Slovenia Business Week no. 15, April 11th, 2005
Table of Contents:
HEADLINES ............................................................................................................................. 3
PM Takes Stock of the Legacy of Former Government ........................................................ 3
Car Maker Revoz Remains Leading Slovenian Exporter in 2004 ......................................... 4
D&B: Slovenia Sees Higher Deficit Despite Stronger Real GDP Growth ............................ 5
INTERNATIONAL COOPERATION ...................................................................................... 6
Export Agency Signs Cooperation Agreement with Russian Counterpart ............................ 6
New Bosnia-Herzegovina Ambassador Presents Credentials ................................................ 6
EUROPEAN UNION ................................................................................................................. 7
Slovenia and Britain for EU Financial Talks to End before July ........................................... 7
Slovenian MPs Attend Debate on EU Financial Perspective ................................................. 7
Panel Assesses First Year of Slovenia EU Membership as Good .......................................... 8
Government Backs EU Directive on Unfair Commercial Practices ...................................... 9
EU Plans to Limit China Textile Imports too Complex, Experts Say.................................... 9
Government-Parliament Cooperation on EU Issues Important, Cukjati Says ..................... 10
Restructuring Is an Opportunity, Drobnic Says ................................................................... 10
Foreigners Ever Keener to Buy Property in Slovenia .......................................................... 10
Labour Inflow from New Members to Slovenia Doubles after EU Enlargement ................ 11
Agriculture Not Hit by 1st Year in the EU, Food Industry Struggles .................................. 12
Impact of EU Entry Varies Across Individual Industries..................................................... 13
STATISTICS/FORECASTS .................................................................................................... 15
European Commission Forecasts 3.7% Growth for Slovenia .............................................. 15
Industrial Output Up 2.1% in January and February............................................................ 16
Inflation Forecast Upgraded, Growth Kept Unchanged, IMAD Tells Government ............ 16
Factory-Gate Prices Flat in March ....................................................................................... 16
Export-Import Ratio at 92.6% in February .......................................................................... 17
FINANCE................................................................................................................................. 18
Foreign Debt-Reserves Gap Widens to EUR 7.87bn ........................................................... 18
PM Jansa Wants Development-Oriented Budget ................................................................. 18
DARS to Issue Second Edition Bonds ................................................................................. 18
KAD Chair Names Telco as Most Likely Candidate for Stock Listing ............................... 19
Government Okays Appointment of New SOD Head ......................................................... 19
New Supervisory Board Named at Insurer Triglav .............................................................. 20
Central Bank Reduces FX Swap Rate, Warns of Inflation .................................................. 20
KBC Interested in Entering Insurer Triglav ......................................................................... 20
Economists in Favour of Profit Sharing ............................................................................... 21
Ljubljana Stock Exchange .................................................................................................... 22
Foreign Exchange ................................................................................................................. 22
BRANCH INFORMATION .................................................................................................... 23
Meat Producers Complain About Red Meat Being Stigmatised .......................................... 23
Vizjak Calls for Prudent Privatisation of Steel Industry ...................................................... 23
Manufacturers Should Invest More in Industrial Design ..................................................... 24
Prices of Agricultural Products Dropped in 2004 ................................................................ 24
COMPANIES ........................................................................................................................... 26
Lasko's Disputed Purchase of Delo Stake Statute-Barred .................................................... 26
Oil Trader Petrol Gets New Supervisory Board ................................................................... 26
Kapital Magazine Lists 50 Most Influential Businesswomen .............................................. 27
Velenje Coalmine Celebrating 130th Anniversary .............................................................. 27
Strategic Partnership the Only Solution for Elan ................................................................. 27
Acroni Receives Energy Efficiency Award ......................................................................... 28
Juteks Moves Part of Production to Russia .......................................................................... 28
Droga Shareholders Back Merger with Kolinska ................................................................ 28
Retailer Spar Boosts Revenues by 13 Percent ..................................................................... 29
Kolinska Okays Merger with Droga .................................................................................... 30
Furniture Maker Lesnina Ups Profit .................................................................................... 30
Ferko to Run Merged Food Company Droga Kolinska ....................................................... 30
Delo Shareholders Get Dividends of 1.25 Euros per Share ................................................. 31
Managers Urge for Creating Leverage for Economic Growth ............................................. 31
Najdi.si Sets Up Shop in Serbia-Montenegro ...................................................................... 32
Fructal's Macedonia Subsidiary Expands Production Line .................................................. 32
Slovenia Needs to Utilise Public-Private Partnership .......................................................... 32
Economist Mrkaic Advocates Privatisation of Oil Company Petrol .................................... 33
FAIRS, CONGRESSES ........................................................................................................... 35
Megra Construction Fair Opens ........................................................................................... 35
Slovenia Takes Central Stage at Bookworld ........................................................................ 35
SLOVENIA IN BRIEF ............................................................................................................ 36
Survey Shows High Approval Ratings for SDS, Government ............................................. 36
CoE Committee Visits Slovenia to Monitor Minority Protection ........................................ 36
Rupel Urges Belgrade and Pristina to Launch Talks on Kosovo ......................................... 36
Textile Company Novoteks Goes into Bankruptcy.............................................................. 36
US Ambassador Stresses Importance of US-Europe Partnership ........................................ 36
Ministry Says Decision on Wind Turbines Must Be Re-examined ..................................... 36
Government Decrees Two New State Celebrations ............................................................. 36
Ministers Discuss Slovenian-Swedish Defence Cooperation .............................................. 37
Public Sector Wages to Increase by 2% in July ................................................................... 37
Culture Minister Promises Changes to Public Broadcaster Bill .......................................... 37
Automatic Shutdown at NEK ............................................................................................... 37
2
HEADLINES
PM Takes Stock of the Legacy of Former Government
Prime Minister Janez Jansa has highlighted Slovenia's international position as a full-fledged
member of EU and NATO among the assets taken over from the previous government
Prime Minister Janez Jansa has highlighted Slovenia's international position as a full-fledged
member of EU and NATO among the assets taken over from the previous government. On the
downside, Jansa quoted the "rather non-transparent budget" with some SIT 70bn (EUR 292m)
worth of liabilities from the past which have no cover in the 2005 budget.
The prime minister took stock of the general situation assumed from the previous government
at a press conference on Wednesday, 6 April after individual ministers and heads of
government offices had presented the state of affairs at their respective departments.
Speaking about what he found positive in the legacy of the former government, Jansa
highlighted the fact that a large part of the national legislation had been aligned with EU law.
Moreover, most of the Maastricht requirements for the introduction of the euro have been
met.
On the other hand, Jansa voiced dissatisfaction over the government's strong influence in the
economy, unfinished privatisation and excessive regulation that discourages entrepreneurship.
He was also critical of the tax system, which he deems too complicated and not businessfriendly.
According to Jansa, the previous government did not leave behind a complete balance sheet of
the state's financial assets, or a transparent balance sheet of property owned by the state.
Moreover, there was no information system to monitor social transfers, or computer-aided
personnel planning. The PM said his government would now set up the missing records and
systems.
He said that the government would debate the spring forecast at its regular session. This
would serve as a basis to draw up an amended budget bill, which however can only cover half
of the SIT 70bn (EUR 291m) liabilities mentioned, Jansa said, noting that savings measures
would be necessary.
According to him, "there will be less funds for development as we believed there would be at
the start of our term in office".
The PM also blamed the former government for issuing state guarantees too easily, saying
that some of these did not have cover in property. He was also critical of excessive payments
received by top officials in the public sector.
The intentional lack of control over privatisation resulted in big social differences, Jansa said.
He also put the accusing finger on the centre-left government for permitting monopolies of
some state-owned companies.
The labour market is inflexible, and as such contributes to unemployment, Jansa said. As a
result, economic growth was not 4% as the previous government promised at the beginning of
its term in office, Jansa said, accusing his predecessors of failing to deliver on their promises.
The prime minister also quoted the previous government's failings in transport, excessive red
tape, court backlogs. There are huge backlogs elsewhere too: the Finance Ministry has
accumulated some 10,000 pending cases, of which 7,000 pertain to taxes, while there are
some 8,000 pending cases at the Interior Ministry.
Jansa also found fault with the school system, which he believes is too centralised, the
demographic policy of the previous government and the financial position of municipalities,
something that he described as "alarming".
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The government furthermore found wrongdoing to the detriment of the state and public
interest, Jansa said. According to him, the former government, for example, signed contracts
carrying substantial financial consequences for the state without a legal basis and at the time
when it no longer had full responsibilities.
There were also attempts to influence law enforcement bodies, Jansa said, adding that public
contracting was not always based on public tenders. Many public procurement procedures
were annulled, while there were also delays and some conditions in the tenders were adapted
to suit individual contractors, Jansa said.
Commenting on the bill on the public broadcaster, which is to be debated by the government
tomorrow, Jansa said the act was needed and that it should be passed as soon as possible.
Speaking about foreign policy, Jansa said that his government inherited outstanding problems
with Croatia, as well as inefficient system of drawing money from EU funds and problems
with the protection of Slovenian minorities in other countries.
Car Maker Revoz Remains Leading Slovenian Exporter in 2004
Following are the home-appliance manufacturer Gorenje, pharmaceutical company Lek, carseat cover maker Prevent and pharmaceutical company Krka, according to a list of leading
Slovenian exporters published by the daily Delo
Car maker Revoz was the no. 1 Slovenian exporter in 2004, generating 5.6% of all Slovenian
exports. Following are the home-appliance manufacturer Gorenje, pharmaceutical company
Lek, car-seat cover maker Prevent and pharmaceutical company Krka, according to a list of
leading Slovenian exporters published by the daily Delo on Tuesday, 5 April.
Revoz, which has in fact occupied the top spot among Slovenian exporters since 1995,
recorded exports of SIT 196.8bn (EUR 0.82bn) in 2004. The Renault-owned company plans
to increase the figure by 29.3% to SIT 218.3bn (EUR 0.91bn).
The second-placed Velenje-based Gorenje group posted exports of SIT 184.7bn (EUR
0.77bn), 6.2% of all Slovenian exports of goods. This year, the figure is to increase by 1.7%.
While Revoz's exports to the EU - representing 8.4% of Slovenian exports to the EU in 2004 were focused on France, Gorenje's exports to the EU (4.9% of Slovenian EU exports) were
more dispersed.
Moreover, the Gorenje group is by far the leading Slovenian exporter to the countries of
former Yugoslavia. While its exports to these countries totalled SIT 57.44bn (EUR 239m) last
year, the exports of second-placed hardware retailer Merkur to former Yugoslav countries
stood at SIT 14.18bn (EUR 59m) in 2004.
Placing third on the list of Slovenia's leading exporters overall is the Ljubljana-based
pharmaceuticals company Lek, with last year's exports of SIT 109.6bn/EUR 457m (3.4% of
total Slovenian exports).
Following is the Slovenj Gradec-based Prevent with 81.4bn/EUR 339m of exports (2.7% of
total Slovenian exports), which plans to raise the figure by 19.2% this year.
Exports of the fifth-placed Krka totalled last year SIT 79.5bn/EUR 332m (2.7% of the
country's total exports), and are expected to increase by 15.3% in 2005.
Top ten also includes Slovenska Bistrica-based aluminium producer Impol (SIT 62.5bn/EUR
261m), Slovenian Steel Group SIJ (SIT 64.4bn/EUR 269m), the Kranj-based tyre
manufacturer Sava Tires (SIT 58.1bn/EUR 242m), aluminium company Talum (SIT
51.6bn/EUR 215m) and the Koper-based manufacturer of automotive components Cimos
(SIT 50.5bn/EUR 211m).
Topping the list of the leading exporters of services is the national air carrier Adria Airways,
with SIT 31.2bn (EUR 130m) of exports. It is followed by Slovenian Railways (SIT
30bn/EUR 125m), tourist agency Kompas (SIT 20.6bn/EUR 86m), Merkur (SIT 22.8bn/EUR
95m) and shipping company Splosna plovba Portoroz (SIT 21.7bn/EUR 90m).
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Slovenian exports are anticipated to increase by 6% this year, with exports to the EU expected
to be up 12%, according to Delo.
The list of leading Slovenian exporters used to be published by the Gospodarski vestnik
business weekly, whose publication has ceased recently. Delo notes that some companies
refused to participate in the survey this year.
D&B: Slovenia Sees Higher Deficit Despite Stronger Real GDP Growth
Slovenia has firmly retained the first place in the region in the April report of the
international rating firm Dun&Bradstreet (D&B), which gave the country an upward trend
indicator
Slovenia has firmly retained the first place in the region in the April report of the international
rating firm Dun&Bradstreet (D&B), which gave the country an upward trend indicator.
While most of the forecast figures remain the same, D&B corrected the real GDP growth
figure for 2006, from 4.2% to 4%. D&B expects higher fiscal deficit, yet still within the
convergence criterion for eurozone entry.
The report observes that the government has an optimistic plan of bringing down the deficit
through a combination of spending cuts in 2006 and increased revenues in 2007 stemming
from a significant rise in net budgetary inflows from the EU budget.
However, D&B wonders whether Slovenia will manage to do away with administrative delays
due to which a significant proportion of the funds earmarked for Slovenia were not disbursed
in 2004.
Despite stronger-than-expected GDP growth in 2004 (when the economy expanded by 4.6%,
compared with 2.5% in 2003) the fiscal deficit increased to 1.9% of GDP in 2004, D&B
observes.
According to D&B, the deficit is to increase to 2.1% of GDP in 2005. "While this is less than
1 percentage point of GDP below the 3% ceiling imposed under the Maastricht criteria for
eurozone entry (planned for 2007), we are relatively sanguine about the prospects for bringing
the deficit down in the near term. Indeed, the government plans to cut the fiscal deficit to
1.1% of GDP," D&B says.
"Given the exigencies of EMU entry, room for manoeuvre in both fiscal and monetary policy
will be limited. We therefore expect a more concerted effort to tackle the labour market
rigidities that have helped fuel strong real wage growth (and hence inflation) amid relatively
high unemployment rates (10.4% at end-2004)," the report says.
5
INTERNATIONAL COOPERATION
Export Agency Signs Cooperation Agreement with Russian Counterpart
The memorandum was signed by SID chairman Marko Plahuta and the chairman of
Vnesheconombank Vladimir A. Dmitriev during their official meeting in Moscow
The Slovenian Export Corporation (SID) has signed a memorandum on cooperation with the
Russian financial institution Vnesheconombank. According to a press release issued by SID,
the document serves the basis for the consolidation and further development of long-term
cooperation between the two institutions in a bid to boost ties in export financing between the
two countries.
The memorandum was signed by SID chairman Marko Plahuta and the chairman of
Vnesheconombank Vladimir A. Dmitriev during their official meeting in Moscow on
Wednesday, 6 April.
The two institutions have pledged to create the conditions for the exchange of information on
potential projects and on the financing of concrete projects.
They also plan to share experience in project financing, co-financing, the financing and
insurance of export credits in consortiums of Slovenian and foreign commercial banks and
export credit agencies (multisourcing), as well as technical assistance.
Vnesheconombank is a specialised state bank that ensures centralised foreign economic
operations, services sovereign foreign debt, grants loans and issues guarantees on behalf of
the Russian government.
New Bosnia-Herzegovina Ambassador Presents Credentials
The new Ambassador of Bosnia-Herzegovina to Slovenia Izmir Talic presented copies of his
credentials to Foreign Ministry State Secretary Bozo Cerar
The new Ambassador of Bosnia-Herzegovina to Slovenia Izmir Talic presented copies of his
credentials to Foreign Ministry State Secretary Bozo Cerar on Friday, 8 April. Talic and Cerar
shared a view that Slovenian-Bosnian relations are "traditionally good", and stressed that both
sides were interested in upgrading cooperation in all areas, particularly business, the Foreign
Ministry said in a press release.
As a member of the EU and NATO and the OSCE presiding country, Slovenia makes efforts,
with a view of security and stability in Europe, for Western Balkan countries to have an EuroAtlantic prospect.
Slovenia, the press release adds, welcomes the progress Bosnia-Herzegovina has made in its
efforts to joint the EU and NATO. Moreover, the country is willing to further share its
experience and know-how with this Balkan country.
Slovenia and Bosnia-Herzegovina established diplomatic relations in October 1992. Izmir
Talic is replacing Mladen Bosic, who has been Bosnia's ambassador here since 2001.
Slovenia's ambassador in Sarajevo is Tadej Labernik.
6
EUROPEAN UNION
Slovenia and Britain for EU Financial Talks to End before July
Head of the Government Office for European Affairs, Marcel Koprol met EU affairs adviser
to the British Prime Minister Kim Darrooch, head of preparations for Britain's EU
presidency Chris Sainty and Minister for Europe Denis MacShane
Head of the Government Office for European Affairs, Marcel Koprol, said after talks in Great
Britain on Monday, 4 April that both countries would like to see the negotiations on the
financial period 2007-2013 conclude before the end of the Luxembourg presidency.
Koprol met EU affairs adviser to the British Prime Minister Kim Darrooch, head of
preparations for Britain's EU presidency Chris Sainty and Minister for Europe Denis
MacShane.
As Koprol told STA after the talks, the British officials also briefed him about the priorities of
their government, as Great Britain assumes the six-month EU presidency in the second half of
the year.
The issues expected to top the British agenda will be the beginning of the accession
negotiations with Turkey, ongoing talks within the Doha development agenda and
environmental problems.
Koprol and his guests also discussed the Lisbon strategy, notably its services directive, which
Great Britain considers to be particularly important for boosting competitiveness in the
Union's internal market.
As Slovenia is due to preside over the EU in the first half of 2008 as the first among the
newcomers, British officials offered to help the country in its preparations for the presidency.
A number of Slovenian diplomats will be invited to London to become acquainted with the
activities of the British Foreign Ministry during the British helm at the EU, according to
Koprol.
Slovenian MPs Attend Debate on EU Financial Perspective
The chairman of the parliamentary EU affairs committee Anton Kokalj reiterated in Brussels
that Slovenia wanted to see the negotiations on the next EU financial perspective conclude
before the end of June
The chairman of the parliamentary EU affairs committee Anton Kokalj reiterated in Brussels
on Tuesday, 5 April that Slovenia wanted to see the negotiations on the next EU financial
perspective conclude before the end of June.
Kokalj, who chaired the Slovenian delegation at the two-day consultations of national
parliaments about the financial period 2007-2013, explained that Slovenia favours a proposal
of the European Commission, which envisages an annual spending of 1.14 percent of GNP.
The proposal of the Commission, presented last year, contains two key stipulations, namely
that 0.41 percent of GNP goes for the cohesion funds and that the funds earmarked for the
Western Balkans need to be consolidated, Kokalj also maintained.
He explained for the press that the debate on 5 April highlighted that a proposal for 1.1
percent spending is most likely to be approved in the end, which however would not affect
Slovenia considerably. "What matters is that the agreement is reached by June," he added.
The heated debate also evolved around the share of GNP that a net receiver can draw from the
common budget. The threshold now stands at 4 percent, which the least developed members,
notably Poland and the Baltic countries, would like to raise it.
7
Kokalj said that the Slovenian delegation refused to back either camp, as its position is
somewhere in the middle. It is wiser to follow negotiations at this point and not take any
extreme positions, Kokalj commented.
Panel Assesses First Year of Slovenia EU Membership as Good
A year after becoming a full-fledged member of the EU, Slovenia is a success story as it has
proven to be a constructive, creative and a reliable partner
A year after becoming a full-fledged member of the EU, Slovenia is a success story as it has
proven to be a constructive, creative and a reliable partner. Nevertheless, the country faces
new challenges and should therefore not be self-complacent, was said at a panel held in
Brussels on Tuesday, 5 April.
The panel was organised ahead of the first anniversary of Slovenia's accession to the EU. It
was addressed by Slovenian European Commissioner Janez Potocnik, the head of the
Slovenian Economic and Research Association Boris Cizelj, KBC director general for Central
Europe, Marko Voljc and Slovenia's Ambassador to the EU Ciril Stokelj.
The ambassador said that in the first year of its membership, Slovenia constructively
contributed to all debates and that it had realised its interests in negotiations on the
constitutional treaty, decisions on accession negotiations with Turkey and Croatia, and the
Lisbon Strategy reform.
Just a few weeks after the 1 May entry, the country entered the ERM II exchange rate
mechanism, the grooming phase for the euro, Stokelj said, and added that Slovenia was now
advocating its interests in the negotiations on the EU's financial arrangements for the 20072013 period.
These are a big challenge for the future and the country hopes they will be successfully
concluded by June. Another future strategic target is the entry into the eurozone, planned for 1
January 2007, while the country has also launched preparations for its stint at the helm of the
EU in the first half of 2008.
"We are preparing for full presidency, while we are also in touch with Germany and Portugal
if we form a part of the presiding troika with the implementation of the constitution," Stokelj
said in his address. He ranked Slovenia in the happy middle among the 25 member states.
Science and Research Commissioner Potocnik said that Slovenia joined the EU in what was a
key moment of European unification. Membership has given the country more freedom in
setting its priorities than it had in the pre-accession period, but also greater responsibility,
Potocnik said.
"It will be easier to implement all priorities, no matter what they are. However, this is only
possible if the country enjoys a reputation as a constructive and skilled partner that wants to
realise its interests by striking reasonable compromises," the commissioner said.
After a year in the EU, all macroeconomic indicators are favourable for Slovenia, Potocnik
said, but underscored the need for the country to pursue structural reforms to secure
sustainable development and growth.
One of the main motors of this is science and research, an area where Slovenia's starting
position is good, Potocnik said. "If it will not capitalise on this, it may fall behind."
A year after Slovenia joined the EU, the country is no longer mistaken for Slovakia or
Slavonia, Boris Cizelj said. According to him, the impact of membership on business is hard
to assess, while he did say that there had been no changes in trade despite the loss due to the
expiry of preferential agreements with Balkan countries.
8
Government Backs EU Directive on Unfair Commercial Practices
The government says the directive will protect the economic interests of consumers and fair
competition between businesses, thereby protecting small and mid-sized enterprises in crossborder commerce
The government has said it agrees with the proposed EU Directive on Unfair Commercial
Practices, which is designed to protect consumers from sharp business practices and rogue
traders across the EU. The government says the directive will protect the economic interests
of consumers and fair competition between businesses, thereby protecting small and midsized enterprises in cross-border commerce.
The European Parliament confirmed the proposed directive on 24 February, while the
competitiveness council is expected to pass it in June. The directive is scheduled to enter into
force in 2007.
EU Plans to Limit China Textile Imports too Complex, Experts Say
The guidelines were released on 6 April and are meant to clarify under what circumstances
the European Commission would consider safeguard action against textile and clothing
imports from China
An Economics Ministry official said the guidelines adopted by the European Commission to
determine how the Commission would apply safeguards on Chinese textile imports were too
complicated and very lengthy. Metka Jerina, who heads the trade policy department at the
ministry, said the implementation of the guidelines was unclear. The guidelines were released
on Wednesday, 6 April and are meant to clarify under what circumstances the European
Commission would consider safeguard action against textile and clothing imports from China.
The move comes amidst concerns about Chinese textile goods flooding the EU market after
textile quotas were lifted worldwide on 1 January. These concerns were also voiced by the
Slovenian textile industry, which would like to see restrictions on Chinese textile imports.
The guidelines establish alert zones for each category of Chinese textile imports. To reach
these alert zones Chinese exports will need to show a rapid and sustained rise over a defined
period.
If these thresholds are reached, an investigation will be launched and China will be allowed to
act to provide sufficient remedy. If no remedy is achieved, formal WTO consultations with
the Chinese authorities would require them to act to limit textile exports in the affected
categories.
If this is still insufficient, safeguards can be invoked. Safeguards would take the form of
quantitative import restrictions applicable for a year, but extendable on reapplication. These
measures can only be used until 2008, according to the Commission.
Jerina said it was unclear how China will curb its exports. Moreover, there is no data on actual
imports of Chinese textile, which could justify the application of safeguard measures.
Joze Smole, the secretary of the association for Textiles, Clothing and Leather Processing
Association at the Chamber of Commerce and Industry of Slovenia (CCIS), too, highlighted
that the procedure was complicated and very non-transparent.
Smole highlighted that the European Commission still does not have data on Chinese imports
in the first three months of the year from six member states.
He said the number of import licences issues for Chinese textile had surged in Slovenia, but
explained that the data about actual imports was not yet available.
Given that the monitoring of imports in the first three months alone has presented a number of
difficulties, the procedures will be difficult to implement and monitor, according to Smole.
The European Commission guidelines, which establish procedures and criteria for the
objective and transparent use of safeguard proceedings, relate to the textiles-specific
9
safeguard clause written into China's Protocol of Accession to the WTO in 2001 which was
incorporated into EU law in 2003.
Government-Parliament Cooperation on EU Issues Important, Cukjati Says
Speaker of Slovenian Parliament France Cukjati spoke at the beginning of a three-day
conference on the internationalisation of parliaments and the role of national parliaments in
the EU
Discussing the role of national parliaments in the EU, Speaker of Slovenian Parliament
France Cukjati acknowledged the importance of the cooperation between the government and
the parliament, saying it can be successful only if both partners are equally strong, influential
and creative. Since parliament does not possess such direct, financially strong leverage as the
government, it is the weaker one in this relationship and must fight for its space, according to
Cukjati, who spoke at the beginning of a three-day conference on the internationalisation of
parliaments and the role of national parliaments in the EU.
Cukjati said that considerable efforts had been invested to provide the parliament a tiny share
of power in the adoption of EU legislation when the issue was on the agenda two years ago.
The parliament can now pass binding positions to be represented by government officials at
the EU level.
Anton Kokalj, the chair of the parliamentary EU committee, echoed Cukjati's statement that
the parliament's powers are limited when EU issues are discussed. The parliament among
other things cooperates in the drafting of positions to be represented by Slovenia in the EU.
Kokalj said that the European constitution encourages the role of national parliaments in the
Union. They are to play an important role in monitoring the respect of the principle of
subsidiarity, according to the constitution, which also encourages inter-parliamentary
cooperation between national parliaments and the European Parliament, Kokalj said.
"The role of national parliaments will depend on their own initiatives in future and the
constitutional treaty provides a good base for that," Kokalj stressed.
The conference, which was held by the IPSA Research Committee of Legislative Specialists
and the Slovenian Political Science Association, was attended by a number of foreign and
Slovenian experts.
Restructuring Is an Opportunity, Drobnic Says
Speaking on the sidelines of an informal meeting of EU labour ministers in Brussels, Drobnic
said restructuring was "an opportunity, not a threat"
Labour Minister Janez Drobnic has said restructuring of the economy is a big opportunity to
make Slovenia's economy more competitive. Speaking on the sidelines of an informal meeting
of EU labour ministers in Brussels, Drobnic said restructuring was "an opportunity, not a
threat."
Moreover, he claimed it was up to Slovenia to take advantage of the opportunities
restructuring offers.
The key goal for Slovenia is to ensure social inclusion, job growth and a better quality of life,
as well as a more dynamic economy, he said.
"We're talking about big changes and the main question that arises is how to perceive
restructuring. If we understand it...as adapting to new working conditions, then it will be
easier to carry it out. However, if we see it as something being forced upon us, then it will be
much more difficult."
Foreigners Ever Keener to Buy Property in Slovenia
EU citizens are increasingly interested in buying real estate in Slovenia after restrictions
were lifted following EU entry nearly one year ago
10
EU citizens are increasingly interested in buying real estate in Slovenia after restrictions were
lifted following EU entry nearly one year ago. Some 500 properties have been sold in the first
year, according to the Tax Administration, mostly at the seaside and in the northeastern region
of Pomurje. The Ministry of Justice does not think the figures are alarming and said there is
no need to invoke the safety clause to protect the property market. Sales will level gradually
and the opening of the property market will probably not have a negative impact on supply of
real estate for Slovenian citizens, the ministry has said.
Neither the Tax Administration nor the Justice Ministry have information on the type of real
estate that foreigners buy most often. Real estate agents, meanwhile, stress that most buyers
come from Great Britain, Italy, Germany, Austria, Ireland and Spain, although most purchases
are done privately, not through agents.
While buyers who opt for the plains of Prekmurje most commonly buy houses (old buildings
can be had for as little as SIT 5m (EUR 21,000), those buying at the seaside tend to opt for
apartments and condos.
British buyers are at the top of the list in both regions, which real estate agents says is
probably the results of cheap flights from London to Ljubljana. Agents from the Primorsko
region have also said that Britons who buy property tend to be working class, while Austrian
and German buyers come from the upper and middle classes.
The Gorenjsko region is also exceedingly popular, and although only ten percent of all
properties sold to foreigners are in the region, agents say that foreigners, especially Britons
and the Irish, buy up 70 percent of all real estate on the market. The ski resort Kranjska Gora
is the most popular location, followed by the picturesque lakeside resorts of Bled and Bohinj.
According to the property agents, foreigners come here to buy houses, but when they see that
prices are much higher than in Poland or Slovakia they typically opt for condos or apartments
instead.
Prices have so far been rising due to the ongoing development of the resorts, by 10 to 30
percent. But the agents expect that the raising demand will push up prices even further.
Slovenia is one of the few EU members that have fully liberalised their real estate market for
EU citizens following EU entry. The country has negotiated the option of invoking special
safeguarding measures in case of excessive demand that would push up prices, but this looks
unlikely to happen at this point.
Labour Inflow from New Members to Slovenia Doubles after EU Enlargement
Over 40,700 foreign citizens were registered as employed in Slovenia at the end of December
2004, with as many as 36,200 coming from the countries of former Yugoslavia and about
2,280 from the EU
The first year of Slovenia's membership of the EU has seen no major disruption on the labour
market despite a considerable inflow of workers from the new member states, which almost
doubled. The number of Slovenians who found new employment in the EU, on the other
hand, has been low as expected. The Slovenian labour market has witnessed a considerable
arrival of workers from the new member states who were unable to find employment in old
EU members because of labour market restrictions. They were attracted by a better social and
economic status offered in Slovenia, according to Miha Sepec, who is in charge of the
employment of foreigners at the National Employment Service.
Most of them found employment in construction (mainly from Slovakia) and the metal
industry (welders from Slovakia, Poland and the Czech Republic), while there are also
butchers from Hungary and truckers for international transport.
Employers who hired foreign labour in the past have now turned to the new member states for
workforce due to a restriction quota imposed by Slovenia on working permits for citizens
from third countries.
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Over 40,700 foreign citizens were registered as employed in Slovenia at the end of December
2004, with as many as 36,200 coming from the countries of former Yugoslavia and about
2,280 from the EU. The number of the latter increased by 1,070 since 30 April.
The highest increase was noted in the labour force from Slovakia, which increased form 302
in April 2004 to 1,047 in December. The number of Polish workers was up by 90 to 123, the
number of Czech workers almost doubled to 100, and the number of Hungarians employed in
Slovenia doubled as well, to 80 workers.
Workers from other new member states have shown no particular interest in getting a job in
Slovenia. There was one person from each Estonia and Malta employed in Slovenia at the end
of 2004, and two from each Latvia and Cyprus, according to the Employment Service.
No major changes have been recorded in the employment of citizens from old member states
after 1 May 2004. The number of Britons employed in Slovenia, for example, rose by 20, to
80 at the end of December.
The Employment office expects a further increase in the inflow of workers from new member
states to Slovenia. These workers are expected to gradually replace the workforce coming
from the countries of former Yugoslavia, according to Sepec.
The Labour Ministry told STA the Slovenian government had expected an increased labour
inflow from the new member states and countries of the EU and the EEA that offer services in
Slovenia. Since it was impossible to predict the extent of the inflow, a quota was imposed on
working permits for the workers from third countries.
Slovenians, meanwhile, are mainly interested in getting jobs in the old member states, most of
which imposed labour market restrictions for the new member states.
There are no official data available at the National Employment Service about how many
Slovenians have found jobs in the EU and in which member states, STA was told by Miha
Sepec.
The Slovenian EURES - European Job Mobility Portal service, meanwhile said that 322
Slovenians found employment in the EU between 1 May and the end of December 2004.
Valerija Okorn, the head of EURES Slovenia, said there is an imbalance between the demand
and offer on the job market. A major obstacles for Slovenian job-seekers is the labour market
restriction in most old member states, according to Okorn, while the lack of foreign language
knowledge is also a problem. Moreover, Slovenian job-seekers are reluctant to migrate.
Agriculture Not Hit by 1st Year in the EU, Food Industry Struggles
However, the food-production industry has faced serious challenges in the wake of growing
competition and the loss of traditional former Yugoslav markets
The first year of Slovenia's EU membership has brought no major surprises for the country's
agriculture. However, the food-production industry has faced serious challenges in the wake
of growing competition and the loss of traditional former Yugoslav markets. "The situation in
agriculture has not changed considerably after EU accession," STA was told by Miroslav
Rednak of the Agriculture Institute.
"The main goal was for the situation not to worsen substantially. That has been achieved,"
said Emil Erjavec, agricultural economist at the Ljubljana Faculty of Biotechnology.
"The situation is fairly favourable," he said, adding that this was mainly due to good
preparations. Erjavec believes this shows that the Slovenian agriculture with its model of
direct payments and a comprehensive rural development plan has managed to weather the
initial economic pressure brought about by the EU accession.
The situation in the food-processing industry is more critical, Erjavec observed, explaining
that many companies have faced difficulties after losing the former Yugoslav markets. This
was caused by the cancellation of free-trade agreements. The fall of prices and competition
pressures through trade posed additional problems.
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However, Erjavec stressed that all this was expected to happen and wondered to what extent
these companies were able to prepare for the changes at all. "The main problem was that most
companies practically had no actual experience in trading on the single European market until
enlargement," Erjavec said.
He acknowledged it is no peace of cake to shift the export-orientation from the markets of
former Yugoslavia to the single European market. It will take quite some time for Slovenian
food products to appear on EU shelves, he said.
Erjavec believes the opportunities for the development of Slovenian agriculture lie in sectors
where it can be competitive, such as fruit growing, particularly the production of apples. He
also expects the situation on the beef market to improve in the long term.
Moreover, there is also a wide range of environmental-friendly production, which is backed
by subsidies and can therefore become economically interesting, Erjavec said.
He also noted that the quality of Slovenian agricultural products is high enough for the
products to be seen as interesting raw materials on neighbouring markets. The question is,
however, whether this is also a long-term solution.
Erjavec sees long-term prospects in domestic consumption, particularly through growing
tourism, and in the breakthrough of some products to the European market.
Promotion, however, seems to be a key problem here. As leading representatives of Slovenian
agricultural policy established at this year's meeting of cooperatives, Slovenian farmers do not
know how to market their products. Good marketing and high-quality products are a key to
successful sales, it was said.
The competitiveness of the Slovenian agriculture on the European market is also expected to
be encouraged by an act on the promotion of agriculture.
Impact of EU Entry Varies Across Individual Industries
According to Andrej Kumar of the Ljubljana Faculty of Economics, a year after EU entry the
assets by and large outweigh the negative consequences
Some sectors of the Slovenian economy have been put to a tough test as a result of EU entry.
Not all were equally prepared to face it, while analysts expected the industries that were in
trouble already before the accession to be hit hardest. A year after, importers seem to have
capitalised on advantages of the common market, while exporters feel the increasingly fierce
competition there. According to Andrej Kumar of the Ljubljana Faculty of Economics, a year
after EU entry the assets by and large outweigh the negative consequences. The opportunities
of the EU's internal market are considerable. Moreover, they are bound to increase with the
country's integration into the eurozone, the professor has told STA.
As a result, companies can bring down their operating costs (as they are no more physical and
other barriers) and apply for money from the EU's structural and cohesion funds. Moreover,
Kumar believes that the EU label increases companies' and individuals' reputation on third
markets.
On the downside, pressures of competition force companies into speedy restructuring,
concentration and adaption to new requirements, which also brings higher costs. Nevertheless,
Kumar expects all those effects to be of temporary nature.
He does not think it is possible to say, in general, whether industries are better off or not.
Foreign companies are increasingly aware of the accessibility and attractiveness of the
Slovenian market, despite its small size.
Competition is therefore getting stronger and the negative consequences of this affect
companies and industries that have been heavily relaying on the domestic market. Problems
are also faced by companies that are smaller than their European rivals.
While some sectors have not witnessed much change after EU entry, textile, farming, food
and processing industries have had to cope with considerable difficulties. Their troubles result
13
from the small size of companies (making them uncompetitive in terms of economies of
scale), poor operating results and small added value.
Furthermore, Kumar also says that it took the troubled industries too long to begin targeting
EU markets and to seek opportunities in less demanding markets of the former Yugoslavia.
"In financial services sector, we may expect an increased presence of subjects from EU
countries who will be gradually taking over the bulk of business in the financial sector,"
Kumar told STA. He also believes that this market will remain small in Slovenia.
Individual sectors have not faced changes only due to EU entry, but also due to global
economic trends. According to Kumar, changes brought about by the integration into the EU
prevail, while global effects "may be connected with China's entry into the World Trade
Organisation as well as effects related to the textile industry, oil and steel prices, which are a
potential threat to Slovenia's inflation".
Slovenian companies will continue to face increasing competition on the domestic and the
EU's internal market. The market will open up for some new members of the WTO, like
China, and shortly Russia, Kumar said.
"Solutions lie in changes of contents and a clear definition of targets of active economic and
foreign trade policies." Kumar meanwhile believes that is no longer sensible to look for
solutions for individual sectors.
He believes Slovenia must create a national economic environment that will encourage
competitive growth, development of knowledge, innovation and practical technological
advances.
It is clear, according to Kumar, that companies with higher value added, income per employee
and greater productivity are in an advantageous position over others in the new business
conditions dictated by the EU and globalisation.
14
STATISTICS/FORECASTS
European Commission Forecasts 3.7% Growth for Slovenia
The European Commission projects Slovenia's economy will grow by 3.7% this year, with the
expansion speeding up to 4% in 2006
The European Commission projects Slovenia's economy will grow by 3.7% this year, with the
expansion speeding up to 4% in 2006. Inflation is set to stand at 2.6% in both years, according
to the spring economic forecast released in Brussels on Monday, 4 April.
The European Commission also forecasts Slovenia's budget deficit to reach 2.2% this year
and to drop to 2.1% of GDP in 2006. The figures are below the EU average, which is set at
2.6% and 2.5% of GDP respectively.
Compared to its autumn forecast, the Commission upgraded GDP projections for Slovenia
from 3.6% to 3.7% of GDP for 2005 and 3.8% to 4% for 2006. It meanwhile downgraded the
figures for the EU average and the eurozone to 2% for 2005 and 2.3% for 2006 and 1.6% and
2.1% respectively.
Since Slovenia's anticipated growth is above those figures, the European Commission entitled
the Slovenia section of the report "Strong growth fuelled by exports".
It says that, following subdued activity in 2003, the economy in 2004 achieved the fastest
growth over the past four years (4.6%), the stimulus coming from a favourable international
environment. Ignited by a recovery of the EU markets at the end of 2003, exports expanded
considerably throughout 2004, the report says.
Greater domestic and foreign demand confirms the anticipation of a solid economic revival in
the 2004-2006 period, although the Commission does not expect growth to exceed that of
2004.
This year, the economy is likely to become temporarily affected by relatively slow growth in
Slovenia's main trading partners. Growth is expected to be fulled by domestic consumption.
Growth is to strengthen in 2006 when the negative effects of high oil prices are expected to
gradually fade. Domestic demand is set to provide the main impetus as household spending
and investment stay robust against the background of vigorous construction activity and
production capacity adjustments geared to building up competitiveness.
The Commission also upgraded its forecast for Slovenia's inflation, from 3.6% for 2005 and
3% for 2006 anticipated in the autumn forecast to 2.6% for both years.
The Commission says that inflatory pressures have been well contained as the government has
remained committed to prudence in regulating administered price increases, and frequent
adjustments of excise duties on oil.
Moreover, inflation has been falling against a stable exchange rate set by the central bank
upon the country's entry into the exchange rate mechanism ERM II, the grooming phase for
the euro. The Commission says this halted a long period of continuous depreciation against
the euro.
Despite this favourable forecast, inflation in Slovenia remains above the EU average - the new
projections set the EU's inflation at 1.9% for this year and 1.7% in 2006. The eurozone is to
post 1.9% inflation this year, which is to drop to 1.5% in 2006.
As to Slovenia's budget deficit, the Commission anticipates it to increase as the revenue ratio
declines further due to the direct tax reform effective from January 2005.
Nevertheless, the current forward-looking indexation mechanism, containing the rise of public
sector wages and social sector transfers, is to limit the rise in expenditures. Anticipating the
increase in the inflows of EU funds, the Commission projects the deficit to stabilise at slightly
above of 2% of GDP.
15
Industrial Output Up 2.1% in January and February
January's output rose by 0.7 percent over December last year, while that of February
dropped by 2.1 percent over the previous month
Slovenia's industrial output rose by 2.1 percent in the first two months of 2005 compared to
the same period last year, the national Statistics Office said on Thursday, 7 April. Year-onyear, the production in manufacturing was up 2.4 percent, while electricity, gas and water
output increased by 1.9 percent. The mining output was meanwhile down 8 percent.
January's output rose by 0.7 percent over December last year, while that of February dropped
by 2.1 percent over the previous month.
Inflation Forecast Upgraded, Growth Kept Unchanged, IMAD Tells Government
According to IMAD, this year's inflation rate is to stand at 2.5 percent instead of the 3 percent
forecast in autumn
The Institute for Macroeconomic Analysis and Development (IMAD) has acquainted the
government with an upgraded inflation forecast for this year. Apart from predicting lower
inflation, IMAD also said it was keeping its growth outlook unchanged in its spring report,
which the government reviewed on Thursday, 7 April. According to IMAD, this year's
inflation rate is to stand at 2.5 percent instead of the 3 percent forecast in autumn. Moreover,
next year's inflation outlook has been brought down from 2.5 percent to 2.3 percent.
The government was also told by IMAD that the growth forecast for 2005 was kept
unchanged at 3.8 percent. However, the 2006 figure was upgraded by 0.2 percentage points to
4.1 percent.
However, IMAD said it did change the expected structure of growth for this year, with
exports expected to contribute more to economic expansion. In line with the institute's
forecasts, exports are to grow by 6.5 percent this year.
The decision to keep the growth forecast unchanged comes in spite of forecast-beating growth
in 2004, when the economy expanded by 4.6 percent, the fastest rate since 1999.
Moreover, IMAD said in its report that the economic growth should also result in positive
developments on the labour market in 2005 and 2006. As a result, the trend of strong job
growth is expected to persist throughout both years.
The report also tells the government that the preservation of current macroeconomic policies
is the key to keeping inflation under wraps.
IMAD director Janez Sustersic presented two scenarios that might invalidate the forecasts for
this year: higher-than-expected oil prices or faster domestic consumption.
According to Sustersic, inflation could be 0.3 percentage points higher if oil prices go up by
10 dollars per barrel. This would also curb GDP growth by 0.2 percentage points.
If the EU sees slower growth as well, which Sustersic said was unlikely, this might shave as
much as 0.3 percentage points off the GDP growth forecast.
In case domestic spending accelerates, the economy would expand by an additional 0.5
percentage points and inflation would be 0.2 percentage points higher than forecast.
The IMAD report will serve as a basis for the upcoming supplementary budget. "The main
objective is to not increase the budget deficit: the state may not boost domestic consumption
as it would thereby act inflationarily," Sustersic stressed.
Factory-Gate Prices Flat in March
Factory-gate prices remained flat in March over February and were up 3.8 percent over
March last year
Factory-gate prices remained flat in March over February and were up 3.8 percent over March
last year, the national Statistics Office said on Friday, 8 April. Year-on-year, the highest
16
increase, that of 5.8 percent, was recorded in prices of capital goods, while intermediate goods
jumped by 4.1 percent and consumer goods were up by 3 percent.
On the monthly basis, capital goods were up 0.4 percent, consumer goods rose by 0.2 percent
and intermediate goods dropped by 0.2 percent.
Mining prices dropped by 1.6 percent, water and electricity prices slipped by 1.9 percent,
while prices in manufacturing were up 0.4 percent month-on-month.
Export-Import Ratio at 92.6% in February
Slovenia exported EUR 1.03bn worth of goods in February
Slovenia exported EUR 1.03bn worth of goods in February, up 1.7% over January and up 7%
year-on-year. Imports totalled EUR 1.12bn, up 8.3% over January and up 8% over February
2004. According to preliminary data released by the Statistics Office, trade gap stood at EUR
83.22m in February, while exports covered 92.6% of imports.
Exports to EU countries amounted to EUR 175.85bn, representing 70.9% of the overall
exports, while imports form the 25-nation bloc totalled EUR 216.16bn, or 80.7% of the total
of imports.
17
FINANCE
Foreign Debt-Reserves Gap Widens to EUR 7.87bn
The central bank said that Slovenia's foreign exchange reserves totalled EUR 7.48bn as of the
last day of 2004
The gap between Slovenian foreign exchange debt and reserves widened to EUR 7.87bn by
the end of 2004, according to the latest Bulletin of the Bank of Slovenia.
The central bank said on Monday, 4 April that Slovenia's foreign exchange reserves totalled
EUR 7.48bn as of the last day of 2004.
The foreign debt, meanwhile, stood at EUR 15.35bn, the bulletin says.
The bulk of Slovenia's foreign exchange reserves, EUR 6.37bn, was made up of the reserves
of the central bank, while the rest belonged to commercial banks.
Long-term foreign debt totalled EUR 11.48bn, while short-term debt amounted to EUR 2.8bn,
and debt liabilities to affiliated enterprises and direct investors amounted to EUR 1.07bn.
PM Jansa Wants Development-Oriented Budget
The government would like this year's supplementary budget to shift priorities to
development, yet a lot of the money will have to be earmarked for shortfalls instead of
development needs, PM Janez Jansa said in a radio interview
The government would like this year's supplementary budget to shift priorities to
development, yet a lot of the money will have to be earmarked for shortfalls instead of
development needs, PM Janez Jansa said in a radio interview on Monday, 4 April.
The PM said that individual ministries uncovered unplanned liabilities that the previous
government did not plan for but which are due this year. Budget revenues will be somewhat
higher but not enough to cover the liabilities, he told TV Slovenija.
"It is very irresponsible that this had not been factored in," Jansa said about the various
shortfalls that the ministries are said to have uncovered and which have already been made
public by the individual ministers.
The PM also noted that the government had promised to withdraw from corporate structures
when it was inaugurated, however, he said, it is impossible to do that in four months. The
government's goal is to significantly withdraw in this term.
Jansa was quick to point out, though, that the state will not stage a complete withdrawal: in
banking, for example, it intends to retain its influence as it still wants banks to serve local
needs. Yet the banks do not have to be in 100% state ownership for that, he noted.
Jansa also talked about the labour market, which he dubbed as the most rigid anywhere.
Changes will have to be made, he stressed. A flexible labour market does not mean fewer
jobs, but lesser job security and a better offer of jobs; the greatest problem is not if someone is
laid off, but if they cannot get a new job, he added.
DARS to Issue Second Edition Bonds
The bonds will be issued for 20 years at an annual coupon interest rate of 4.5 percent
The Slovenian Motorways' Company (DARS) has decided to issue the company bonds of the
second edition in a total nominal value of SIT 14.8bn (EUR 61.7m). The bonds will be issued
for 20 years at an annual coupon interest rate of 4.5 percent.
The company said on Tuesday, 5 April that the purchase money would go for funding the
construction of a section of the Ljubljana ring and two sections of the motorway connecting
the Slovenian capital and Croatia's Zagreb.
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DARS issued the first edition of bonds in July 2004, in the nominal value of SIT 13.43bn
(EUR 56m), and plans to issue the third edition, valued at SIT 11.4bn (EUR 47.5m), in the
second half of the year.
Given the high demand for the DARS first issue of bonds, the company financial director
Bostjan Kovac expects a lot of interest in the second edition as well, notably among banks,
insurance companies and mutual funds.
KAD Chair Names Telco as Most Likely Candidate for Stock Listing
KAD will support efforts of other owners and management boards if they assess that listing
would bring additional business opportunities, Tomaz Toplak told the daily Vecer
The chairman of Pension Fund Management (KAD) has named the state-owned telco
Telekom Slovenije as one of the first candidates for stock market floatation. KAD will
support efforts of other owners and management boards if they assess that listing would bring
additional business opportunities, Tomaz Toplak told the daily Vecer.
After they have looked into all investments, KAD will draw up guidelines for disinvestment
in 35 companies where they hold stock worth SIT 7bn (EUR 29.2m), said Toplak. One of
them could be food company Droga.
The long-term strategy is clear: withdrawing from non-market investments where ownership
has been consolidated, and directing money into market investments or short-term securities
with a view to maximising yields, he said.
According to Toplak, KAD wants to extend the sustainability of the system and develop the
management of pension funds. How the state will achieve this depends on the state-property
privatisation programme.
KAD already has SIT 20bn (EUR 83.4m) in foreign securities. "We will certainly invest in
safe and liquid securities," he said, adding that liquidity is crucial since KAD must contribute
about SIT 6bn (EUR 25m) in the pension purse every year.
How KAD will ultimately re-incorporate is unclear at this point, he said, and added that any
sort of restructuring is not expected before 2006.
One option is for the organisational structure to remain unchanged, while the second option,
depending on whether the pension system will be comprehensively reformed, would be to
create a financial group focused on insurance business.
If KAD transforms into a life insurance company, it would retain the pension funds it
manages. This is not in discord with the appropriate EU directive, he said.
Government Okays Appointment of New SOD Head
The government cleared Marko Pogacnik to take over as the head of the Slovenian Restitution
Fund (SOD), a state-run fund at a correspondence session
The government on Tuesday, 5 April cleared Marko Pogacnik to take over as the head of the
Slovenian Restitution Fund (SOD), a state-run fund. According to a press release from the
Government Press Relations and Media Office, the decision was taken by the government at a
correspondence session.
Pogacnik will fill the void at the top of the SOD, which owns key stakes in major Slovenian
companies - making it a proxy for the government to influence the economy - after Goran
Bizjak stepped down in December. Kaja Spiler had been the acting managing director in the
meantime.
SOD's board selected Pogacnik among seven candidates bidding for the office. It referred the
appointment to the government for mandatory confirmation.
19
New Supervisory Board Named at Insurer Triglav
Triglav shareholders decided that the new supervisory board will be made up of Gregor
Gomiscek, Ales Hauc, Damjan Mihevc, Mateja Perger, Tomaz Toplak and Radovan Zerjav
A new supervisory board has been named at Zavarovalnica Triglav, Slovenia's largest insurer.
The changes have been prompted by the new centre-right government, which had its
supervisors appointed to the state-owned insurer.
Triglav shareholders decided on Wednesday, 6 April, that the new supervisory board will be
made up of Gregor Gomiscek, Ales Hauc, Damjan Mihevc, Mateja Perger, Tomaz Toplak and
Radovan Zerjav.
They will replace the supervisors appointed in June 2003 by the previous government.
The state controls the insurer through the Restitution Fund (SOD), which is the custodian of
the state's 85.1 percent stake.
Central Bank Reduces FX Swap Rate, Warns of Inflation
The central bank has reduced by 25 basis points the spot buy/sell foreign exchange swap rate
in what the Board of Governors says is a structural adjustment to ensure stability on the
money market
The central bank has reduced by 25 basis points the spot buy/sell foreign exchange swap rate
in what the Board of Governors says is a structural adjustment to ensure stability on the
money market. Due to excessive supply of foreign currency on the money market, the tolar
gained 0.03 percent against the euro in March to SIT 239.71, according to the central bank's
press release. However, the bank says the rate remains stable.
The governors also reviewed inflation data for March, when the annual rate amounted to 3.1
percent.
They said that Slovenia should meet the inflation criteria for eurozone despite the March
increase, but advised caution in administered prices and wage policy in light of relatively high
oil prices.
The central bank reduced the banks' obligation for investment in foreign currency bills from
30 to 25 percent.
KBC Interested in Entering Insurer Triglav
Willy Duron, the president of the Belgian financial group KBC, which holds a 34% stake in
Slovenia's leading bank, Nova Ljubljanska banka, has indicated that the group is also
interested in acquiring a stake in Zavarovalnica Triglav, Slovenia's top insurer
Willy Duron, the president of the Belgian financial group KBC, which holds a 34% stake in
Slovenia's leading bank, Nova Ljubljanska banka, has indicated that the group is also
interested in acquiring a stake in Zavarovalnica Triglav, Slovenia's top insurer. Asked by the
Slovenian national radio whether KBC was considering entering Zavarovalnica Triglav,
Duron said on Thursday, 7 April: "Probably. You have mentioned the name of an insurance
company that is likely to come up and I would be glad to sit at this negotiating table too."
KBC, which is keen to increase its stake in Nova Ljubljanska banka (NLB) in the long term,
is overly satisfied with the management, strategy and operations of the Slovenian bank, while
it would recommend it to put more effort into consolidating its position on the markets of the
former Yugoslavia.
NLB costs have been brought under control, dropping by 5 percentage points. Moreover, in
less than a year, the bank earned more than EUR 300 million by marketing new banking
products, according to Duron.
In the interview with Radio Slovenija, the official also praised more than a 20% increase in
profit in 2004. In the insurance offered by the bank, Duron highlighted the success of the
product NLB Vita, saying it could reach a 10% market share this year.
20
Economists in Favour of Profit Sharing
Profit sharing is common world-wide, while it could be introduced in Slovenia provided that
the payroll tax is abolished
Profit sharing is common world-wide, while it could be introduced in Slovenia provided that
the payroll tax is abolished. Three economists established this in a paper that they presented to
managers gathered at the seaside resort of Portoroz on Friday, 8 April. An arrangement in
which an employer shares some of its profits with its employees is diversified and is known in
all European countries.
It is realised in different ways, while it always entails tax relief, Janez Prasnikar, Aleksandra
Gregoric and Mitja Cok of the Ljubljana Faculty of Economics said in a presentation.
They believe that workers' participation in decision-making when they own a certain stake in
the company can have both positive and negative effects.
Positive implications are manifested in workers' loyalty to the company and in competitive
atmosphere. On the downside, the authors of the paper say decision-making process can be
lengthy and therefore inefficient.
Profit sharing is often associated with greater efficiency. According to Aleksandra Gregoric,
companies opt for profit sharing in order to reduce conflicting interests. Most often they pay
out a part of their profit to employees in cash or shares.
The paper outlines three different arrangements. One option is to give employees an option to
purchase shares under favourable terms. In the US for example, a company hires a loan, buys
shares on behalf of its employees, invests them in a fund and pays off the loan from
dividends.
The other option is a simple distribution, usually as a result of privatisation, like in Slovenia.
Profit sharing is also possible through share option schemes. Employees save up for years in
their company, and then buy its shares at a reduced price.
There are two forms of profit sharing used in Slovenia. One entails bonuses that are paid out
to members of management or supervisory boards. Among the 104 listed, only 20 pay out
bonuses from profit to supervisory board members.
Workers' ownership is also common in Slovenia. During privatisation, 74 to 150 mediumsized and large companies were in the majority internal ownership. An analysis conducted in
2002 showed that only 20 such companies remained in internal ownership.
There are two proposals of how to apply the European practice of profit sharing in Slovenia.
They both envisage the proposal for employees to form a fund of shares that would be
managed by a mutual fund.
This would invest 75% or 90% of its investments in the shares of the parent company and the
rest in bank deposits. The employees would control its operations through a board of
employees.
Economist Janez Prasnikar said profit sharing would be good for Slovenia give its implication
on productivity. He noted, however, that this would be possible only if the government was to
do away with payroll tax.
The need for abolishing the tax was also highlighted by representatives of workers and
managers who participated in the debate in Portoroz. They warned that in the opposite case,
the introduction of profit sharing would fail in Slovenia.
The debate wrapped up a two-day spring meeting of managers as part of which the Youth
Section of the Association Manager presented the Young Manager Award on Thursday, 7
April. The title went to Robert Licen, the executive director of Akrapovic, a company
specialising in exhaust system technology.
Licen, who took his master's degree from management and organisation at the Ljubljana
Faculty of Economics, was employed as executive director at Akrapovic in 2001 with the task
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of reorganising what was then a workshop into a modern industrial company, a goal he
succeeded in, the Association Manager said.
According to its press release, Akrapovic has developed into one of the most innovative
Slovenian companies, well-known world-wide. Under Licen's leadership, the company
became a world leader in the development and production of high-tech exhaust systems with a
15% share on the world market.
Ljubljana Stock Exchange
Bearish mood dominated on the Ljubljana Stock Exchange last week, which recorded a paltry
turnover of SIT 5.67bn (EUR 23.6m
Bearish mood dominated on the Ljubljana Stock Exchange last week, which recorded a paltry
turnover of SIT 5.67bn (EUR 23.6m). Block trades accounted for 57% of the turnover. The
SBI benchmark index closed the week at 4,826.36 points, down 38.76 points (0.80%) over the
previous week. Also down was the investment fund index PIX, which lost 22.60 points
(0.51%) closing at 4,440.26 points, and the BIO bond index, which shed 0.12 points (0.10%)
to 122 points.
Analysts expect more lively trading in the coming days, as companies started publishing the
amount of dividends that will be paid this year.
The most popular share on the official market was that of the hardware retailer Merkur, which
saw a turnover of SIT 599m (EUR 2.5m), mostly on the account of two block trades on
Friday, 8 April of SIT 566m (EUR 2.36m). The share closed at SIT 41,047 (EUR 171.22),
down 1.19%.
Pharmaceutical company Krka shed 1.27% in the wake of a lawsuit filed by US
pharmaceutical companies Warner Lambert and Pfizer over alleged violation of patent rights
for two forms of Atorvastatin, a cholesterol lowering medication. The turnover amounted to
SIT 463.2m (EUR 1.93m), with the share closing at SIT 79,008 (EUR 329.56).
Retailer Mercator recorded a turnover of SIT 177m (EUR 0.74m), with the share edging up
0.05% to SIT 40,008 (EUR 166.88m).
The free market saw a turnover of SIT 50m (EUR 208,600). Vinyl floorings producer Juteks
rose 7% to SIT 29,368 (EUR 122.50) after announcing it would move part of its production to
Russia, the company's main market. The investment estimated at over EUR 10m (EUR
41,700) is to increase Juteks's production by 30 to 40%.
Zlata moneta 2 recorded a turnover of SIT 95.5m (EUR 398,000) on the free market.
Most popular investment fund shares were NFD 1 (SIT 388.1m/EUR 1.62m; -0.43% to SIT
332.29/EUR 1.39) and Triglav steber 1 (SIT 101.9m/EUR 425,000; -0.74% to SIT
3,743.17/EUR 15.61).
Restitution Fund bonds noted a turnover of SIT 478.38m (EUR 2m), closing at 108.50% of
their nominal value.
Foreign Exchange
Mean exchange rate of the Bank of Slovenia
Euro (EUR) - SIT 239.73 ---US dollar (USD) - SIT 186.82 (+1.80)
Swiss franc (CHF) - SIT 154.72 (+0.25)
British pound (GBP) - SIT 349.31 (+0.21)
22
BRANCH INFORMATION
Meat Producers Complain About Red Meat Being Stigmatised
A debate about the safety of read meat has surfaced after the Ministry of Health launched a
campaign encouraging people to eat more fruit and vegetables
Representatives of the meat-processing industry complained at a round table on Monday, 4
April about red meat being "stigmatised" in public campaigns which describe it as risky for
health.
A debate about the safety of read meat has surfaced after the Ministry of Health launched a
campaign encouraging people to eat more fruit and vegetables.
Meat producers responded with their own advertising campaign, promoting the benefits of
read meat. The campaign has though been criticised for advocating unsafe food.
In the round-table organised by the Chamber of Commerce and Industry of Slovenia,
representatives of the meat producers maintained they had a right to act if they considered that
the public had a wrong idea about read meat.
As Marko Visnar of the Association of the Pig-Breeders highlighted, the Slovenian meatprocessing industry has made a major progress in recent years in improving the quality of
meat.
Also attending the round table, Jozica Maucec Zakotnik of the Health Ministry meanwhile
insisted that Slovenians consume enough meat, therefore no meat-promoting campaign is
needed.
On the contrary, people should be encouraged to eat more fruit, vegetables, fish and skimmed
milk, while avoiding greasy, salty and sugary food, Maucec Zakotnik maintained.
Asked to give an expert opinion at the round table, Karl Salobir of the Ljubljana Biotechnical
Faculty said that meat can be hazardous if greasy and prepared in a wrong way.
He added that any kind of non-balanced diet, whether it be a vegetarian or meat-favouring
one, can be dangerous for health.
Vizjak Calls for Prudent Privatisation of Steel Industry
The government wants development-oriented privatisation with strategic partnerships
Economics Minister Andrej Vizjak has called for prudent privatisation of steel companies
after visiting companies making up the Slovenian Steel Industry holding on Tuesday, 5 April.
The government wants development-oriented privatisation with strategic partnerships, he said.
According to Vizjak, this is a favourable time for privatisation since demand is increasing. He
was quick to point out, however, that the government would work together with the
conglomerate and individual companies in the privatisation process.
Speaking to the press after talks with managers of Metal, Sistemska tehnika and Nozi Ravne,
Vizjak said he was optimistic. "The Slovenian steel industry is one of the crucial pillars of our
economy." The industry is growing and the prospects are upbeat, he said.
Vizjak said the authorities would study all options before embarking on privatisation. A
government commission will work with the holding company and individual companies to
establish the state and pinpoint the requirements.
He said the commission, which has already been set up, would first have to see whether there
might be potential strategic partners that had not expressed interest before. Domestic partners
are not excluded.
Slovenian Steel Industry manager Tibor Simonka was optimistic about the future. He said the
results can be improved, provided that ambitious investments are carried out.
23
Director of tooling steel specialist Metal Darko Mikec said he was pleased that privatisation
would not be rushed. He said it was crucial for the region that the companies find a strategic
partner who will preserve jobs and steel production in Ravne.
Manufacturers Should Invest More in Industrial Design
A round table on industrial design and the feasibility of establishing a centre of excellence
was organised by the Ljubljana Faculty of Economics, gathering company chief executives
and industrial designers
Slovenian manufacturers could boost their value added and make their brands more
recognizable worldwide by paying more attention to industrial design, participants of a round
table agreed on Monday, 4 April.
The round table on industrial design and the feasibility of establishing a centre of excellence
was organised by the Ljubljana Faculty of Economics, gathering company chief executives
and industrial designers.
The participants agreed that few manufacturers of textile, leather or household products are
aware of the importance of industrial design in increasing their competitive strength.
Franjo Bobinac, chief executive of household appliance maker Gorenje, highlighted that a
centre of excellence could help manufacturers of mass products raise their prices.
Highlighting the experience of his company, Bobinac said that innovativeness and a
recognizable brand are key elements for remaining competitive since just low prices do not
suffice anymore.
Gorenje has been able to raise its prices up to 25 percent by offering products boasting top
design, which, according to Bobinac, plays a crucial part in making a brand recognizable.
Vladimir Pezdirc of the Ljubljana Academy of Fine Arts meanwhile said that cooperation had
been modest between industrial designers and companies since the latter were not interested
or did not know how to use industrial design.
Tatjana Fink, chief executive of construction company Trimo, on the other hand highlighted
that many designers are not aware of the importance of quick solutions in the business sector.
The participants of the round table agreed, though, that Slovenian companies, now past the
transition period, should invest more in research and development, with special attention to be
paid to industrial design.
A centre of excellence could play a crucial role in this development by helping the companies
of the traditional industry to follow new trends, the participants moreover agreed.
Prices of Agricultural Products Dropped in 2004
The prices were down by 1.1%, and by 1.9% in the year-on-year comparison, as a result of an
increase in supply
Producer prices of agricultural products dropped in nominal terms in 2004 in what was the
first such instance over the past few years. The prices were down by 1.1%, and by 1.9% in the
year-on-year comparison, as a result of an increase in supply. Last year was quite favourable
for Slovenian farmers after 2003, a year in which they suffered the impact of drought, the
Office for Macroeconomic Analysis and Development says in the latest edition of its
publication Economic Mirror.
Hence, the prices of crops dropped by as much as 9.6%, which is the level of 2002. On the
other hand, prices in cattle-breeding increased by 3.2%. While cattle was dearer by 5.5%, the
prices of animal products increased by only 0.1%.
The drop in prices was most substantial in potatoes, vegetables and fruit, as the increase in
output compared to a year before was the most robust here. The prices of industrial crop
meanwhile increased due to higher minimal buy-in prices fixed in line with the common
agricultural policy.
24
Monthly trends in buy-in prices in Slovenia followed the trends in the EU. In the first half of
the year, price indices was rather high, whereupon prices dropped, yet the drop in Slovenia
was not as strong as in the EU.
25
COMPANIES
Lasko's Disputed Purchase of Delo Stake Statute-Barred
The Celje Local Court established in a retrial that the case has fallen under the statute of
limitations
Brewer Pivovarna Lasko is off the hook regarding its disputed purchase in 2003 of a stake in
newspaper publisher Delo. The Celje Local Court established in a retrial that the case has
fallen under the statute of limitations, the brewery said on Monday, 4 April.
The court had to re-examine the case after the Celje Higher Court overturned in February an
earlier decision of the court of first instance that found Lasko and its CEO Tone Turnsek
guilty of violating takeover legislation.
The court had originally ruled that the brewery violated the act on takeovers by not publishing
a takeover bid although it held 27.33 percent of Delo in February 2003, thereby exceeding the
25-percent threshold.
The Securities Market Agency had claimed Lasko owned a 24.99-percent stake, while its softdrinks subsidiary, Radenska, "parked" its 2.34-percent stake at investment fund Infond, a
company affiliated with Lasko.
Lasko said that they still own the 24.99% of Delo that they acquired on 14 February 2003.
Oil Trader Petrol Gets New Supervisory Board
Petrol is one of the first major companies in partial state ownership that got a new
supervisory board after the new government came to power last year
The AGM of oil trader Petrol elected a new supervisory board on Monday, 4 April. Four of
the candidates put forward by the old supervisors were confirmed, but the shareholders
decided against two and instead sided with the state-owned Restitution Fund (SOD) which
nominated economist Mico Mrkaic and SOD chairman Milan Podpecan.
Mrkaic and Podpecan replaced the originally nominated Uros Slavinec, the chief executive of
chemical company Helios, and Miran Mejak, the long-time head of the Petrol supervisors.
The newcomers will be joined by Matjaz Gantar, the head of financial group KD Group,
former economics minister Joze Zagozen, Igor Irgolic, the director of Robert Bosch Slovenija,
and Viktor Baraga, the honorary consul of Australia.
According to government spokesman Jernej Pavlin, the board is good as it was backed by
over 80 percent of the capital. The shareholders who did not back the original proposal simply
thought the SOD proposal was a better alternative, added Andrijana Starina Kosem of the
Economics Ministry.
Petrol is one of the first major companies in partial state ownership that got a new supervisory
board after the new government came to power last year. Since the state-owned SOD and
Pension Fund Management (KAD) hold a combined stake of 27%, analysts were guessing
whether the new supervisors will be close to the government.
Indeed, Mrkaic and Gantar are members of the government's strategic council for economic
development, Podpecan was appointed to SOD by the government, and Zagozen is a member
of the executive board of the ruling Slovenian Democrats (SDS).
Asked by STA whether this is in line with the government's promise of gradual withdrawal
from corporate structures, Pavlin said that the state would sell off stakes in companies which
dominate less than half of their market, and eliminate obstacles for competition where there
are monopolists.
26
Kapital Magazine Lists 50 Most Influential Businesswomen
The top six are: Janja Bratos, Tatjana Fink, Sonja Gole, Romana Pajenk, Danica Purg and
Cvetka Selsek
The magazine Kapital has compiled a list of 50 most influential Slovenian businesswomen.
The top six are: Janja Bratos, Tatjana Fink, Sonja Gole, Romana Pajenk, Danica Purg and
Cvetka Selsek.
Bratos is CEO of the pharmaceutical company Lek, Fink CEO of the construction company
Trimo, Gole CEO of the caravan producer Adria Mobil and Pajenk CEO of the bank
Probanka. Purg is dean of the IEDC- Bled School of Management, while Selsek is CEO of the
bank SKB.
Given that the question of determining influence can be a very delicate one, the magazine has
decided not to rank the managers by influence but by alphabetical order, said Kapital in a
press release.
The magazine assessed the managers based on revenues at their company, net profit, the
number of employees, the number of management boards they are members of, the number of
associations they actively participate in, whether their company is doing business on foreign
markets, R&D investment and others.
The selectors also paid attention to subjective criteria, such as the managers' charisma, their
ambitions, international acclaim and media presence.
Velenje Coalmine Celebrating 130th Anniversary
According to the CEO the mining will continue until 2035
The Premogovnik Velenje coalmine is celebrating 130 years this year. A total of 200 million
tonnes of coal have been dug in that period, CEO Evgen Dervaric told the press on Tuesday, 5
April.
According to the CEO the mining will continue until 2035. Analyses have shown that there
are 150 million tonnes of coal reserves in the ground, with current technology allowing
between 100 and 110 million tonnes to be dug out.
Premogovnik Velenje, which comprises 11 subsidiaries, is undergoing restructuring. The
number of employees in the parent company and the HTZ subsidiary is expected to drop from
3,000 to 2,000 in 10 years.
Despite that, Dervaric announced that 800 workers would be newly employed, mainly in the
mining sector. The number of workers is expected to drop due to restructuring and through
retirement.
The company will have to reduce the cost of mining by 15 percent in the coming decade in
order to remain competitive.
Dervaric said that the thermoelectric power plant in Sostanj was planning a sixth block that
would be powered by the coal from the Velenje-based mine.
Dervaric said the beginning of coal mining go back to 1875 when the first drilling works took
place. In 1885, underground coal digging started, while an annual record of 5.1 million tonnes
of coal was dug in 1985.
Last year, the company signed a 10-year contract on the sale of coal to Holding Slovenske
elektrarne electricity holding and the Sostanj thermoelectric power plant.
Strategic Partnership the Only Solution for Elan
Tevz Tavcar said that Elan needs to "become bigger, join forces with other providers and
create a comprehensive offer and distribution"
Commercial or even strategic partnership is the only solution for Elan's long-term
development, according to chairman of Skimar, the holding company of the sports goods
27
maker. Tevz Tavcar said that Elan needs to "become bigger, join forces with other providers
and create a comprehensive offer and distribution".
Tavcar revealed that the Elan management is in talks with three potential partners, but he
refused to disclose their names. Elan chairman Matjaz Sarabon said that "we are playing an
active role in integration and will not allow ourselves to be acquired".
According to Tavcar, Elan will not be sold, but merely wants to supplement the offer of its
distribution subsidiaries with new products. "Sales of skis, poles and bindings are not enough.
We have to offer other skiing equipment".
Elan posted sales of SIT 10bn (EUR 41.7m), with profit at SIT 177m (EUR 0.74m). The
company's supervisory board said that the result was expected, as the year was "tough for
Elan and its subsidiaries".
Elan is the six largest ski maker in the world, yet Sarabon noted that it is far form fifth place.
Revenues need to be boosted to remain in the race for fifth and fourth place, which would
ensure long-term stability.
Acroni Receives Energy Efficiency Award
Acroni, a maker of flat-rolled steel products, received an award for energy efficiency at the
7th conference of energy managers
Acroni, a maker of flat-rolled steel products, received an award for energy efficiency at the
7th conference of energy managers on Tuesday, 5 April.
The steel company received another award, as manager Dusan Novkovic was conferred the
award for best energy manager.
The spa Terme Snovik was meanwhile awarded for best energy-efficiency project for its
system of heating with a combination of solar energy and heat pumps.
A small woodworking company, Mizarstvo Ovsenik, received a special award as it invested
10 percent of the revenues in efficient use of renewable sources.
The traditional event focuses on energy efficiency and environmental issues.
The participants examined environment legislation, practical aspects of carbon trading,
changes to the CO2 tax and voluntary environmental agreements between companies and the
state.
Tomorrow, the energy managers will discuss regulations on the Integrated Pollution
Prevention and Control (IPPC) certificates, which will become mandatory in 2007.
The conference of energy managers is organised by business daily Finance in association with
the Jozef Stefan Institute and the Ministry of the Environment and Spatial Planning.
Juteks Moves Part of Production to Russia
Worth 10 million euros, the production facility for 3-metre floor coverings should be
completed in a year
Juteks, a maker of PVC floor coverings, intends to move a part of production to Russia, the
company's most important market, where labour and energy costs are lower, according to
chief financial officer Drago Kovac.
The company is currently on the lookout for an appropriate location and potential suppliers.
Worth 10 million euros, the production facility for 3-metre floor coverings should be
completed in a year, Kovac told STA on Tuesday, 5 April.
Juteks is also in the middle of expanding a 4-metre production line at its headquarters in
Zalec. This investment will boost output by 30 to 40 percent, Kovac said.
Droga Shareholders Back Merger with Kolinska
With 65.40% of the capital present, the merger was backed with a 97.69% majority
28
Shareholders of food company Droga have backed the proposed merger with Kolinska
without the hiccups that many analysts expected from small shareholders allegedly displeased
with the swap ratio.
With 65.40% of the capital present, the merger was backed with a 97.69% majority. The
Austrian-owned Raiffeisen bank, which owns 0.3% of Droga, initially wanted to block the
merger but withdrew its proposal before the voting.
Former Droga chairman Matjaz Cacovic said in the debate preceding the vote that the two
companies do not have complementary programmes, so the merger does not make sense.
He also alleged that the merger strategy is unclear and that many people might be laid off.
According to him, the merged company will become the target of a hostile takeover.
The company's current chairman, Robert Ferko, said the management is well aware of the
possibility of a hostile takeover. Yet he pointed out that the non-complementarity of the two
companies' product lines will result in benefits at certain segments.
The shareholders also backed the candidates for the Droga Kolinska supervisory board:
Istrabenz chief executive Igor Bavcar, current chief Droga supervisor Gorazd Cuk, chairman
of investment firm Maksima Holding Miroslav Golubic and Milan Cadez, who works for
TCG Unitech and is a prominent member of the ruling Slovenian Democrats (SDS).
Droga's biggest shareholder is the energy and tourism conglomerate Istrabenz (24.99%),
followed by the state-owned Restitution Fund (8.82%) and Pension Fund Management
(8.55%), and investment funds Triglav Steber 1 (5.93%), Maksima (5.42%) and Poteza
nalozbe (5.3%).
The united company, which will be based in Ljubljana, will have about 1,900 employees and
revenues of nearly SIT 50bn (EUR 200m).
Retailer Spar Boosts Revenues by 13 Percent
Grocer Spar Slovenija posted sales of SIT 103bn (EUR 429.6m) for 2004
Grocer Spar Slovenija posted sales of SIT 103bn (EUR 429.6m) for 2004, up 13 percent over
the year before. Spar thus grabbed a market share of 19.6 percent last year, the company's
general manager Igor Mervic told the press on Wednesday, 6 April. Mervic declined to talk
about profits.
The Spar chief used the occasion to criticise the city of Ljubljana, which in February crushed
the retailer's plans for the construction of a shopping and entertainment centre in the northern
Ljubljana borough of Siska.
The city council passed the draft zoning plan but rejected the appropriate decree. What
happened here has not happened anywhere in Europe, according to Mervic.
He said this was a shameful political decision with which the city councillors rejected 2,000
jobs. Worst of all, he said, nobody is willing to explain the decision, not even mayor Danica
Simsic who has received several letters from him but is yet to reply.
Despite the setback, Mervic said Spar will not sell the plot of land. He said the company has
not given up on the plans yet.
Spar intends to expand further this year. While seven new stores opened in 2004, 10 more are
planned for 2005. SIT 9bn (EUR 37.5m) is to be spent on investment this year.
According to Mervic, 66 percent of the products on Spar shelves are of Slovenian origin. If
Slovenian companies continue to make good products, the percentage could increase.
Mervic said Spar has good cooperation with dairies and the meat industry, but he is not too
happy with the beverage industry.
Spar Slovenija is 100-percent owned by Swiss company Aspiag. It has 7 megamarkets and 37
stores in the country.
29
Kolinska Okays Merger with Droga
Once it is registered, Droga Kolinska will be the biggest food company in Slovenia, with sales
of about SIT 50bn (EUR 200m) and 1,900 employees
Shareholders of food company Kolinska on Wednesday, 6 April backed the merger with
Droga in what was the final formal step after Droga confirmed the merger earlier in the day.
They also rubber-stamped the proposed supervisory board of the merged company Droga
Kolinska, and confirmed the articles of incorporation.
The approval was but a formality as energy and tourism conglomerate Istrabenz, under whose
auspices the merger is being carried out, owns 93 percent of Kolinska. The merger was
confirmed with 94.4% of the voting capital.
Kolinska chairman Iztok Bricl said Droga Kolinska would be listed on the Ljubljana Stock
Exchange in July. He said the new management would immediately start seeking synergy
effects that are said to be worth SIT 16.6bn (EUR 69.25m), in particular in sales and
production. It is expected, though, that the effects will be negative the first year, he
acknowledged.
The new supervisory board was also confirmed, consisting of Istrabenz CEO Igor Bavcar,
current chief Droga supervisor Gorazd Cuk, chairman of investment firm Maksima Holding
Miroslav Golubic and Milan Cadez, who works for TCG Unitech and is a prominent member
of the ruling Slovenian Democrats (SDS).
Bavcar also said that the period ahead would be very difficult. "We realise that the planned
(synergy and management) measures would be difficult, which is why the supervisory board
will place special emphasis on them," he stressed.
Having owned 24.99% of Droga and 93% of Kolinska prior to the merger, Istrabenz is the
owner of 55% of Droga Kolinska. The state-run Restitution Fund (SOD) and Pension Fund
Management (KAD) have a combined stake of about 10%, followed by investment firms
Maksima (8%) and Triglav DZU (4%).
According to Bricl, Droga Kolinska will sign a strategic partnership deal with Serbia's Grand
Prom in early May, which will further increase the value of the company. "The partnership
with Grand Prom will provide a strong presence on the Serbian market, where Grand Prom is
the biggest coffee producer," he said. Grand Prom will have a stake (between 3.5 and 3.7%) in
Droga Kolinska.
Once it is registered, Droga Kolinska will be the biggest food company in Slovenia, with sales
of about SIT 50bn (EUR 200m) and 1,900 employees.
Furniture Maker Lesnina Ups Profit
Furniture retailer Lesnina raised its sales revenues from SIT 14.33bn (EUR 59.7m) in 2003 to
SIT 16.75bn (EUR 69.8m) in 2004, while its net profit jumped from SIT 1.36bn (EUR 5.6m) to
SIT 1.92bn (EUR 8m) year-on-year
Furniture retailer Lesnina raised its sales revenues from SIT 14.33bn (EUR 59.7m) in 2003 to
SIT 16.75bn (EUR 69.8m) in 2004, while its net profit jumped from SIT 1.36bn (EUR 5.6m)
to SIT 1.92bn (EUR 8m) year-on-year, the company said on Wednesday, 6 April.
As Lesnina's management said in a press release, the company hopes to increase sales by 10
percent on the domestic market and by 20 percent on the Croatian market this year.
The management moreover plans to open new shops in Croatia's Cakovec and Rijeka next
year and introduce a new line of products, Italstyle, according to the press release.
Ferko to Run Merged Food Company Droga Kolinska
In line with the decision taken by the supervisors, Ferko will take over the running of the onemember board as soon as the new company is officially registered, expectedly later this month
30
The supervisory board of Droga Kolinska, the product of the merger between food companies
Droga and Kolinska, has appointed incumbent Droga boss Robert Ferko the chairman of the
new company. In line with the decision taken by the supervisors, Ferko will take over the
running of the one-member board as soon as the new company is officially registered,
expectedly later this month, Droga said in a press release on Thursday, 7 April.
The supervisors made the appointment on 6 April, only hours after they were themselves
appointed by the shareholders of the new company. Earlier in the day, the shareholders of
Droga and Kolinska separately backed the merger, which resulted in the largest food company
in Slovenia.
The supervisors also offered the remaining members of the management teams at Droga and
Kolinska executive posts at the new company, the press release says.
In response to his appointment, Ferko, 40, said he was happy with the trust shown in him by
the new company's supervisors. "This is proof that I have worked well until now and at the
same time a big challenge." He has worked for Droga since 2000.
The chair of Droga Kolinska supervisors Igor Bavcar meanwhile said the supervisors believe
that, with his 16 years of experience, Ferko will be able to make Droga Kolinska a leading
regional player.
Delo Shareholders Get Dividends of 1.25 Euros per Share
The payout is to be confirmed at the company's AGM scheduled for 19 May
Shareholders of newspaper publisher Delo will receive dividends of SIT 300 (EUR 1.25) per
share, the supervisory board decided on Wednesday, 6 April. The payout is to be confirmed at
the company's AGM scheduled for 19 May. Delo posted sales of SIT 12.7bn (EUR 53m) last
year, with net profit at SIT 729m (EUR 3.04m). A total of SIT 200m (EUR 0.83m) will be
earmarked for dividends, the company said on Thursday, 7 April.
The publisher said it would focus this year on new development projects, own distribution (it
has recently cancelled a distribution contract with Delo prodaja) and new editions, as well as
on boosting the sales of existing publications.
Managers Urge for Creating Leverage for Economic Growth
Managers support all efforts by the government and other bodies that are aimed at making
Slovenia attractive to foreign investment
Managers support all efforts by the government and other bodies that are aimed at making
Slovenia attractive to foreign investment, the head of the Association Manager said on
Thursday, 7 April. Franjo Bobinac also called for giving sufficient weight to knowledge as the
motor of growth and for making the macroeconomic framework stable and attractive.
Slovenian managers understand economic growth and the creation of new jobs, two aspects of
Lisbon Strategy, as final objectives, said Bobinac as he addressed the press at the start of a
two-day meeting of managers in Portoroz.
"However, the leverage to achieve those two basic goals is elsewhere. The problem is how
Slovenia, and every company and trade mark within it, will create all the conditions for
securing an adequate competitive edge."
Bobinac underscored the need for science and the education system to connect with the
economy. The aim should be research that yields concrete results on the market, he said.
Last year, managers were very critical of tax legislation, Bobinac pointed out. According to
him, the tax wedge on wages in Slovenia is much higher than in other European countries.
"The new tax legislation adopted by the previous government has in fact reduced investment
breaks, thus making a step backwards in terms of orientation towards development."
According to Bobinac, the tax system should be simple and transparent.
31
The official also touched on profit sharing. According to him, the issue is important from the
aspect of competitiveness as it affects the motivation of workers. "We expect a legislative
framework for profit sharing to be passed as soon as possible."
Opening their spring meeting, some 220 managers convened at an assembly of Manager
Association as part of which they elected new leadership. Bobinac was re-appointed the head
of the association.
The association has also a section of women managers, who will confer an award to
a women-manager friendly company. The winner is foundry Livar of Ivancna Gorica, which
employs 700 people and has four women on the nine-member management team.
The section has also decided to introduce a new award, called Artemida, for those women
managers who have succeeded in making it to the top job in their companies. Both awards are
aimed at encouraging women managers to become the top executive officers in their
companies, the head of the section, Romana Pajenk, said.
Najdi.si Sets Up Shop in Serbia-Montenegro
The new search engine, www.pogodak.co.yu, is fully adapted to Serbian, as users can opt for
Cyillic or Latin script as they search Serbian indexed pages
Najdi.si, the most popular search engine in Slovenia, has started offering services in SerbiaMontenegro as part of its expansion to Southeast Europe. The new search engine,
www.pogodak.co.yu, is fully adapted to Serbian, as users can opt for Cyillic or Latin script as
they search Serbian indexed pages.
Novifirum, the company behind najdi.si, launched a search engine in Croatia
(www.pogodak.hr) in October 2004.
According to Peter Brecelj, the director for the development of new markets at Noviforum,
the company will launch search engines for Bosnia-Herzegovina and Macedonia by the end of
this year.
Romania and Bulgaria are in line for next year.
Fructal's Macedonia Subsidiary Expands Production Line
Fruktal Mak, the Macedonian subsidiary of the beverage producer Fructal, opened a new
bottling facility in Skopje in an investment worth EUR 2m
Fruktal Mak, the Macedonian subsidiary of the beverage producer Fructal, opened a new
bottling facility in Skopje on Friday, 8 April in an investment worth EUR 2m. According to
company plans, 90% of the production will be exported to SE Europe, a press release said.
The new bottling production, which has an annual capacity of five million bottles, also
opened 70 new jobs. It will extend Fruktal Mak's range of products from juices and fruit
drinks to fruit syrups, Fructal said in the press release.
The company, which has been part of the Fructal group for five years, also sells Fructal baby
food on the Macedonian market.
Fruktal Mak last year sold a total of 36,523 hectoliters of beverage in Macedonia and on
foreign markets, which is a slight rise from 2003, when the figure stood at 36,442.
The expansion of the production line is to make Fruktal Mak the Fructal production centre for
SE Europe and a major Macedonian exporter.
The company expects a three-fold increase in turnover this year, with annual revenues
amounting to EUR 9m.
Slovenia Needs to Utilise Public-Private Partnership
Slovenia lags behind in public-private partnerships, but the awareness of such funding is
increasing
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Slovenia lags behind in public-private partnerships, but the awareness of such funding is
increasing, according to Finance Minister Andrej Bajuk. "I hope we will strengthen such
cooperation with the help of Britain's experience," Bajuk said on Friday, 8 April. Speaking at
a seminar co-organised by the British embassy, Bajuk said public-private funding of projects
in the public interest improves the effectiveness of financing as well as competitiveness. It can
successfully replace traditional funding, he stressed.
According to Mojmir Mrak, a professor at the Ljubljana Faculty of Economics, the gap
between demand and the actual funding available in Slovenia in this field is at 3% of GDP.
Bajuk said the state is already creating the necessary legal framework to improve the
situation. Slovenia is introducing this approach because budget funding is restricted in
preparations for the changeover to the euro, because it lacks infrastructure and because the
private sector is a lot more receptive and responsive to progress, he said.
Mrak outlined the state of public-private partnership, labelling it as poor. Yet he also pointed
to the negative image of the project for the construction of power plants on the lower Sava
river, where the selected partner was not appropriate but the tender was nevertheless not
annulled. Projects like this, he said, undermine the credibility of this system.
According to Mrak, in Slovenia there is an incorrect understanding of how such partnerships
should work, and the conviction that the only thing that matters is to carry out the project,
regardless of how it is funded. Additionally, Slovenia's financial position has so far been too
weak to promote public-private partnership.
The state should draw up a list of projects, create a legal and institutional framework, and
train about 200 people to act on behalf of the state as competent interlocutors with the private
sector, according to the economist.
Britain's extensive experience in public-private partnership was outlined by Ambassador
Hugh Mortimer and Stephen Harris of International Financial Services, one of the coorganisers of the seminar.
Economist Mrkaic Advocates Privatisation of Oil Company Petrol
Economist Mico Mrkaic, who was appointed member of the supervisory board of oil trader
Petrol earlier this week, said he would advocate prompt privatisation of Petrol
Economist Mico Mrkaic, who was appointed member of the supervisory board of oil trader
Petrol earlier this week, said he would advocate prompt privatisation of Petrol. The head of
the government Strategic Council for Economic Development, Mrkaic said that he would take
professional and not political decisions as a supervisor. Asked whether the fact that Petrol
CEO Janez Lotric does not advocate privatisation means that he would be dismissed, Mrkaic
said this was not necessarily so. "The supervisory council assesses the management's work
according to results not ideological differences," Mrkaic told the supplement of the daily
Dnevnik on Saturday, 9 April. "Petrol can be a successful and efficient company even if
privatised," he said.
Mrkaic, who is also a member of the supervisory board of the Pension Fund Management,
advocates prompt privatisation of all state-owned companies. He also advocates the
privatisation of services, with a few exceptions. He supports the privatisation of public
utilities and primary health services, while he believes that "secondary health services can be
privatised provided that the state keeps a strong control".
Mrkaic believes that there should be no prior labelling of sectors that should be kept in
Slovenian hands. The goal, according to him, is to provide the best product at the best price to
the consumers.
Since consumers are organised much worse compared to producers and companies, the state
must help them, according to Mrkaic. "If consumer help for example means the breaking of
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the electricity holding, which has united all Slovenian electricity producers and now controls
the Slovenian market, this should be considered then," he told Dnevnik.
Mrkaic is convinced that fears from the introduction of the flat tax rate, proposed by the
Strategic Council, have no ground. He rejected claims that it would increase inequality.
Mrkaic said he would not lower basic welfare aid, but would make a thorough check of the
list of those eligible to it. He also said that financial incentives for the unemployed should be
strengthened. The current system does not encourage the older generation to work, which is
why Slovenia has one of the highest unemployment rates among people older than 58 in the
world, he said.
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FAIRS, CONGRESSES
Megra Construction Fair Opens
Organisers have said the event, taking place for the first time after Slovenia joined the EU, is
an excellent opportunity to asses the state of the construction industry in the country
The Megra construction fair opened in Gornja Radgona on Tuesday, 5 April, featuring 450
exhibitors from 19 countries. Organisers have said the event, taking place for the first time
after Slovenia joined the EU, is an excellent opportunity to asses the state of the construction
industry in the country.
Delivering the keynote address, Economics Minister Andrej Vizjak said the fair proved how
the business is alive and well. He highlighted the role of the state, which provides a lot of
work for construction companies with motorway, housing and power plant construction.
Vizjak assessed that the value of works in the energy sector will exceed the value of the
motorway programme by the end of the decade. He also said he would meet his Austrian
counterpart shortly to talk about the restrictions to free flow of persons in the EU, which
hampers Slovenian construction companies.
The head of Pomurski sejem, the organiser of the trade fair, stressed that construction
represents 5% of GDP in Slovenia and employs close to 60,000 workers, or 7.4% of the total
workforce. He said Megra would focus this year on housing and interior equipment, but it also
features construction equipment and materials, insulation, design and planning.
Slovenia Takes Central Stage at Bookworld
The 11th Bookworld is planned to focus on books for and about travels, while its seminars
and conferences will notably examine "Slavonic literature in a global context"
Slovenia will take central stage at Bookworld, the annual international book fair in Prague,
due between 5 and 8 May, displaying its music, film and theatre in addition to books. The
fair's opening is due to be attended by Slovenian Culture Minister Vasko Simoniti, while a
number of Slovenian authors will attend the show's round tables, including Evald Flisar,
Drago Jancar, Milan Jesih, Mojca Kumerdej and Svetlana Makarovic.
They are expected to discuss with their Czech counterparts current literary trends, focusing on
children's books, homoerotic poetry, urban elements in poetry, literary magazines, and women
in literature, among other topics.
The fair's organisers have said they decided to put Slovenia in the focus this year because
Slovenian and Czech literatures have a lot in common. Moreover, Czech ranks right after
Croatian in the number of translations of Slovenian books.
The book show will be accompanied by screenings of popular Slovenian films of recent years,
among them "Suburbs", "Guardian of the Frontier", "Sweet Dreams" and "Ode to Preseren",
and concerts by Slovenian musicians, including Fake Orchestra and Janja Majzelj.
The 11th Bookworld is planned to focus on books for and about travels, while its seminars
and conferences will notably examine "Slavonic literature in a global context".
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SLOVENIA IN BRIEF
Survey Shows High Approval Ratings for SDS, Government
The senior coalition Slovenian Democrats (SDS) have consolidated their position as the
leading parliamentary party in the country. According to a poll, whose results were published
on Monday, 4 April, the right-leaning SDS improved its voter approval rating by 3 percentage
points to 35.3%. The largest opposition party, the Liberal Democrats (LDS), has improved its
rating as well, gaining 0.7 percentage point to 15.8%, according to the survey, released by the
daily Delo.
CoE Committee Visits Slovenia to Monitor Minority Protection
The Advisory Committee on the Framework Convention for the Protection of National
Minorities arrived on a five-day visit on Monday, 4 April to draft an opinion on the
implementation of the minority protection convention. This is the second monitoring visit by
the committee.
Rupel Urges Belgrade and Pristina to Launch Talks on Kosovo
Foreign Minister and OSCE Chairman Dimitrij Rupel, who began a two-day visit to SerbiaMontenegro on Monday, 4 April, said in talks with Serbian officials that Belgrade and
Pristina should begin negotiations on the status of Kosovo as soon as possible.
Textile Company Novoteks Goes into Bankruptcy
Textile company Novoteks has gone into bankruptcy and laid off the last remaining 100
workers after it was concluded that it is impossible to carry through with bankruptcy
protection, the company's administrator Milan Vajda told STA on Tuesday, 5 April.
US Ambassador Stresses Importance of US-Europe Partnership
US Ambassador Thomas B. Robertson has said that without the strong leadership of the
United States and NATO in the past 12 years, the stability and prosperity of Slovenia and all
the Balkans would look very different, and much worse today. The ambassador said this in a
lecture on the partnership between the US and Europe, organised by the Euro-Atlantic
Council and the Slovenian Association for International Relations on Wednesday, 6 April.
Ministry Says Decision on Wind Turbines Must Be Re-examined
The Ministry of the Environment and Spatial Planning has upheld a complaint against the
Agency for the Environment, which decided not to grant its consent to the construction of
wind turbines on Volovja reber, a ridge in SW Slovenia. The ministry thus upheld the
complaint filed by the electricity distributor Elektro Primorska and the municipality of Ilirska
Bistrica, in which wind turbines are to be built. The ministry ordered the agency to reexamine the case and issue a new decision. It decided so because not all subjects that had the
appropriate right had been granted the status of parties in the procedure, an Environment
Ministry official said on Thursday, 7 April.
Government Decrees Two New State Celebrations
The government has decreed two new memorial days, to mark the "return of Primorsko to the
homeland" (15 September) and the reunification with the regions of Stajersko and Prekmurje
(23 November). While 15 September marks the enactment of the peace treaty with Italy and
the return of Primorsko to Slovenia, 23 November marks the day in 1918 when general
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Rudolf Maister disarmed an armed German militia in Maribor, preventing the annexation of
Stajersko to Austria.
Ministers Discuss Slovenian-Swedish Defence Cooperation
Swedish Defence Minister Leni Bjoerklund and her Slovenian counterpart Karl Erjavec
shared a view that defence cooperation between the two countries is good as they held a news
conference after meeting in Ljubljana on Friday, 8 April. Erjavec explained that bilateral
cooperation is especially extensive in crisis management and rescue operations, while the visit
of the Swedish official was a good opportunity to boost it further. Slovenia and Sweden are
currently working on 25 common projects in crisis management and rescue missions,
according to Erjavec.
Public Sector Wages to Increase by 2% in July
Wages of public sector employees will increase by 2% on 1 July, trade unions and
government negotiators agreed on Friday, 8 April. In accordance with a 2003 agreement,
additional pension insurance premiums that the state pays will go up by 3.04%, the unions'
chief negotiator Bojan Hribar told STA.
Culture Minister Promises Changes to Public Broadcaster Bill
Culture Minister Vasko Simoniti said his ministry would be making changes to the
controversial bill on the public broadcaster after meeting with representatives of the Slovenian
Association of Journalists (DNS) on Friday, 8 April.
Automatic Shutdown at NEK
The Krsko Nuclear Power Plant (NEK) automatically shut down just before 10 AM on
Sunday, 10 April. The shutdown was caused by a fault that occurred as a result of reduction in
capacity due to a regular test of turbine valves, NEK said. According to NEK, the security
systems responded duly and the fault had no impact on the environment or people's health.
The plant is currently in a stable state of hot shutdown and is expected to be re-connected to
the electricity grid on Monday, 11 April.
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