's energy regulator is doing its work expertly and responsibly in relation to all present on the market. The European Commission says our regulator is working well and clearly," added the president of the agency's council Franc Zlahtic. The press conference was also attended by Economics Minister Andrej Vizjak, who hailed the agency as an important institution in setting up the electrical energy and natural gas market. 21 Regarding changes in the energy law, Vizjak said that they are already being negotiated and that they should be discussed by the government next month. Red-Capped Boy Most Original Illustrated Children's Book "Red-Capped Boy" by Andreja Peklar won best Slovenian illustrated children's book 2006 award "Red-Capped Boy" by Andreja Peklar won best Slovenian illustrated children's book 2006 award. The winning work tells a story of a Golden Deer who trampled and destroyed corn crops so a Great Warrior was sent to deal with him. A boy with a red cap also secretly went into the forest and reminded the Golden Deer that the earth belongs to all of us and so the deer stopped ravaging the land while the hunters forever laid down their bows and arrows. Meanwhile artists at home prepared a large bowl full of intoxicating drinks for the feast. Images decorating the bowl depict the event which provides a direct reference to one pf the most prominent Slovenian archeological findings. The bowl or situla from Vace, dating back to the 6th century BC, is the most important artifact of the Hallstatt Culture in Slovenia. It represents a masterpiece of decorative art and European prehistory as a whole. According to the jury, the illustrated story transmits the universal message about living together in harmony and mutual respect, an ancient wisdom which still applies today. The author has revived part of the content and aesthetics of our heritage and by discovering archaic images of beauty has enriched the contemporary world of illustrationm according to the jury. Rudi Zaman, president of the committee which organises the project "Original Slovenian Illustrated Book", stressed that children's books were becoming more popular. "This could be seen at the children's and youth book fair in Bologna so it is right that we encourage the same trend in Slovenia," he said at a press conference at which all nominees were presented. The competition organised for the third year running by the Printing and Media Association of the Chamber of Commerce featured 43 works put forward by 22 publishers. 22 COMPANIES PM Claims Government On Track With Privatisation Roadmap The cabinet already has the proposals of expert groups on the privatisation of all strategic sectors - companies and banking institutions - and is therefore "on track with the privatisation roadmap", PM Janez Jansa told the parliament The cabinet already has the proposals of expert groups on the privatisation of all strategic sectors - companies and banking institutions - and is therefore "on track with the privatisation roadmap", PM Janez Jansa told the parliament on Monday, 27 March. "The documents which are binding for the government and the coalition call for a privatisation which would be deliberate and in some places gradual," Jansa said in a Q&A session held at the beginning of the National Assembly's March plenary. The privatisation groups have only to draft privatisation proposals for the state-owned Pension Management Fund (KAD) and Restitution Fund (SOD), Jansa explained. These proposals are expected "shortly", Jansa replied to a question by opposition Social Democrats (SD) MP Miran Potrc. Therefore, differences among privatisation concepts cannot exist, as the cabinet has not yet adopted any of the currently drafted proposals, Jansa explained. The government will moreover try to harmonise the privatisation of Slovenia's largest bank, NLB, with the bank's strategic partner, the Belgian banking and insurance group KBC, Jansa said. Regarding the positions for talks with KBC, Jansa assured that "no differences exist within the coalition" on the future stake of KBC in the NLB. The government will moreover shortly present its resolution on a national programme for the most "productive usage" of privatisation proceeds, except for the banking sector, where the government plans to use the funds to reduce public debt, the PM said. Jansa also reiterated that the government-sponsored tax reforms are designed to simplify and rebalance the tax burden, primarily to reduce it. By abolishing the payroll tax, the national budget would get between SIT 80bn (EUR 333.9m) and SIT 120bn (EUR 500.9m) less. The government would make up for the loss by reducing spending and increasing the taxes on consumption and unproductive assets. One option is to raise both VAT rates, which would increase living costs by 1.3% at the most, and to institute a flat income tax rate, which would raise them by half a percent, Jansa added. SRC.SI Group Ramps Up Profits by 50% in 2005 System integrator SRC.SI group increased its net profit by 50% to SIT 600m (EUR 2.5m) in 2005 year-on-year System integrator SRC.SI group increased its net profit by 50% to SIT 600m (EUR 2.5m) in 2005 year-on-year, SRC.SI CEO Gregor Bencina told the press in Ljubljana on Tuesday, 28 March. The group generated over SIT 11bn (EUR 45.91m) in revenues, 28% more than in 2004, with around 12% of revenues generated abroad, Bencina said. The group moreover employed 85 new workers in 2005, with the total number now exceeding 400 with over 300 employed at the SRC.SI parent company, he added. Apart from growing organically, SRC.SI also acquired Croatia's NOve TEhnologije, opened a subsidiary in Macedonia and a branch office in Brussels, he revealed. SRC.SI chairman Ivan Zerko also said that the group, which aims to become one of SE Europe's leading system integrators, had a successful year. 23 The management plans to increase the group's revenues to EUR 50m in 2006. SRC.SI solutions are used by over 250 companies, banks and public institutions. The SRC.SI group consists of the Ljubljana-based SRC.SI, SRC sistemske integracije in Serbia-Montenegro, SRC sistemska integracija in Macedonia, a branch office in Brussels as well as Croatian NOve TEhnologije and Kranj's Infonet companies. Editor-In-Chief to Take Over as CEO at Daily Finance Peter Frankl, the editor-in-chief at the business daily Finance, will take over as the company's CEO on 1 April Peter Frankl, the editor-in-chief at the business daily Finance, will take over as the company's CEO on 1 April, Finance said in Ljubljana on Wednesday, 29 March. Frankl is taking over from Jurij Giacomelli, who was dismissed on a no-cause basis on Monday, 27 March to take up the post of an adviser for international development at the Swedish company Bonnier Business Press, Finance's majority owner. Giacomelli led Finance for seven years, and was responsible for Slovenia's only business publication to become a daily in 2001. It has 11,700 subscribers. Frankl has worked for Finance since the then twice-a-week business newspaper was first published in 1992. He became editor-in-chief in 1994, and will keep the post as the positions of CEO and editor-in-chief are to be joined. The company Casnik Finance had 133 employees at the end of 2005 and generated SIT 2.2bn (EUR 9.18m) in revenues. Despite purchasing the GV publishing group, it posted a planned pre-tax profit of SIT 38m (EUR 158,609). Besides publishing the Finance daily, Casnik Finance publishes specialised supplements (on trade, energy, ecology) and magazines. It also stages special events and seminars. Bonnier Business Press is a part of Swedish publishing group Bonnier and owns business newspapers in 11 European countries. Mura Boss Elected New Head of Employers' Association The assembly of the Employers' Association of Slovenia elected Borut Meh, CEO of apparel manufacturer Mura, as the association's new president The assembly of the Employers' Association of Slovenia elected Borut Meh, CEO of apparel manufacturer Mura, as the association's new president on Wednesday, 29 March. Meh told the press that "the association will continue with its activities - social negotiations, collective negotiations and harmonisation of collective agreements in individual sectors". Indeed, "the interests of Mura and the association are similar: we want to increase the competitiveness of Mura and the Slovenian economy wants the same," he revealed. Meh believes that the voluntary association had performed its tasks well in the past, however its role is likely to increase with the planned changes to the way the Chamber of Commerce and Industry of Slovenia (CCIS) is organised. One of the association's more important tasks will be amendments to the employment relationship act, which will need to be amended because of discrepancies between a liberal economy and an extensively regulated labour market. "In the beginning we will try to harmonise the differences through collective agreements, but in the end I believe that we will have to amend the act to promote liberalisation of the labour market," Meh added. He moreover sees trade unions as a difficult partner in talks. "We will try to be a difficult partner as well," he said. Meh, who has succeeded Stojan Binder at the helm of the association, beat the only other candidate, fuel trader Petrol CEO Marko Kryzanowski, with 34 votes against 5. 24 Finance Minister Wants to Speed Up Hydro Plant Construction It would make sense to speed up the construction of the planned chain of five hydro power plants on the lower part of the Sava River, Finance Minister Andrej Bajuk said in Sevnica It would make sense to speed up the construction of the planned chain of five hydro power plants on the lower part of the Sava River, Finance Minister Andrej Bajuk said in Sevnica on Wednesday, 29 March. According to Bajuk, who visited the construction site of the Bostanj hydro plant, the construction of each next plant in the chain should begin a year after construction of a previous one begins. Bajuk, who is touring the Posavje region with the cabinet, believes that securing sufficient funds for such construction should not present a problem. He pointed out that the anticipated income from licenses should provide sufficient funds for construction of the plants and would be available at the time needed. Environment Minister Janez Podobnik meanwhile expressed his pleasure at the recent government adoption of a business plan for a public company INFRA, which would be tasked with managing the infrastructure during the construction. The first hydro power plant in the chain, Bostanj, is scheduled to be connected to the grid in June. Preparation works for the second plant, Blanca, are also well underway, with construction slated to begin in mid-2006. Preparation works for the Krsko plant will also begin this year, works on the Brezice facility are scheduled to start in 2011, while the fate of the last one in the chain, Mokrice, depends on a water regime agreement with Croatia. Under the original plan the new facilities should be constructed by 2018 and will more than double the power generated on the Sava river. Their total output is expected to account for 21% of the Slovenian hydro power electricity production, and will in turn meet 6% of the country's energy needs. Profits at Autocommerce More than Double in 2005 Autocommerce, the car dealership-cum-diversified conglomerate, posted profits of SIT 4.5bn (EUR 18.8m) for 2005 Autocommerce, the car dealership-cum-diversified conglomerate, posted profits of SIT 4.5bn (EUR 18.8m) for 2005, more than double that in 2004 and 22% above plans. Sales topped SIT 125.2bn (EUR 522.6m), up 34% over the year before, according to unaudited results released on Thursday, 30 March. According to the company, the bulk of the sales increase is a result of the full integration of subsidiary Adria Mobil, the maker of caravans, which had been only partially included in the 2004 balance sheet when it was acquired late that year. The bottom line was also boosted by lower financial expenditures for interest and other liabilities, the management said in a press release, adding that the performance was in line with plans and the group's 2005-2009 strategy. The group's core businesses are car sales, IT, investment banking and stock brokerage, business hotels and manufacturing. Autocommerce is in majority ownership of Protej, a company set up by Autocommerce managers in 2005, which holds 75% of the company. Autocommerce was listed on the Ljubljana Stock Exchange (LJSE) on 24 January this year. Mobile Operator Simobil Gets Advertiser of the Year Award Simobil, Slovenia's second largest mobile operator, has been awarded the "Advertiser of the Year" award at the 15th festival of Slovenian advertising (SOF) 25 Simobil, Slovenia's second largest mobile operator, has been awarded the "Advertiser of the Year" award at the 15th festival of Slovenian advertising (SOF). Simobil won the award for its long-term awareness on the importance of managing its trademark, the organisers told the press in Portoroz on Thursday, 30 March, the second day of the event. Indeed, the company was successful in addressing its target audience especially through its well-chosen soundtracks for its ads, the Slovenian Advertising Chamber said. Meanwhile, Gordana Petek Ivandic was named the advertising personality of the year for her many years of successful promotion of the Belinka trademark. Belinka is a manufacturer of paints and coatings. The festival's head Dejan Turk said that a record number of ads, over 800, were entered for this year's festival. Sceptical, Managers Underline the Need for Reforms Managers attending a panel on prospects for Slovenia's technological breakthrough have underlined the need for far-reaching reforms Managers attending a panel on prospects for Slovenia's technological breakthrough on Thursday, 30 March have underlined the need for far-reaching reforms, but voiced the fear that the reform efforts might stall with the resignation of Development Minister Joze P. Damijan. The fears were voiced even though Economics Minister Andrej Vizjak and the former development minister said that the reforms would definitely continue, as they do not depend on one person alone. "The PM is the key person. He believes in reforms and will not accept rotten compromises because of the self-interest of certain individuals," Vizjak told a panel, which examined who was to blame for the lack of technological breakthrough - the government, universities or companies. Yet the statement did little to alleviate the concerns of managers. Most notably, the chief executive of household appliance maker Gorenje, Franjo Bobinac, said companies prefer to rely on themselves and expect little from others. All that companies expect from the state is an environment conductive to entrepreneurship; everything else must be fought for, Bobinac told the panel, which was held as part of the PODIM conference on innovation and entrepreneurship. He said reforms are necessary. "We should not look up to old member states which are stagnating. We should follow those which are quickly ascending," said Bobinac, who acknowledged that Damijan's resignation put him in a bad mood. Igor Akrapovic, the owner of the namesake company which specialises in motorbike exhaust systems, voiced the fear that the reform zeal would fade with Damijan's resignation and reforms would be only partial or "cosmetic". Meanwhile, Japec Jakopin, the co-owner of luxury yacht maker Seaway, said he was disappointed with Slovenia and the people. People have to ask themselves what they can do for a better future instead of waiting for what the state will do for them, he said. "The whole of Europe is concerned about competitiveness and jobs, while Slovenia is still convinced that we don't have to change anything," he added. Ales Vahcic of the Ljubljana Faculty of Economics, who is confident reforms will continue, meanwhile noted that Slovenians hate the market: we were used to monopolies and if things had gone awry for anyone the state protected them, he said. 26 Sava Group Profits Down 21% Y-Y in 2005 The Sava group generated net profits of SIT 9.2bn (EUR 38.39m) in 2005 The Sava group generated net profits of SIT 9.2bn (EUR 38.39m) in 2005, which is 21% less than in 2004 but still 4.3% above plans, Sava said on Friday, 31 March. The group posted sales of SIT 58.5bn (EUR 244.17m) in 2005, 4% more than in 2004, but 3% below plans, the group added. However, the 2004 profits were largely influenced by a purchase of spa Panonske terme below its book value, Sava said. Discounting the one-off purchase, the group's actual net profits in 2005 were 9% higher than the year before, meaning that Sava had a very successful year, the group said. Sava's results were also influenced by the switch from Slovenian to international accounting standards. The group generated 38% of revenues in retail, followed by tyre making and sales (32%), while its tourism companies contributed 21% to the total revenues. The group employed 3,407 people at the end of 2005, 30 more than at the end of 2004. Sava Offloads Entire Stake in NFD Holding Chemical and tourism company Sava has offloaded its entire 14.7% stake in asset management firm NFD Holding for SIT 3.3bn (EUR 13.7m) in order to secure funds for the recent acquisition of a stake in hardware trader Merkur Chemical and tourism company Sava has offloaded its entire 14.7% stake in asset management firm NFD Holding for SIT 3.3bn (EUR 13.7m) in order to secure funds for the recent acquisition of a stake in hardware trader Merkur. Sava sold its stake in a block deal on Friday, 31 March at a price of SIT 700 (EUR 2.92) per share, which is significantly above today's closing price of SIT 617 (EUR 2.58). The group said in a press release that it would use the proceeds to "financially round-off" the acquisition of a 19.6% stake in Merkur, which was carried out in mid-March. Although Sava no longer holds a stake in NFD, it said it expects good cooperation to continue, especially in tourism, where the two "share common interests." Drinks Group Pivovarna Lasko Posts 3.5-Fold Profit Rise in 2005 Beverage group Pivovarna Lasko posted SIT 4.4bn (EUR 18.36m) in net profits in 2005 Beverage group Pivovarna Lasko posted SIT 4.4bn (EUR 18.36m) in net profits in 2005, 367% more than in the same period in 2004, the group said on Friday, 31 March. According to unaudited and unconsolidated results, the group generated revenues to the tune of SIT 63.7bn (EUR 265.87m), almost 105% more than in 2004. The upbeat business results are largely the result of the inclusion of beverage group Pivovarna Union into the group balance sheet for the first time in 2005. The two largest contributors to the group's bottom line were both breweries, Pivovarna Lasko with a net profit of SIT 1.35bn (EUR 5.63bn) and Pivovarna Union with SIT 1.73bn (EUR 7.22m). The group sold a total of 4.88 million hectolitres of alcoholic and non-alcoholic beverages in 2005, with the 2006 plan targetting sales of SIT 5.19 million hectolitres. According to the plan, the group projects sales of SIT 68.9bn (EUR 287.57m) and net profits of SIT 5bn (EUR 20.86m). The group includes brewers Pivovarna Lasko and Pivovarna Union as well as soft drinks subsidiaries Fructal and Radenska. 27 Iskra Avtoelektrika Misses Profits Targets Iskra Avtoelektrika, a maker of electronics components for the car industry, posted profits of SIT 453m (EUR 1.9m) for 2005 Iskra Avtoelektrika, a maker of electronics components for the car industry, posted profits of SIT 453m (EUR 1.9m) for 2005, down 5% year-on-year and 41% below plans. Sales topped SIT 31.8bn (EUR 132.7m), which is an increase of 6% over the year before but still 4% below the target for the year, the company said in a press release on Friday. The company blames the lacklustre performance on the unfavourable exchange rate of the US dollar and the high prices of strategic inputs, notably aluminium, copper and steel, which pushed production costs up 7% over 2004. Iskra Avtoelektrika expects the global economic situation to improve this year and projects sales to reach EUR 143.8m, with profits at around EUR 3m. Terme Catez Posts Bumper Profit Spa manager Terme Catez reported a net profit of SIT 1.9bn (EUR 7.9m) for 2005 Spa manager Terme Catez reported a net profit of SIT 1.9bn (EUR 7.9m) for 2005, up 73.6% year-on-year, on operating sales that increased by almost 9% to SIT 8.7bn (EUR 36.3m), according to unaudited consolidated results. Sales are expected to increase marginally to SIT 8.9bn (EUR 37.1m) this year, with operating profit at SIT 1.5bn (EUR 6.3m). The group's largest investment this year will be a SIT 1.5bn (EUR 6.3m) investment in apartments at marina Portoroz, Terme Catez said in a press release. Food and Tourism Drag Down Profits at Istrabenz Istrabenz, the food, energy and tourism group, saw profits plummet to SIT 3.7bn (EUR 15.44m) Istrabenz, the food, energy and tourism group, saw profits plummet to SIT 3.7bn (EUR 15.44m), just over a quarter of what it was the year before. Sales meanwhile increased by 182% to SIT 139bn (EUR 580.2m), mostly due to the full inclusion in the balance sheet of food group Droga Kolinska, according to unaudited results released on Friday. Droga Kolinska posted sales of SIT 56bn (EUR 233.7m) for the year, up 18% on the year before and 5% above plans. However, it fell short of profit targets due to additional costs from the consolidation of the Droga Kolinska merger. The performance of the energy division was above expectations, whereas the investment and tourism division fell short of targets, the latter due to the merger of Hoteli Morje and Hoteli Palace, and a drop in the number of overnight stays. The Istrabenz group plans net profits of SIT 3.7bn (EUR 15.4m) for this year. Privatisation of Steel Group Could Start in June After a new privatisation plan for the Slovenian Steel Group was adopted by the government in December, investors are expected to be invited to bid for the state-owned stake in the group in June After a new privatisation plan for the Slovenian Steel Group was adopted by the government in December, investors are expected to be invited to bid for the state-owned stake in the group in June. The move comes three years after the privatisation of three of SIJ's companies (Acroni, Metal and Nozi) was halted in August 2003 due to unfavourable conditions on the global steel market. 28 Unlike the aborted 2001 programme which envisaged the privatisation of subsidiaries piece by piece and the subsequent liquidation of the group, the new scheme envisages the sale of the group as a whole. A valuation is under way, whereupon an information memorandum would be compiled and sent to the potential bidders before a call to bidders is out, STA was told by the chair of the commission in charge of the sale Marija Zagozen. While refusing to say how many parties would be notified in advance, she said there was a lot of interest, mostly from outside of the EU. "They would probably like to enter the EU market," added Zagozen, head of the SIJ supervisory board. The new programme sets out the privatisation of Acroni, Metal, Nozi, Elektrode Jesenice, Metalweld Polska, two companies employing the disabled SUZ Jesenice and ZIP Center Ravne, and some others. It envisages two lots of shares: a stake of 25% plus one share that would be kept by the state, and a 55.35% stake to be offered to bidders. The programme aims at keeping the group with a view of making the Slovenian steel producers more competitive, and covering part of the public debt with the proceeds from the sell-off. The privatisation was re-launched after the situation on the world steel market has improved, something that could be seen from the SIJ's upbeat results. The group, which employs more than 3,000 workers, made a pre-tax profit of some SIT 6.7bn (EUR 27.7m) in 2005, up 3.5 times over 2004, on sales revenues of SIT 113bn (EUR 471.6m), a rise of 23%. The trend continues into 2006. 29 SLOVENIA IN BRIEF Drnovsek and Papadopoulos Express Support to EU Constitution Slovenian President Janez Drnovsek and his Cypriot counterpart Tassos Papadopoulos, who met in Nicosia on Monday, 27 March, are united in the view that the ratification of the European Constitution should continue. Speaking to the press after the meeting, the pair stressed that the ratification process is needed in order to consolidate the EU's institutions and its further enlargement. Macedonia and Slovenia Sign Agreement on Fight Against Crime The Macedonian Public Prosecutor's Office and the Slovenian State Prosecutor's Office have signed a memorandum of understanding on cooperation in the fight against serious criminal offences, the Slovenian office has said. The agreement was signed between Macedonian Public Prosecutor Aleksander Prcevski and Slovenian State Prosecutor General Barbara Brezigar, who was on an official visit in Macedonia on Prcevski's invitation. Parliament Formally Halts Re-incorporation of Vzajemna MPs were unanimous on Wednesday, 29 March in passing amendments to the health insurance act by which they formally halted the re-incorporation of mutual insurer Vzajemna into a joint-stock company. Bogdan Benko Appointed to Senior Foreign Ministry Post Bogdan Benko, a career diplomat, has been named the acting head of the Foreign Ministry's directorate for European affairs and bilateral relations. He succeeds Janez Sumrada, who was dismissed by the government on Thursday, 30 March. Benko has previously held various posts at the Foreign Ministry and diplomatic missions in Belgrade, Brazil, Italy's Trieste and Croatia's Zagreb. Between 2002 and 2006 he was ambassador to Portugal. Government Relieves Three Ambassadors At its session on Thursday, 30 March, the cabinet relieved at three ambassadors, whose terms have ran out, of their duties, the government's PR and media office said after the session. The relieved diplomats are Slovenia's Ambassador to the UN Roman Kirn; Ambassador to Egypt, United Arab Emirates, Kuwait, Qatar, Saudi Arabia and Jordan Mitja Drobnic; and Ambassador to Greece, Georgia, Cyprus and Armenia Jozefa Puhar. Government Delegation and Trade Unions to Visit Sweden A government delegation headed by Development Office State Secretary Andrej Horvat and representatives of seven trade unions are scheduled to tour Scandinavian countries between 2 and 7 April, Horvat told the press on Wednesday, 29 March. During their visit to Denmark, Norway, Sweden and Finland, the representatives will get acquainted with best practices in the labour market and technological development, Horvat said. Government Adopts Changes to Legislation on Phone Line Compensation The cabinet adopted changes to the act on the return of investments into the public telecommunications network, Economics Minister Andrej Vizjak told the press after the government's session on Thursday, 30 March. 30 Minister Mate Discusses EU Membership Preparations in Macedonia The work of the EU's police mission to Macedonia (EUPAT) and Macedonia's preparations for EU membership topped the agenda as Slovenian Interior Minister Dragutin Mate met the head of EUPAT Juergen Scholz at the outset of his three-day visit on Thursday, 30 March. 31