Slovenia Business Week no 32, October 16th, 2006
Table of Contents:
HEADLINES ............................................................................................................................. 3
CCIS Forecasts GDP Growth of 4.5% for This Year, 4.3% for 2007 ................................... 3
Company Numbers Up 1.8% in 2005 .................................................................................... 3
State Funds Selling Stakes in 84 Companies ......................................................................... 4
INTERNATIONAL COOPERATION ...................................................................................... 5
Slovenia Wants Croatia to Enact Reciprocity on Real Estate ................................................ 5
President Drnovsek Receives Credentials of Three Ambassadors ......................................... 5
Szili Endorses Minority's Effort for Seat in Hungarian Parliament ....................................... 5
Slovenia Still Striving to Become OECD Member ................................................................ 6
Montenegro Promised Slovenia's Assistance in EU Bid ........................................................ 7
Greek, Slovenian FMs Call for More Cooperation ................................................................ 7
EUROPEAN UNION ................................................................................................................. 9
MP Says Budgetary Supervision Improves Trust in EU ........................................................ 9
FM Sees Luxembourg as Guiding Star for Slovenia EU Stint ............................................... 9
EU Ministers Label Inflation Criterion Key for Euro Stability ........................................... 10
EU Warns Slovenia of Financial Crisis Because of Ageing ................................................ 10
Government Adopts Lisbon Implementation Report ........................................................... 11
EU Commission Issues Several Warnings to Slovenia ........................................................ 12
Finance Minister Downplays Warnings from Brussels ........................................................ 13
EU Enlargement Dominates Vujanovic Visit to Parliament ................................................ 13
Commission Protests Slovenian Eco Impact Assessment Legislation ................................. 14
LEGISLATION ........................................................................................................................ 15
Court Cancels Direct Marketing Restriction for TV Slovenija ............................................ 15
STATISTICS/FORECASTS .................................................................................................... 16
Economist Warns Government to Save for Rainy Day........................................................ 16
Factory-Gate Prices Up 0.6% in September ......................................................................... 16
Central Bank Governor Sees Interesting Year for the Economy ......................................... 17
Export-Import Ratio at 88.7% in August ............................................................................. 17
Industrial Output Up 10.9% Y/Y ......................................................................................... 18
EU Survey: Half of Slovenians Know EU Has 25 Members ............................................... 18
CO2 Emissions Down in 2004 ............................................................................................. 18
FINANCE................................................................................................................................. 19
PM Forecasts Zero Budget Deficit by 2011 ......................................................................... 19
Petrol Prices Down Again .................................................................................................... 20
NKBM Almost Reaches 2006 Profit Target in 9 Months .................................................... 20
Finance Minister Bajuk Wants EIB Mandate Curbed .......................................................... 21
Parliamentary Committee Endorses Euro Bill ..................................................................... 21
National Council Vetoes Minimum Wage Act .................................................................... 22
Government Endorses Plan for Projects Worth EUR 24bn until 2023 ................................ 22
KD Holding Moves to Acquire Dezelna banka ................................................................... 23
Mutual Funds Boast EUR 1.64bn in Assets Under Management ........................................ 24
Ljubljana Stock Exchange .................................................................................................... 24
Foreign Exchange ................................................................................................................. 24
BRANCH INFORMATION .................................................................................................... 25
Committee Endorses Sunday Opening Hours for All Shops ............................................... 25
Minister Warns of Environment Obligations after 2012 ...................................................... 25
Ministry: Plan For Cutting CO2 Emission Ready by 20 October ........................................ 26
Government Adopts Bill for Securing Funds for Railway Projects ..................................... 26
Slovenian Incoming Workshop Started Takes Place in Radenci ......................................... 27
COMPANIES ........................................................................................................................... 28
Ljubljanske mlekarne to Wrap up 2006 in Red.................................................................... 28
Petrol, Lukoil Set to Launch Joint Venture This Year ......................................................... 28
Daily Dnevnik Sells Its Stake in Publisher DZS .................................................................. 29
Semenarna Ljubljana to Celebrate 100th Anniversary ........................................................ 29
Family Business Gains Control of Clothes Company Elkroj ............................................... 30
Krka Reports 23% Rise in 9-Month Sales Revenues ........................................................... 30
Alpina Eyeing Acquisition of Fellow Footwear Maker Peko .............................................. 31
Krka Temporarily Banned from Selling Perindopril in the UK ........................................... 31
Salford Offering EUR 31.5m for Stake in Ljubljanske Mlekarne ....................................... 32
Pressure to Keep Dairy in Slovenian Hands Increases ........................................................ 32
HSE and German Power Giant to Vie for Projects in Macedonia ....................................... 33
Director General of Slovenian Railways Resigns ................................................................ 33
Mlinotest Managers Reject Pekarna Blatnik Takeover Bid ................................................. 34
Zito Enters Takeover Battle for Mlinotest ........................................................................... 34
Adria Airways Begins Operations with Second Cargo Plane .............................................. 35
SLOVENIA IN BRIEF ............................................................................................................ 36
Bozic Presents Bid for Galileo Seat to German Counterpart ............................................... 36
Demining Fund Wants to Expand Activities Outside SE Europe ........................................ 36
Brussels Says Sale of Mercator not Case of State Aid ......................................................... 36
College of Polymer Technology to Open in Slovenj Gradec ............................................... 36
Ambassador to NATO Relieved of His Duties .................................................................... 36
Slovenia, Montenegro Sign Crime Prevention Accord ........................................................ 36
Six Slovenian Poets Available to English Readers .............................................................. 36
2
HEADLINES
CCIS Forecasts GDP Growth of 4.5% for This Year, 4.3% for 2007
Inflation is expected to stand at 2.5% this year and the next
The Chamber of Commerce and Industry (CCIS) forecasts that the Slovenian economy will
grow at a rate of 4.5% this year and slow down somewhat to 4.3% in 2007. Inflation is
expected to stand at 2.5% this year and the next, CCIS said on Wednesday, 11 October.
The figures are on par with the forecasts of the central bank, and somewhat more pessimistic
than the projections of the Institute for Macroeconomic Analysis and Development (IMAD),
which has put the GDP growth figures at 4.7% and 4.3% for the two years respectively.
The chamber's department for economic outlook and policies believes that the global
economy will cool off somewhat, which will have a negative impact on Slovenia's exports and
imports, Irena Rostan, the head of the department, told the press.
It is expected that growth in exports, the main engine of Slovenia's economic growth, will
slow down from 9.2% this year to 8.2% in 2007, whereas imports are to grow by 8.5% this
year and 7.2% next year, Rostan said.
According to projections, wages will grow by 2.1% this year and 2.2% in 2007. At the same
time, the number of jobs is expected to increase by 0.8% and 0.7% respectively, which would
put the ILO-compatible employment rate at 6.6% and 6.7% respectively.
Although the CCIS expects stable inflation, it points out that consumer prices could be
affected if prices of raw materials increase. There are also risks associated with the adoption
of the euro in 2007, although no particular impact on prices is expected.
The department for economic outlook estimates that the price of oil would hover around 60
US dollars per barrel in 2007, 9% lower than this year. Inputs overall are meanwhile projected
to grow at an average of 8%.
A survey conducted by the CCIS in September has shown that the expectations of Slovenian
businessmen are "moderately optimistic", especially regarding imports, sales and
employment.
However, CCIS points out that the greater optimism might be due to the fact that a greater
number of successful companies participated in the survey this year.
Company Numbers Up 1.8% in 2005
A total of 95,399 companies were registered in Slovenia in 2005
A total of 95,399 companies were registered in Slovenia in 2005, a rise of 1.8% on a year
earlier and over 4% more than in 2003. Around 60% of the total number were sole
proprietors, figures from the Statistics Office show.
Not only did the number of companies increase last year, so did their wealth, as total revenues
grew by 8.8% to SIT 14,973bn (EUR 62.5bn), the data indicates.
According to the Statistics Office, a Slovenian company generated revenues of EUR 655,000
and had 6.4 workers on average.
Moreover, a breakdown of company numbers shows that micro and small companies
accounted for 98.5% of all registered entities.
Such companies generated 39.5% of the total revenues, as compared to 38.5% by large
companies (of over 250 employees) and 22% by medium-sized companies (of between 50 and
250 employees).
In 2005, the biggest rise in the number of companies was seen in the financial sector: it had
1,175 registered companies, an increase of 11.5% on the year before.
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In the real estate and business services sector, the number of companies grew by 6.7% over
2004 to 21,328, while the number of construction companies was up 6.6% to 15,043.
Retail and auto repair companies were still the largest single sector in terms of company
numbers as grouped by the Statistics Office, making up 24.2% of all companies. They also
generated 34.5% of all revenues.
Although making up only 18.7% of all companies, the manufacturing sector accounted for by
far the most workers, as it employed 39.3% of the nearly 610,000 employees at Slovenian
companies. It also generated 33.5% of all revenues.
Micro and small companies employed 44.3% of workers at all Slovenian companies, large
companies had 35.3% of the total workforce and medium-sized companies had 20.3% of the
total workers, the data shows.
State Funds Selling Stakes in 84 Companies
Three state-run funds on Friday, 13 October published a call for bids for stakes in 84
companies, including retailer Merkur, newspaper publisher Dnevnik, graphics company Cetis
and hotel operator Terme Maribor, in line with the government's strategy to gradually
withdraw from active management in companies
Three state-run funds on Friday, 13 October published a call for bids for stakes in 84
companies, including retailer Merkur, newspaper publisher Dnevnik, graphics company Cetis
and hotel operator Terme Maribor, in line with the government's strategy to gradually
withdraw from active management in companies.
The stakes are being sold by the Pension Fund Management (KAD), Restitution Fund (SOD)
and the DSU management and consultancy enterprise, with the deadline for non-binding bids
expiring on 13 November.
The biggest company on the list is hardware retailer Merkur, where KAD and SOD hold a
combined 23.75% stake.
Merkur spokesman Rok Istenic was unable to say who the potential bidders might be, but he
told STA the company wants owners who will endorse the mid-term development strategy.
Other big names on the list include newspaper publisher Dnevnik, hotel chain Terme Maribor,
Hoteli Bernardin, furniture makers Marles, Novoles and Svea, as well as the dairy Pomurske
mlekarne.
Offers may be submitted by domestic as well as foreign individuals and companies.
4
INTERNATIONAL COOPERATION
Slovenia Wants Croatia to Enact Reciprocity on Real Estate
The Foreign Ministry has urged Croatia to allow Slovenians to acquire ownership right on
property there in line with the stabilisation and association agreement with the EU in which
Croatia pledged it would guarantee reciprocity for purchases of real estate by EU citizen
The Foreign Ministry has urged Croatia to allow Slovenians to acquire ownership right on
property there in line with the stabilisation and association agreement with the EU in which
Croatia pledged it would guarantee reciprocity for purchases of real estate by EU citizens.
"This will happen or the agreement cannot apply," Foreign Minister Dimitrij Rupel told the
press on Tuesday, 10 October. He was responding to claims by the Croatian Foreign Ministry
that Slovenia had not sent a diplomatic note notifying Croatia that it had adopted the relevant
act which enables reciprocity.
The Slovenian Foreign Ministry said in its press release that it had sent the relevant note on 28
June. "Pretending that this did not happen is very short-sighted," Rupel told the press after a
meeting with Luxembourg FM Jean Asselborn.
According to the ministry, the note informs Croatia that its citizens and companies can
acquire ownership rights on property purchased in Slovenia, which is in line with the 1999
reciprocity act. The ministry says it has received no reply from Croatia yet.
President Drnovsek Receives Credentials of Three Ambassadors
Slovenian President Janez Drnovsek received the credentials of three new ambassadors to
Slovenia, Poland's Piotr Kaszuba, Albania's Valter Ibrahimi and Montenegro's Branko
Perovic
President Janez Drnovsek received on Tuesday, 10 October the credentials of three new
ambassadors to Slovenia, Poland's Piotr Kaszuba, Albania's Valter Ibrahimi and Montenegro's
Branko Perovic.
Drnovsek stressed successful cooperation between Slovenia and Poland in talks with
Kaszuba, while the latter said that he hoped the two countries would continue to strengthen
their economic cooperation.
Ibrahimi, who will cover Slovenia from Vienna, and Drnovsek meanwhile agreed that
cooperation between Slovenia and Albania improved in the last years.
Ibrahimi also thanked Drnovsek for Slovenia's support in the June-signed stabilisation and
accession agreement between Albania and the EU. He, however, stressed that the two
countries could greatly improve economic cooperation.
Perovic, Montenegro's first ambassador to Slovenia, thanked Drnovsek for Slovenia's support
in Montenegro's independence process and presented some foreign investments into the
newly-fledged republic.
Prior to Montenegro's independence, gained after the May referendum, Serbia-Montenegro
had a joint ambassador to Slovenia.
Slovenian Foreign Minister Dimitrij Rupel received the copies of the credentials on Monday,
9 October.
Szili Endorses Minority's Effort for Seat in Hungarian Parliament
Hungarian Parliament Speaker Katalin Szili visited Slovenia
Hungarian Parliament Speaker Katalin Szili has expressed support for the efforts of the
Slovenian minority in Hungary to be represented in parliament. This should happen as soon as
5
possible, Szili told the press on Thursday, 12 October after talks with her Slovenian
counterpart France Cukjati. She also met FM Dimitrij Rupel later in the day.
Hungary has been looking into this issue since 1992. "All political blocs in Hungary support
the representation of minorities in the Hungarian parliament, but this is also related to many
other issues that need to be resolved, for example the elections act," Szili said.
According to Cukjati, the talks touched on bilateral cooperation in all fields, in particular the
cooperation of parliaments on European policies and towards Southeastern Europe.
Hungary and Slovenia will coordinate their positions on the Balkans and help in the
democratisation of the Balkans countries and their accession to the European Union, he said.
Szili also stressed the importance of willingness for bilateral cooperation, making special note
of the completion and connection of motorways and rail lines between the two countries.
She also embraced Cukjati's proposal for the strengthening of ties between the parliamentary
committees for the economy from both countries and, eventually, from Croatia.
According to Szili, Hungary is also interested in Slovenia's experience with the adoption of
the euro and its EU chairmanship in 2008, as Hungary will take over at the helm of the EU in
2011.
Szili and Cukjati shared the belief that Hungary and Slovenia should become part of the
Schengen border-free zone next year as originally planned.
Szili also met Foreign Minister Dimitrij Rupel, with the pair discussing bilateral, regional and
European cooperation.
They also touched on the situation of the Slovenian minority in Hungary and the Hungarian
minority in Slovenia, the Foreign Ministry wrote in a press release.
Rupel thanked Szili for her endeavours in promoting parliamentary representation of
minorities in the Hungarian parliament.
He also told Szili that he wants Slovenia and Hungary to act together in talks on offsetting the
consequences of the delay in the implementation of the Schengen Information System II (SIS
II), the ministry also wrote.
In the afternoon Szili conferred decorations on several individuals who helped Hungarian
refugees in the aftermath of the Hungarian Revolution 50 years ago.
Slovenia Still Striving to Become OECD Member
The government called on the Foreign Ministry to once again inform the members of the
Organisation for Economic Co-operation and Development (OECD) and the European
Commission on Slovenia's interest in membership in the OECD
The government called on the Foreign Ministry on Thursday, 12 October to once again inform
the members of the Organisation for Economic Co-operation and Development (OECD) and
the European Commission on Slovenia's interest in membership in the OECD.
The OECD council adopted in July a mechanism for defining potential member states. The
mechanism is a timetable of internal consultations which are to conclude in April 2007 when
a list of candidates for OECD membership is to be presented.
The Foreign Ministry is to follow the implementation of the mechanism and inform the
parliamentary foreign policy and economy committees about the OECD council's decisions,
the government decided at its session.
The OECD was founded in 1960, succeeding the Organisation for European Economic Cooperation (OEEC). The group of 30 states has only one fifth of the world's population,
however it accounts for four fifths of the world's GDP.
The organisation's aim is to spread policies that would enable the highest possible economic
growth, employment and living standards in its member states.
Slovenia's membership in the OECD is one of the major tasks of the country's foreign policy,
the Foreign Ministry states on its website.
6
Montenegro Promised Slovenia's Assistance in EU Bid
President Janez Drnovsek has promised Slovenia's assistance in Montenegro's efforts to join
the EU as he held talks with his Montenegrin counterpart Filip Vujanovic
President Janez Drnovsek has promised Slovenia's assistance in Montenegro's efforts to join
the EU as he held talks with his Montenegrin counterpart Filip Vujanovic on Thursday, 12
October.
The two countries have a long record of cooperation, political and economic relations are
good and they will remain so in the future as Slovenia supports Montenegro on its path
towards the EU, Drnovsek told the press.
Drnovsek believes that Montenegro should join the EU soon, however it is uncertain when the
EU will admit new members. He hopes that the candidates will not have to wait.
Meanwhile, Vujanovic pointed out that Montenegro fulfils all the conditions for joining the
Partnership for Peace and voiced his hope that Slovenia will support its efforts at the NATO
summit in Riga in November.
Discussing the economic cooperation between the countries, Vujanovic said that Slovenian
companies have a good name in Montenegro and a good chance to participate in infrastructure
projects that Montenegro is planning.
Slovenian companies represent an important share of foreign direct investments (FDI) in
Montenegro, which wants to build the reputation of a safe country, open for foreign
investments.
Vujanovic moreover thanked Slovenia for recognising Montenegro's independence and for
establishing diplomatic relations quickly after the country declared its independence on 3 June
2006.
Slovenia recognised Montenegro's independence on 21 June, the two countries formally
established diplomatic relations on 22 June, and on 23 June the Slovenian embassy was
opened in Montenegro's capital Podgorica.
However the embassy is still headed by a charge d'affaires Branko Rakovec, and Drnovsek
expressed his hope that Slovenia's government will nominate an ambassador soon.
Vujanovic's first official visit to Slovenia since Montenegro declared independence from
Serbia was labelled by Drnovsek as "historical".
Drnovsek, being the first foreign statesman to do so, visited Podgorica only one day after the
21 May referendum at which just over 55% of those that took part voted for Montenegro's
independence.
Montenegro's efforts to join the EU and NATO also topped Vujanovic's talks with Prime
Minister Janez Jansa along with the situation in the Western Balkans and bilateral relations.
Jansa also congratulated Vujanovic on a peaceful and democratic referendum on
independence.
Greek, Slovenian FMs Call for More Cooperation
The relations between Slovenia and Greece are excellent, however, should be improved at all
levels, Greek and Slovenian foreign ministers Dora Bakoyiannis and Dimitrij Rupel agreed
The relations between Slovenia and Greece are excellent, however, should be improved at all
levels, Greek and Slovenian foreign ministers Dora Bakoyiannis and Dimitrij Rupel agreed in
Athens on Thursday, 12 October.
According to the press release by the Slovenian Foreign Ministry, the pair mainly stressed the
need to improve economic cooperation as Rupel attended an informal meeting of EU
ministers from Mediterranean countries.
Rupel moreover thanked his Greek counterpart for Greece's opening its labour market to
workers from new EU members.
7
He also asked her for Greece's support regarding Slovenia's entry into the Schengen
Information System I+, an interim solution to the delay of implementing the Schengen
Information System II (SIS II).
The pair agreed on the importance of European prospects of the Western Balkans and called
for accepting the countries that lie between Slovenia and Greece into the EU as soon as
possible.
Rupel informed his Greek counterpart on Slovenia's preparations for its stint as EU chair in
the first half of 2008 and listed the country's priority tasks, the press release also reads.
The two-day meeting, attended by foreign ministers from Cyprus, Greece, France, Italy,
Malta, Portugal, Slovenia and Spain, is expected to discuss illegal migrations, cooperation on
EU's external maritime borders, EU expansion, the bloc's constitutional treaty and the peace
process in the Middle East.
8
EUROPEAN UNION
MP Says Budgetary Supervision Improves Trust in EU
Milan M. Cvikl attended a two-day joint session of the national budgetary oversight bodies
and the European parliament
Budgetary supervision is one of the mechanisms to increase the trust of EU's citizens into the
bloc's institutions, Milan M. Cvikl, a member of the Slovenian parliamentary budgetary and
finance oversight committee said in Brussels on Monday, 9 October.
Cvikl, who attended a two-day joint session of the national budgetary oversight bodies and the
European parliament, added that supervision ensures that the institutions work in line with the
rules.
He also told STA before the beginning of the session that strengthening budgetary
supervision, meaning the parliament over the executive branch, would be key for improving
Europe's competitiveness.
Therefore he was "disappointed" over last November's decision of the bloc's finance
ministers, who refused to institute a "preliminary disclosure statement".
The statement would oblige finance ministers at the end of a budgetary year to guarantee that
European and national budgetary means are being spent in accordance with the rules.
Cvikl added that Slovenia used up a total of 95% of the available means prior to entering the
EU. "It managed that through stringent control mechanisms that prevented deficiencies seen
in some of the old EU members," he noted.
FM Sees Luxembourg as Guiding Star for Slovenia EU Stint
Slovenian Foreign Minister Dimitrij Rupel met his Luxembourg counterpart Jean Asselborn
in Ljubljana
Foreign Minister Dimitrij Rupel came out of talks with his Luxembourg counterpart Jean
Asselborn in Ljubljana on Tuesday, 10 October saying this small country could serve as a
"guiding star" to Slovenia, given it had successfully presided over the EU eleven times.
"Luxembourg is a model for us in many ways. It is a small, successful country whose
diplomatic staff is small in number like Slovenia's, but it has nevertheless successfully
presided over the European Union eleven times," Rupel stated at a joint press conference
following talks with Asselborn.
"I believe the example of Luxembourg can serve us as a very good guiding star," Rupel said
referring to Slovenia's preparations to take over at the helm of the EU at the beginning of
2008.
According to Rupel, Luxembourg managed to use its potential to chair the EU in the most
rational manner. Moreover, the country possesses "extensive information, both formal and
semi-formal, on how to run a beast as big as the European Union".
Asselborn described Slovenia's upcoming stint as EU president as a major task that the
country was bound to do well, while he refrained from giving concrete advice. He finds it
especially important that the government enjoys the support of the national parliament during
its stint.
The Luxembourg FM therefore urged the opposition in Slovenia's National Assembly to show
the willingness to build consensus during Slovenia's presidency.
According to Asselborn, it is also important that the staff responsible for the tasks under the
presidency is motivated and that everyone knows in advance exactly what their
responsibilities are.
9
He furthermore assessed that the performance of Slovenia, which will be the first newcomer
to take over the chairmanship, will also be important for the other new member states which
will follow in its footsteps.
Meanwhile, Asselborn pointed out that both Luxembourg and Slovenia have ratified the
European constitutional treaty and expressed hope that Germany, EU president in the first half
of 2007, will make an attempt at reviving the document. This process could however drag out
well into Slovenia's chairmanship, according to Asselborn.
Resolving the issues connected to the constitution and the institutional arrangements is
instrumental for the bloc's further enlargement. Asselborn assessed that countries in the
Balkans need to be given European prospects and encouraged to start moving towards
Brussels.
Asselborn and Rupel moreover touched on the expansion of the Schengen zone, with Rupel
expressing concern over the expected delay.
Asselborn said that he understood Slovenia's wish to enter the zone and expressed his full
support, he added, however, that it is also vital that an appropriate technical solution is found
for the expansion.
Luxembourg's FM, who last visited Slovenia officially during his country's EU presidency in
March 2005, also made a stop at the National Assembly, where he was received by Anton
Kokalj, the chair of the parliamentary EU affairs committee.
EU Ministers Label Inflation Criterion Key for Euro Stability
EU Finance Ministers decided that they would not change the rules regarding the
interpretation and use of inflation as a convergence criterion, saying that this was a
cornerstone of the credibility of the euro
EU Finance Ministers decided on Tuesday, 10 October that they would not change the rules
regarding the interpretation and use of inflation as a convergence criterion, saying that this
was a cornerstone of the credibility of the euro.
According to Finland's Eero Heinaluoma, "the rules cannot be changed", even though the
inflation criterion proved to be the largest obstacle in the first round of expansion of the
eurozone.
Slovenian Finance Minister Andrej Bajuk agreed with the positions of the European
Commission and the European Central Bank. "Once the rules are adopted they just need to be
fulfilled," he said.
The idea on possible changes to the criterion was raised after Lithuania, unlike Slovenia, was
denied the adoption of the euro due to its inability to bring inflation under control.
Bajuk also pointed out that Slovenia was praised at the meeting as the only 2004 newcomer to
succeed in fulfilling the Maastricht convergence criteria.
"Suddenly an atmosphere of trust emerged," while the country was also mentioned as a
"formal example" proving that fulfilling formal criteria is possible while maintaining
sustainability, Bajuk said.
Although the country is expected to switch over to the single European currency on 1 January
2007, Bajuk also attended the Monday, 9 October meeting of eurozone finance ministers.
Slovenia was invited to join the group as an observer after the EU gave it the final green light
on 11 July to join the eurozone.
EU Warns Slovenia of Financial Crisis Because of Ageing
Unveiling a report on the sustainability of public finances, the Commission said that Slovenia
was one of six countries most vulnerable to face problems with the sustainability of public
finances
10
The European Commission has warned Slovenia that it is facing a financial crisis because of
the rapid ageing of its population. Unveiling a report on the sustainability of public finances
on Thursday, 12 October in Brussels, the Commission said that Slovenia was one of six
countries most vulnerable to face problems with the sustainability of public finances.
It moreover said that the country was among the three EU members that are expected to face
the most serious consequences of ageing on the budget because of the growing spending on
pensions. The Commission therefore called on Slovenia to urgently enact changes to the
pension system.
The projected expenditure related to population ageing is expected to increase by 9.7% of
GDP between 2004 and 2050, with public pension expenditure up 7.3% of GDP.
The Commission warned that although Slovenia implemented a promising pension system in
1999, a law introducing indexation in 2005 weakened the effects of the initial reform.
The only thing alleviating the debt that is to arise because of ageing in Slovenia is the
relatively low rate of public debt at the moment, the Commission added.
Slovenia must implement further changes to the pension system to curb future expenditure
and reduce the risk for the long-term sustainability of public finance.
Despite the stark warning, the Slovenian Ministry of Finance claims that the public finance
system is clearly sustainable at least until 2020.
Slovenia is pursuing a prudent public finance policy with a gradual reduction of the deficit, it
has also framed a broad set of reform measures that will boost growth, employment and
productivity, which in turn will improve sustainability in the long term, the ministry said in a
press release.
Marko Strovs of the Ministry of Labour, Family and Social Affairs struck a similarly positive
note in a statement for STA, saying that Slovenia was aware of the problem and it has been
reforming the pension system for a decade.
According to him, Slovenia will have to find solutions in creating jobs and raising the
retirement age.
The EU has proposed the employment of foreigners as a possible measure to counterbalance
the negative impact of ageing, but Strovs said that the government was not particularly keen
on that. "Slovenia already has a lot of immigrants," he said.
Other countries that face a financial crisis in the mid- or long-term as a result of an ageing
population, according to the Commission's report, are Cyprus, the Czech Republic, Greece,
Hungary and Portugal.
Government Adopts Lisbon Implementation Report
The government has adopted a report on the implementation of the Lisbon Strategy in
Slovenia, the first annual overview of the enactment of priorities, goals and measures set
down in the programme of reforms that was adopted a year ago
The government has adopted a report on the implementation of the Lisbon Strategy in
Slovenia, the first annual overview of the enactment of priorities, goals and measures set
down in the programme of reforms that was adopted a year ago.
According to Janez Sustersic, the head of the government Institute for Macroeconomic
Analysis and Development (IMAD), crucial tax and welfare measures were passed in the first
year, foremost among them the phasing out of the payroll tax.
Speaking to the press after the government session on Thursday, 12 October, Sustersic also
said that the proposed tax reform package, which was adopted by the government in
September, would boost GDP growth by 0.3 percentage points in 2007 by reducing corporate
and personal income tax.
The effects of the tax reform on employment will be further boosted by stricter rules on when
the unemployed or welfare recipients can reject work.
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Coupled with the government's proposal that all social transfers be indexed solely to
consumer price growth, the measure will create additional incentives to activate the least
qualified people, Sustersic said.
The government has also been making efforts to create a better business environment, cutting
red tape and making progress in the reduction of court backlogs, he said.
Sustersic also sees noticeably fiercer competition in telecommunications, while the
government will have to put in place the necessary measures for full electricity market
liberalisation, which kicks in mid-2007.
According to him, structural reforms are being carried out in a favourable macroeconomic
environment, while the wage agreement for 2007 guarantees that wage growth will lag
productivity growth, boosting Slovenia's competitiveness as it enters the eurozone next year.
EU Commission Issues Several Warnings to Slovenia
European Commission issued two reasoned opinions to Slovenia, calling on the country to
transpose into its legislation public procurement directives and two key railway directives
European Commission issued two reasoned opinions to Slovenia on Thursday, 12 October,
calling on the country to transpose into its legislation public procurement directives and two
key railway directives.
The deadline for complying with the provisions of public procurement directives expired on
31 January 2006, with Slovenia being rebuked alongside Belgium, Estonia, Finland,
Germany, Greece, Portugal and Sweden in failing to do so.
The Finance Ministry explained to STA that the government has already adopted the relevant
bills and sent them into parliamentary procedure where they have already been deemed fit for
second reading.
The ministry expects that the bills in question - on public procurement and on procurement
procedures for entities operating in the water, energy, transport and postal services sectors will be passed into legislation by the end of this year.
Regarding the railway directives, the Commission said that they had had to be transposed into
national legislation before 30 April 2006, whereby Slovenia, together with 12 other EU
members failed to transpose two of its key directives which deal with safety and technical
interoperability.
Transport Minster Janez Bozic told STA on Thursday, 12 October that just today a relevant
"bill on railroad transport was forwarded to parliament and will be discussed by it next week".
Transport Ministry State Secretary Peter Verlic meanwhile said that the bill on state
guarantees to finance railroad infrastructure projects in the 2006-2009 period aims at securing
the missing SIT 99.7bn (EUR 416.91m).
Petric also told the press after the cabinet session that Slovenia will allocate SIT 72bn (EUR
301.07m) for priority projects on the 5th and 10th trans-European transport routes which are
co-financed by the EU.
The Commission moreover formally warned Slovenia for its failure to submit the plan for
curbing carbon dioxide emissions between 2008 and 2012.
The Environment and Spatial Planning Ministry told STA on Wednesday, 11 October that
they will send the plan to the Commission by 20 October.
Besides Slovenia, formal notices were also sent to Austria, the Czech Republic, Denmark,
Hungary, Finland, Italy, Portugal and Spain, nine of the 25 EU members.
Finally, Slovenia, like all the remaining EU newcomers with the exception of Cyprus, also
received a formal notice concerning its failure to enable notary services to be performed by
non-Slovenian citizens from the EU.
12
There was also good news from the Commission for Slovenia, with the Commission
establishing that Slovenia has ensured full portability of phone numbers between operators
and that proceedings against Slovenia could be suspended in this field.
Finance Minister Downplays Warnings from Brussels
Finance Minister Andrej Bajuk has downplayed the European Commission's warning that
Slovenia could face a financial crisis due to the ageing of its population, saying it is nothing
new and that the country is well aware of the problem
Finance Minister Andrej Bajuk has downplayed the European Commission's warning that
Slovenia could face a financial crisis due to the ageing of its population, saying it is nothing
new and that the country is well aware of the problem.
Addressing the press on Friday, 13 October, 13 October, Bajuk said Slovenia regularly
reported to the European Commission on long-term problems reflecting on its public finances
due to unfavourable demographic trends.
While he believes that the problem of an ageing population must be openly discussed in the
public, Bajuk warned against creating an "atmosphere of crisis and catastrophe".
According to him, the government has put forward several measures, such as changing the
indexation of social transfers. Moreover, Bajuk announced the cabinet would draw up bills on
the financial instruments market, investment funds and companies by the end of the year.
He said these two bills would create second and third pension pillars as well as regulate the
capital market by ensuring legal security for small shareholders and investors.
On a different note, Bajuk voiced satisfaction over Thursday's debate in the parliamentary
finance committee, saying its amendments did not much change the structure of the income
tax act. He said he was also happy with the increase in tax relief for families with more than
three children.
The European Commission said on 12 October that Slovenia was one of six countries most
vulnerable to face problems with the sustainability of public finances due to the rapid ageing
of its population.
Unveiling a report on the sustainability of public finances, the Commission also said that the
country was among the three EU members expected to face the most serious consequences of
ageing on the budget because of the growing spending on pensions. It therefore called on
Slovenia to urgently enact changes to the pension system.
EU Enlargement Dominates Vujanovic Visit to Parliament
Speaker of Parliament France Cukjati reassured Montenegrin President Filip Vujanovic that
Slovenia was in favour of the EU's enlargement to the Western Balkan
Speaker of Parliament France Cukjati on Friday, 13 October, 13 October, reassured
Montenegrin President Filip Vujanovic that Slovenia was in favour of the EU's enlargement to
the Western Balkans regardless of qualms about the European constitutional treaty.
A delay in EU enlargement would be a great disappointment for the Montenegrin people and
government, which is working hard to meet EU requirements, President Vujanovic said at the
meeting with Cukjati as quoted by the parliament's press office.
Its press release said Cukjati voiced Slovenia's readiness to share its knowledge and
experience with Montenegro. He believes the slow-down in the enlargement process requires
even closer cooperation among nations.
Cukjati also proposed that legislatures from the countries of the former Yugoslavia could
establish closer ties, something he believes would contribute to economic cooperation too.
Vujanovic briefed him on the course in the passage of Montenegro's constitution. There are
two issues that still need to be tackled, i.e. the Church and the language. He hopes the
document would be passed by two-thirds majority in parliament so as to avoid a referendum.
13
Commission Protests Slovenian Eco Impact Assessment Legislation
The European Commission has addressed a warning to Slovenia over the country's failure to
transpose fully EU regulations on environmental impact assessment (EIA) of projects
The European Commission has addressed a warning to Slovenia over the country's failure to
transpose fully EU regulations on environmental impact assessment (EIA) of projects.
"The Slovenian legislation omits certain categories of project mentioned in the EIA Directive
(such as groundwater abstraction) and covers other project categories inadequately", the
Commission said in its press release on Friday, 13 October.
It has therefore decided to launch infringement procedures in a bid to get Slovenia to fully
implement the EIA directive.
The Commission told Slovenia in its warning that the current deficiencies in legislation mean
that "projects which might need an EIA will escape one".
The EIA Directive determines the need for environmental impact assessments of various
types of projects that may have a significant impact on the environment. Its goal is to ensure
that all projects with a significant impact on the environment end up undergoing EIAs.
Similar warnings were also addressed to Hungary, Latvia and Lithuania.
Failure to heed the Commission's first warning leads to a final warning, which is then
followed by action against the country at the European Court of Justice.
14
LEGISLATION
Court Cancels Direct Marketing Restriction for TV Slovenija
The Constitutional Court has annulled a part of the act on the public broadcaster that
prohibits the sales of advertising time available for telesales on RTV Slovenija
The Constitutional Court has annulled a part of the act on the public broadcaster that prohibits
the sales of advertising time available for telesales on RTV Slovenija.
The court was petitioned to examine the 2nd paragraph of Article 15 of RTV Slovenija act by
Studio Moderna, a Ljubljana-based company specialised in direct marketing on television.
The petitioner claimed that the stipulation in question infringed on freedom of expression for
commercial purposes, something that is granted by the Constitution in the right to freedom of
expression.
The contentious paragraph forbids the marketing of broadcasting time for direct marketing on
the programmes of RTV Slovenija, except during available time slots on a special
parliamentary channel at night time, at weekends, holidays or when parliament is in recess.
In its ruling of 20 September, the Constitutional Court says that direct marketing on TV is
different from other advertising contents only in that it gives the price of the advertised
product or service and the address or telephone number of the provider.
The court goes on to say that this type of advertising is subject to the same regulations and
restrictions as other advertising contents.
Moreover, the court believes that the legislator and the government failed to explain why this
type of advertising is supposed to be contentious, morally unacceptable or misleading.
The claim alone that this is a generally accepted fact does not suffice to substantiate the
reasonability of the stipulation, especially given that misleading or morally unacceptable
advertising is prohibited by other regulations, the ruling says.
The court also finds the reason given by the legislator to be inconsistent. It is illogical that the
legislator should allow direct marketing on a special TV channel while claiming that this type
of advertising was in disagreement with the public interest.
15
STATISTICS/FORECASTS
Economist Warns Government to Save for Rainy Day
An economist has warned that Slovenia should carry out reforms now that its economic
growth is high
An economist has warned that Slovenia should carry out reforms now that its economic
growth is high, moreover he believes that it should tackle the problem of structural deficit.
The Institute for Macroeconomic Analysis and Development (IMAD) has recently upgraded
its economic growth projections for this year by 0.5 percentage points to 4.7%, which its head
says shows the country's growth is at the peak this year.
"This is an opportunity to draw up reform measures, to put them forward and pass them, so as
to have this reflected in moderate growth next year," Janez Sustersic, the head of the IMAD,
said in an interview for the Monday, 9 October financial supplement of daily Delo.
What is more, Sustersic does not think current growth rate is all the economy can manage.
"Provided all reform measures were carried through, growth could stay at between 5.5 and 6%
for a few years," Sustersic said in the interview.
According to him, the IMAD has been repeatedly warning of Slovenia's structural deficit.
"This should be at zero in a normal economic situation. This does not mean, however, that
you should surge from minus 1.5% of GDP in one year to above zero next year when
economic growth is high."
"It does mean that you should bring down your structural deficit," the economist told Delo
FT. Another thing that he made a note of was the need to reform the labour market to make it
more flexible. "Calculations also show that growth relies heavily on expenditure for research
and development."
On a different note, Sustersic downplayed the risk of a possible surge in inflation, given that
the IMAD upped its inflation projections from 2.1 to 2.7% for this and next year. "Inflation is
on the increase in Slovenia, but so is the convergence criteria. This means inflation is also
rising in other EU countries."
Sustersic is not concerned about the impact of higher excise duties on inflation. He believes
this would be virtually the same as the impact of the initially planned increase in VAT (from
8.5 to 9% and from 20 to 21%). Moreover, excise duties do not slow down the economy as
much as VAT, which affects all sectors.
What is more, Sustersic said that higher VAT rates could counteract all benefits of lower
income tax. His office in fact forecast higher growth for next year because it expects lower
income tax rates would bolster spending.
Factory-Gate Prices Up 0.6% in September
Factory-gate prices rose by 0.6% in September over the previous month, adding 2.1% since
the beginning of the year, according to the National Statistics Office
Factory-gate prices rose by 0.6% in September over the previous month, adding 2.1% since
the beginning of the year, according to the National Statistics Office. Industrial prices were up
2.7% year-on-year.
Compared to August, prices of raw materials increased by 1.2%. An increase was also
recorded in the prices of durable consumer goods (1.0%), capital goods (0.5%), energy
products (0.4%), while the prices of non-durable consumer goods remained unchanged.
16
Central Bank Governor Sees Interesting Year for the Economy
"It seems that this year will see a slow-down of the extremely rapid growth cycle in the world,
especially in the US and Asia", Gaspari said as he presented a Bank of Slovenia report on
current economic trends
Bank of Slovenia Governor Mitja Gaspari has said that this year is interesting for Slovenia
and the world considering the many uncertainties in economic trends. "It seems that this year
will see a slow-down of the extremely rapid growth cycle in the world, especially in the US
and Asia", Gaspari said as he presented a Bank of Slovenia report on current economic trends.
"In Europe, it is unclear whether the current economic recovery can be sustained in the next
two to three years or whether it is only a short-term effect due to the improved economic
situation in Germany and France," he observed.
The bank's forecasts economic growth for Slovenia at 4.5% this year and at 4.2% and 3.9% in
2007 and 2008 respectively. Inflation is meanwhile expected to reach 2.6% this year and 2.7%
in 2007 and 2008.
The projections are based on oil prices at US$ 70 a barrel. This may be a touch on the
conservative side, Gaspari said, but stressed that while inflation might be higher overall, it
would remain stable.
The projections are also based on an anticipated substantial rise in interest rates, from the
current 3.5% to 4.3% or even 4.5%. The cooling-down of the US economy and its impact on
the EU also form a part of the uncertainties, he said.
Banka Slovenije moreover lists other possible dangers such as higher oil prices, accelerated
growth of controlled prices and excess wage growth.
A rise of the VAT rate, mulled by the government in the future, would meanwhile have an
adverse impact on GDP growth, consumer spending and the business sentiment, Gaspari
pointed out.
"If the VAT is raised, it would be extremely important if that happens in a predictable and
gradual way," Slovenia's chief banker added.
He also believes that Slovenia should cut its budget deficit and that the goal should be
achieved through spending cuts, not just through tax hikes.
He also warned that "even the states that currently do not run a large public expenditure
deficit...should progressively cut it, balance it...that is important due to the extremely
favourable economic situation at the moment."
Export-Import Ratio at 88.7% in August
Slovenia exported EUR 1.13bn worth of goods in August, which is up 17.3% year-on-year
Slovenia exported EUR 1.13bn worth of goods in August, which is up 17.3% year-on-year.
Imports increased by 15.3% to EUR 1.27bn, the National Statistics Office says in its
preliminary report.
The office's figures put the country's trade gap for August at EUR 143.69m and the exportimport ratio at 88.7%, up from 92.3% in July.
Exports in the first eight months of this year amounted to EUR 10.74bn, while imports
totalled EUR 11.51bn. This puts the gap at EUR 770.98m and the export-import ratio at
93.3%.
While exports to the EU-bloc amounted to EUR 7.37bn in the first eight months of the year,
imports from this market amounted to EUR 9.17bn.
Meanwhile, Slovenia exported EUR 3.37bn worth of goods to non-EU countries, while it
imported goods in the total amount of EUR 2.34bn from there.
17
Industrial Output Up 10.9% Y/Y
The volume of industrial output in August decreased by 13.1% over July, but rose by 10.9%
over August 2005
The volume of industrial output in August decreased by 13.1% over July, but rose by 10.9%
over August 2005, according to the freshest data from the National Statistics Office.
The industry expanded by 6.9% in the first eight months of the year compared to the same
period last year.
The drop in the output at the monthly level was mainly due to industry workers taking their
leave in August.
The growth at the annual level was strongest in manufacturing, which expanded its output by
12.2%. The output in electricity, gas and water supply was up by 0.6%, while mining and
quarrying put out by 1.2% less in August than in the same month previous year.
The output of capital goods surged by 25.9%, while an 8.5% increase was recorded in the
output of consumer goods and a 7.7% increase in the output of intermediate goods year-onyear.
EU Survey: Half of Slovenians Know EU Has 25 Members
Just over a half of Slovenians know that the EU is made up of 25 member states, much more
than the EU average of 23%, according to the results of the latest Eurobarometer poll
Just over a half of Slovenians know that the EU is made up of 25 member states, much more
than the EU average of 23%, according to the results of the latest Eurobarometer poll.
The same share of Slovenians is also uninterested in the goings on in the EU's neighbourhood.
What is more, 80% have never met the inhabitants of the EU's Middle Eastern and Eastern
European neighbours, reveals the survey, which was released on Tuesday, 10 October.
EU-wide, people believe that cooperation between the bloc and the countries in its
neighbourhood - in North Africa, eastern Mediterranean, Ukraine, Moldova, Georgia and
Belarus - should yield mutual benefits (68%).
They place fighting organised crime and terrorism on the top of the list of such cooperation
(90%), followed by energy (87%), environment (87%) and democracy (87%).
Meanwhile, 41% of Slovenians believe that the EU should cooperate with its neighbours in
fighting crime.
Moreover, while 70% of EU citizens on average believe that cooperation between the bloc
and its neighbours could bring peace and democracy to those countries, only 29% of
Slovenians share that opinion.
CO2 Emissions Down in 2004
Slovenia's carbon dioxide emissions in 2004 were 4.1% lower than the year before
Slovenia's carbon dioxide emissions in 2004 were 4.1% lower than the year before, but the
emissions of nitroxides increased by 2.1% that year, according to the latest data of the
Statistical Office.
The biggest source of CO2 emissions was electricity, gas and hot water supply (46.5%),
followed by land - in particular road - transport (26.8%) and manufacturing (14%).
These sectors were also the biggest emitters of the greenhouse gas in the 2000-2004 period,
the figures show.
Meanwhile, land transport is the biggest source of nitroxide emissions (57.7), followed by
electricity, gas and hot water supply (29%).
The data is calculated based on the NAEMA (National Accounting Matrix including
Environmental Accounts) air emissions methodology.
18
FINANCE
PM Forecasts Zero Budget Deficit by 2011
The amendments to the 2007 budget project revenues of SIT 1,860bn (EUR 7.76bn) and
expenditures of SIT 1,937bn (EUR 8.08bn), which puts the deficit at 1.01% of GDP
Prime Minister Janez Jansa and Finance Minister Andrej Bajuk were upbeat about Slovenia's
prospects as they presented the amendments to the 2007-2008 budget memorandum and the
2008 budget bill to parliament on Monday, 9 October.
The amendments to the 2007 budget project revenues of SIT 1,860bn (EUR 7.76bn) and
expenditures of SIT 1,937bn (EUR 8.08bn), which puts the deficit at 1.01% of GDP.
Compared to the estimates for the realisation of the 2006 budget, revenues and expenditures
will be lower by 0.5 and 0.6 percentage points respectively.
In 2008 the revenues are projected to top 1,950bn (EUR 8.15bn) with expenditures at SIT
2,024bn (EUR 8.46bn) and a budget deficit of 0.91% of GDP.
According to Jansa, the government would work towards sustainable economic growth,
greater employment and better welfare, whereby the main mid-term goal in public finances is
the reduction of the budget deficit to zero by 2011.
The budgets for 2007 and 2008 are realistically developmental, he said. They include
measures to improve the adaptability and flexibility of the economy, boost budget growth and
employment and make the welfare state cheaper and more efficient.
"Despite politically-motivated resistance against the necessary reforms, the government has
no intention of renouncing the commitment for a society that is more developed and sociallyjust based on realistic foundations," Jansa told the MPs.
Jansa pointed out that the proposed tax reforms would significantly reduce the burden on the
economy, which is why expenditures as well as the budget deficit are being reduced. The
economy is in good shape, which gives us more room for the reduction of the structural
deficit, he said.
According to Jansa, the shortfall from the tax reform measures, which are being carried out to
lift the tax burden on the economy, would be offset with savings measures, the removal of red
tape and a more prudent use of budget funds.
On the other hand, the government will continue to increase spending on research and
development, higher education, active employment policies and scholarships, Jansa added.
Finance Minister Bajuk meanwhile stressed that the budgets for the next two years preserve
macroeconomic stability in a period crucial due to the introduction of the euro.
He pointed out that the budget memorandum for 2007 and 2008 has been drawn up based on
the national development strategy and the government's commitment to economic reforms.
Important steps towards reducing tax burdens were made in tax reform measures last year, but
even more important measures will be introduced with the tax reform package that is already
in parliament, he said.
According to Bajuk, the 2007 budget as well as the budgets of municipalities and the Pension
and Disability Insurance Institute (ZPIZ) and the Health Insurance Institute (ZZZS) would
reduce the general government deficit by 25% compared to the original budget projections. In
2008 it will be reduced even further, to 0.8% of GDP.
In addition, the government's tax reform package will reduce taxes for the citizens and
companies, which would provide a boost to economic growth, increase investment and
employment and improve the wellbeing of all income groups.
19
The budget for 2007 increases funding for the economy by 2.1% compared to the original
budget act. The figure will rise by another 22.7% in 2008, mostly through higher spending on
competitiveness and the promotion of foreign direct investment and small enterprises.
A novelty that Bajuk pointed out is that the funding of municipalities will no longer depend
on income tax. Instead, there will be a fixed sum laid down in each budget so they will know
exactly how much they are entitled to.
The presentation of the budget formally kicked off the period for the filing of amendments:
MPs, deputy groups and working bodies have until 19 October to submit amendments.
Petrol Prices Down Again
As oil prices on the world markets continue to edge lower, petrol is cheaper in Slovenia as by
about 2% on average
As oil prices on the world markets continue to edge lower, petrol is cheaper in Slovenia as of
Tuesday, 10 October by about 2% on average.
Regular unleaded costs SIT 3.9 (EUR 0.016) less at SIT 229.60 (EUR 0.958), with premium
selling for SIT 231.4 (EUR 0.966), SIT 5.20 (EUR 0.021) cheaper, according to energy
company Petrol.
Diesel is SIT 5.9 (EUR 0.025) cheaper at SIT 224.80 (EUR 0.938), whereas heating oil went
down by SIT 8.30 (EUR 0.035) to SIT 138.90 (EUR 0.580).
The price change comes after the entry into force of a government decree which brings back
the old pricing model under which petrol prices are adjusted every two weeks to oil prices and
the exchange rate of the US dollar.
The transitional model, where prices were calculated over 28 days and the five lowest and
five highest quotations were eliminated to mitigate price fluctuations, was phased out.
According to economist France Krizanic, the government measure was probably backed with
an empirical analysis which showed that the longer calculation period did not mitigate the
pressure on retail prices.
Moreover, this indicates that economic policy does not expect sharp spikes in global oil prices
in the future, Krizanic told STA.
As part of the move to go back to the 14-day model, the government also decided to increase
permitted profit margins for fuels by SIT 2 (EUR 0.01) to SIT 19.5 (EUR 0.081) for petrol
and SIT 18.3 (EUR 0.076) for diesel.
NKBM Almost Reaches 2006 Profit Target in 9 Months
Nova Kreditna banka Maribor (NKBM), Slovenia's second largest bank, posted a profit of SIT
6.684bn (EUR 27.95m) in the first nine months of 2006
Nova Kreditna banka Maribor (NKBM), Slovenia's second largest bank, posted a profit of SIT
6.684bn (EUR 27.95m) in the first nine months of 2006, meaning that it has already reached
95% of its profit target for the year, NKBM chief exec Matjaz Kovacic said in Maribor on
Tuesday, 10 October.
Kovacic also revealed that the bank's total assets rose by 12.3% or SIT 88bn (EUR 367.98m)
in the same period, accounting for 78% of this year's planned rise. NKBM assets stood at SIT
715.9bn (EUR 2.99bn) at the end of 2005.
The CEO noted that the bank was not yet preoccupying itself with its planned privatisation, as
the management was currently focussed on preparations for the 2007 euro changeover.
"We will deal with [privatisation] when the project comes about and then offer all the
necessary support to the buyer," he said.
He added that the NKBM expected its owner to take into account the bank's interest and
adjust the privatisation plan accordingly.
20
The NKBM is currently in 90.41% state ownership. Its two-phase privatisation plan has
recently been passed by parliament as part of the changes to the decree on the sale of state
assets in 2006 and 2007.
Kovacic also mentioned mutual funds and insurance products as two sectors the bank is active
in.
Manja Skernisak, NKBM management board member, meanwhile said that the bank was
offering assets and leasing services through associated companies in Croatia. The Mariborbased bank is also in talks about doing business in Montenegro.
According to Skernisak, the bank's market share stands at around 10%. The bank is doing
better than average in deposit accounts, where it holds a 14.2% share and in loans, where it
has a 12.3% share.
Finance Minister Bajuk Wants EIB Mandate Curbed
Slovenian Finance Minister Andrej Bajuk expressed his opposition to the European
Commission's proposal to allow the European Investment Bank (EIB) to approve loans
outside the EU to the tune of EUR 33bn in the 2007-2013 period, up from the current EUR
20.7bn
Slovenian Finance Minister Andrej Bajuk expressed his opposition to the European
Commission's proposal to allow the European Investment Bank (EIB) to approve loans
outside the EU to the tune of EUR 33bn in the 2007-2013 period, up from the current EUR
20.7bn.
The "EIB's mandate" should be curbed, as every euro over the EUR 20.7bn mark means an
unnecessary rise, Bajuk told journalists after a meeting of EU finance ministers on Tuesday,
10 October. He believes that EU member states will most likely not approve the proposal.
Bajuk moreover called for increasing the bank's activities in pre-accession countries and in the
EU's neighbourhood.
Under the Commission's proposal, the pre-accession countries (Croatia, Macedonia and
Turkey) would be eligible for EUR 9bn in EIB loans in the 2007-2103 period.
The bloc's neighbouring and partner countries, such as the Ukraine, Russia, countries of the
Northern Caucasus and the Mediterranean would meanwhile be given EUR 15bn in loans.
A further EUR 4bn would go to Latin America, EUR 2bn to Asia and EUR 1.5bn to Southern
Africa.
Bajuk also wants the EIB to limit its role to reconstruction after natural disasters, wars and
other political crises. The Commission's proposal allocates EUR 1.5bn for such loans.
Slovenia's position was also voiced by Denmark, Hungary, the Netherlands and Spain,
although the latter called for more loans for Latin America.
The countries want the EU to leave investment into more far-away regions to the World Bank.
The bloc's finance ministers are to tackle the issue again in November.
Parliamentary Committee Endorses Euro Bill
The parliament's committee on finance and monetary policy endorsed the euro bill, which
defines the procedures during Slovenia's changeover to the euro as a national currency,
which is scheduled for 1 January 2007
The parliament's committee on finance and monetary policy on Wednesday, 11 October
endorsed the euro bill, which defines the procedures during Slovenia's changeover to the euro
as a national currency, which is scheduled for 1 January 2007.
The bill, which was adopted by the government in July and has been harmonised with the
European Central Bank, deals with the procedure for adopting the euro, sets the period when
both currencies will be in use and determines the withdrawal of the tolar from circulation.
21
Serving as the legal basis for a smooth transition in public administration, the judiciary,
financial markets and the economy, the bill defines that both currencies will be in circulation
for the first two weeks of 2007. During this period the difference for cash payments will be
returned in euros.
Cash-free transactions will be carried out in euros from 1 January 2007. The main interest rate
SITIBOR will be replaced by EURIBOR, whereas tolar deposit accounts, securities, contracts,
bills and other financial instruments will be transformed into euros on the day of the switch
free of charge.
The bill also determines that in the first two months of 2007 banks, savings banks and post
offices will have to exchange tolars for euros free of charge. Slovenia's central bank will
change tolar banknotes for euros indefinitely and without commission, but it will only
exchange tolar coins until 31 December 2016.
National Council Vetoes Minimum Wage Act
The National Council believes that the minimum wage should be the result of a deal between
the social partners and not set by the executive branch
The National Council, the Slovenian parliament's upper chamber, vetoed on Wednesday, 11
October the minimum wage act with 29 votes in favour and none against. The veto, which
was proposed by the trade unions, has already been condemned by Labour Minister Janez
Drobnic.
The National Council believes that the minimum wage should be the result of a deal between
the social partners and not set by the executive branch.
This much was also said by Dusan Semolic, the head of Slovenia's largest trade union, the
ZSSS. He also pointed out that talks between employers and employees on such issues have
always been difficult, but a consensus was always reached.
The veto moreover received the support of the employers, who also believe that the minimum
wage should be determined in talks between social partners.
Jozko Cuk, the head of the Chamber of Commerce and Industry of Slovenia (CCIS), said that
some 2% of Slovenian employees receive the minimum wage. Such a wage in Slovenia is also
higher than in much of the rest of the EU, he added.
The employers want the Social and Economic Council, an industrial relations forum, to be
involved in setting the minimum wage. As their proposal was not endorsed, they decided to
support the veto, he explained.
The act states that the wage - the lowest amount which the employer can pay the employee for
work carried out in full working time - from 1 August 2006 onwards amounts to SIT 125,052
(EUR 522).
Minister Drobnic called the veto bad for the recipients of the minimum wage, as the value of
their earnings will not rise with inflation as stipulated by the act.
He also noted that the act had been twice on the agenda of the Economic and Social Council.
The decision sends the act back to parliament, where it needs the majority of all votes (46).
Government Endorses Plan for Projects Worth EUR 24bn until 2023
The Slovenian government has adopted a resolution on national development projects
between 2007 and 2023 which includes 35 projects worth EUR 24bn designed to boost
growth and bring Slovenia's GDP on par with the EU's average in ten years
The Slovenian government has adopted a resolution on national development projects
between 2007 and 2023 which includes 35 projects worth EUR 24bn designed to boost
growth and bring Slovenia's GDP on par with the EU's average in ten years.
These key projects will accelerate development and facilitate the achievement of the main
objectives of the National Development Strategy - catching up with the EU's average in ten
22
years, or even as early as 2013, Prime Minister Janez Jansa told the press on Thursday, 12
October.
The main projects listed in the resolution involve the creation of a network of business centres
which would create 17,000 new jobs and foster the establishment of some 2,000 small and
mid-sized enterprises, Jansa said.
The resolution also includes projects on sustainable energy supply, the construction of road
and rail infrastructure and investment in the judiciary and health care, Jansa added.
The EUR 24bn needed for implementation would come from the budget (EUR 7bn) and
European funds, but the bulk (EUR 14bn) would be provided by private investors.
The launch of most of the projects is scheduled for the outset of the EU's next budgetary
period (2007-2013), but the funds will be equally distributed until 2023 in order to ensure the
sustainability of public finance, Jansa said.
The most expensive project will be the modernisation of the rail network, which is estimated
at EUR 8bn. The government expects half the money to come from private sources.
The implementation of all the projects is expected to increase purchasing power by 3.3
percentage points until 2010 and a total of 6.8 percentage points until 2013.
Some 12,000 new jobs are to be created by 2008 and up to 50,000 by 2013, when the number
of unemployed people would be 30,000 lower than it is now, according to Jansa.
KD Holding Moves to Acquire Dezelna banka
Asset management firm KD Holding has published a takeover bid for Dezelna banka
Slovenije, a small bank, offering SIT 4,500 (EUR 18.78) per share
Asset management firm KD Holding has published a takeover bid for Dezelna banka
Slovenije, a small bank, offering SIT 4,500 (EUR 18.78) per share. The offer trumps the
recent announcement of the bank's majority owner, Kapitalska zadruga, that embark on a
takeover offering SIT 4,000 (EUR 16.69) per share.
KD Holding's offer was published in the Saturday edition of the daily Delo, which writes that
this is an escalation of the ongoing dispute between the two largest owners of the bank.
KD Holding, which has a 28.08% stake in the bank, has already obtained approval from the
central bank to increase its stake in Slovenia's 12th largest bank by assets beyond 50%.
Kapitalska zadruga owns 42.57%, but its director, Jozef Bernik, has recently told Delo that
the company would not be selling its stake to KD Holding.
According to Matjaz Gantar, the head of KD Holding's parent company KD Group, the
dispute between the two has to do with the supply of fresh capital and the appointment of a
new chairman of the supervisory board.
Speaking for the forthcoming edition of Delo's financial supplement Delo FT, Gantar said that
the dispute was uncomfortable and harmful for the bank.
"When you tell the cooperatives how much fresh capital would be needed in order for the
bank to start moving, the figures are completely unimaginable for their officials," Gantar said.
According to him, if the bank does not get a capital injection it will sooner or later have to
hook up with another bank, be sold or thoroughly restructured.
The bank took over a network of savings banks operated by the Cooperatives' Association,
whose leadership wants the network to continue to serve Slovenian farmers, Gantar explained.
He said he agreed that the savings and loans banks remain as they are, but this means that the
cooperatives will have to provide the money for the capital increase. "They have to make up
their mind," he said.
Owned by cooperatives, Kapitalska zadruga is the successor of the Association of Savings
and Loans Services of Slovenia.
Dezelna banka boasted total assets of SIT 145.1bn (EUR 605m) at the end of August. Halfyear gross profits stood at SIT 815m (EUR 3.4m).
23
Mutual Funds Boast EUR 1.64bn in Assets Under Management
Mutual funds in Slovenia managed assets worth SIT 394bn (EUR 1.64bn) at the beginning of
October, an increase of 35% over the year before and 19% more than at the outset of this
year
Mutual funds in Slovenia managed assets worth SIT 394bn (EUR 1.64bn) at the beginning of
October, an increase of 35% over the year before and 19% more than at the outset of this year,
according to the fund-tracking website www.vzajemci.com.
This puts the per capita investment in mutual funds at EUR 500, which is well below the
average in the richest EU countries.
Currently the biggest mutual fund is the share fund Triglav Steber 1 with SIT 80bn (EUR
333.8m) under management, followed by the KD Group funds Galileo (SIT 56bn/EUR
233.7m) and Rastko (SIT 26.3bn/EUR 109.7m)
Most of the fresh investments are put into funds that invest in Southeastern Europe, most
notably Publikum Balkan (plus SIT 5.4bn/EUR 22.5m), KD Balkan (SIT 4.8bn/EUR 20m).
Infond Bric, which invests in the emerging markets of Brazil, Russia, India and China,
meanwhile saw a net influx of SIT 3.5bn (EUR 14.6m).
This year the outstanding performers include the SGAM fund - Equities China (+29.68%),
Modra linija (+19.37%) and Infond Bric (+18.92%), with several other funds posting gains of
between 15% and 18%.
Ljubljana Stock Exchange
The main market SBI 20 index reached an all-time high last week, adding 63.2 points to close
at 5,705.34
The main market SBI 20 index reached an all-time high last week, adding 63.2 points to close
at 5,705.34 despite a 1.37% drop by pharma company Krka. Indeed, it was not a stellar week
for Slovenia's largest blue chips, reflected also by the big name-heavy SBI TOP index, which
remained virtually flat at 1,347.47.
Trading was relatively slow, with brokers concluding deals worth SIT 7.78bn (EUR 32.53m)
last week with additional SIT 2bn (EUR 8.36m) in block trade.
Krka accounted for around a third of the turnover with deals worth SIT 3.06bn (EUR
12.79m), including SIT 600m (EUR 2.5m) in block trade. The item ended the week at SIT
186,494 (EUR 779.85).
Energy company Petrol meanwhile added 0.04% to SIT 104,975 (EUR 438.05), while
beverage group Pivovarna Lasko soaring 3.6% to a new record of SIT 8,590 (EUR 35.92) on
slim volumes.
A new share was listed on the official market on 12 October, yet Iskra Avtoelektrika, a maker
of electric parts for the car industry, failed to make any impact.
Two items that typically make few headlines, bread and pasta makers Zito and Mlinotest,
meanwhile generated quite a buzz off the market, as Zito entered the takeover battle for
Mlinotest, trumping an offer from family bakery Blatnik.
Investment funds also had a good week, pushing the PIX investment fund index 86.69 points
higher to 4,789.20.
The BIO bond index added 0.08 points to 118.94.
Foreign Exchange
Mean exchange rate of the Bank of Slovenia
Euro (EUR) - SIT 239.62 (-----)
U.S. dollar (USD) - SIT 190.98 (+1.94)
Swiss franc (CHF) - SIT 150.37 (-0.42)
British pound (GBP) - SIT 355.31 (+0.79)
24
BRANCH INFORMATION
Committee Endorses Sunday Opening Hours for All Shops
The parliamentary economy committee endorsed on Tuesday, 10 October changes to the trade
act, which transfers the decision on Sunday opening hours for all shops from the act onto the
sectoral collective bargaining agreement that was signed by the retailers and trade unions
The parliamentary economy committee endorsed on Tuesday, 10 October changes to the trade
act, which transfers the decision on Sunday opening hours for all shops from the act onto the
sectoral collective bargaining agreement that was signed by the retailers and trade unions on
Tuesday, 10 October.
The amendments follow the agreement between the social partners. "It would be difficult to
find arguments against a deal between the retailers and trade unions," Economy Minister
Andrej Vizjak said at the committee's meeting.
The exception among the general consensus was the coalition New Slovenia (NSi). The party
protested that the changes go against the results of the 2003 referendum, at which it was
decided that most shops should remain closed on Sundays.
Only shops selling essential goods were allowed to open for up to ten Sundays a year. The
parliament put the referendum result into law in December 2005.
While NSi lawmaker Martin Nikolic stressed his pleasure over the recent deal, he warned that
it could not replace the will of the people.
Vizjak responded by saying that the referendum was carried out under different
circumstances. "If the question whether the deal between the trade unions and the retailers
was posed today, I believe that the outcome would be clear," he added.
The government adopted the amendments to the trade act in late July and sent them to
parliament to be discussed in shortened procedure. The changes are expected to be passed by
the end of the year and enter into force on 1 January 2007.
The retailers and the trade unions signed the new collective agreement for retail and
wholesale so that shops will be prepared for the new law as soon as it enters into force.
In line with the agreement, the employers must not schedule employees with sick children to
work Sunday or holidays.
Those with children aged between three years and school-age can work up to ten Sundays a
year, and the rest up to two Sundays per month, but not more than 26 Sundays per year.
The two sides also agreed on a 100% price rise for Sunday work and a 200% rise for several
bank holidays, namely 1 January, 1 May (Labour Day), 1 November (All Saints' Day), 25
December and Easter Sunday.
Minister Warns of Environment Obligations after 2012
Environment and Spatial Planning Minister Janez Podobnik warned that countries should
start getting ready today for the problems they will face in meeting the obligations under the
Kyoto agreement after 2012
Environment and Spatial Planning Minister Janez Podobnik warned on Wednesday, 11
October that countries should start getting ready today for the problems they will face in
meeting the obligations under the Kyoto agreement after 2012.
Podobnik, speaking at the opening of a two-day international environment workshop in
Ljubljana, said that while the majority of the countries have no problems in fulfilling their
obligations at the moment, the matters are about to change after 2012.
25
The workshop is meant to prepare the new EU members, acceding countries and accession
candidates, in meeting their environment obligations after 2012, will stress Cyprus, Malta
Slovenia and Hungary.
Cyprus and Malta are not yet included into the first appendix of the Kyoto protocol and thus
have no obligations in the first commitment period. Meanwhile, Slovenia will need a lot of
work and money to reduce its emissions in the 2008-2012 period by 8% in comparison with
1986, Podobnik added.
In order to achieve that, the country has amended its operational plan of greenhouse gas
reduction in 2006, which now includes several new provisions such as environment-friendly
public tenders and CO2 emissions car licensing, he added.
The country moreover intends to keep 40% of greenhouse gases on the same level in the
2008-2012 period through the new emission coupon distribution plan, he explained.
He also called for changes to public transport and to rerouting transit traffic onto trains, as
Slovenia's geo-strategical position makes it very prone to a rise in emissions from road transit.
The workshop is organised by the German ECOLOGIC institute for international and
environment policies. It is attended also by the representatives of the Finnish EU presidency.
Ministry: Plan For Cutting CO2 Emission Ready by 20 October
The Environment and Spatial Planning Ministry told STA that they will send the plan for
curbing carbon dioxide emissions in Slovenia between 2008 and 2012 to the European
Commission by 20 October
The Environment and Spatial Planning Ministry told STA on Wednesday, 11 October that
they will send the plan for curbing carbon dioxide emissions in Slovenia between 2008 and
2012 to the European Commission by 20 October.
The ministry's response comes after the Commission on Tuesday, 10 October announced that
proceedings will be launched shortly against Slovenia for its failure to submit the plan.
Slovenia has failed to meet two deadlines for submitting the plan - the first at the end oh June
and the second on 20 September. According to the ministry, the delay was a result of a public
examination of the plan which lasted until 9 October.
The ministry added that it hopes that the Commission would not launch proceedings before 20
October.
The ministry explained that it has been briefing the Commission regularly about the reasons
for the delay, but that it also understands the Commission cannot treat Slovenia any
differently from the remaining member states.
The European Commission on Tuesday, 10 October said it was to launch proceedings against
nine EU countries for failing to present plans on how they intend to cut CO2 emissions
between 2008 and 2012.
Besides Slovenia, formal notices are also to be sent shortly to the Czech Republic, Denmark,
Hungary, Finland, Italy, Portugal, Spain and Austria, nine of the 25 EU members.
Government Adopts Bill for Securing Funds for Railway Projects
The government has adopted a bill on state guarantees to finance railroad infrastructure
projects in the 2006-2009 period
The government has adopted a bill on state guarantees to finance railroad infrastructure
projects in the 2006-2009 period, a Transport Ministry official said on Thursday, 12 October.
According to Peter Verlic, state secretary at the ministry, the aim of the guarantees is to
secure the missing SIT 99.7bn (EUR 416.91m) in the period.
Petric moreover told the press after the cabinet session that Slovenia will allocate SIT 72bn
(EUR 301.07m) for priority projects on the 5th and 10th trans-European transport routes
which are co-financed by the EU.
26
In addition, the country will earmark SIT 22.8bn (EUR 95.34) for other urgent projects not
co-financed by the EU and SIT 800m (EUR 3.34m) for urgent reconstructions caused by
unforeseen events in 2003, 2004 and 2005.
Allocating the means needed for taking part in projects co-financed by the EU will, Verlic
claims, allow Slovenia to complete the modernisation of the track between the country's sole
seaport of Koper and the Divaca transport hub.
The modernisation will increase the amount of trains on the section by 53% and capacity by
76%.
The electrification of the section between the transport hub of Pragersko and the Hodos
border crossing with Hungary, will guarantee the target speed of 160 km/h and increase the
number of trains on the section, he said.
The projects not financed by the EU are meanwhile meant to eliminate bottlenecks on
sections totalling 40 kilometres.
Currently, the funds for returning the guarantees have been allocated from the budget and
payments for using the infrastructure, while funds from public-private partnerships are being
mulled as well.
Slovenian Incoming Workshop Started Takes Place in Radenci
The aim of the tourist exchange is to increase the number of foreign visitors by presenting
Slovenia's tourist offer to foreign companies
The most important advertising and income-generating event for Slovenian tourism, the
Slovenian Incoming Workshop, officially started in Radenci on Friday, 13 October, drawing
136 Slovenian and 147 foreign tour operators and other companies.
The aim of the tourist exchange is to increase the number of foreign visitors by presenting
Slovenia's tourist offer to foreign companies.
The general manager of the Tourism Board Dimitrij Piciga said at the event that 2007 will be
a year of great opportunities for Slovenian tourism.
The board expects that the 2007 euro changeover and the entry to the Schengen zone in the
near future should have positive effects on Slovenian tourism, Piciga said.
The board has prepared seven advertising campaigns for 2007, to promote Slovenia on Italian,
Austrian and German markets, and in Moscow, Kiev, Barcelona and Paris, he revealed.
In January 2007 Slovenia will moreover for the first time take part in the ACBT (Austrian and
Central European Travel Business) fair in Vienna, he added.
According to the board, tourism currently generates EUR 1.4bn of foreign currency influx,
employs 54,000 people and creates 3.7% of Slovenia's GDP.
The board is also pleased with the efficiency of the "Diversity to Discover" advertisement on
CNN, which increased Slovenia's popularity in the world.
27
COMPANIES
Ljubljanske mlekarne to Wrap up 2006 in Red
EU accession, coupled with the liberalisation of Slovenia's food market, has not come without
a price for the country's largest dairy, which is expected to end the year with a loss
EU accession, coupled with the liberalisation of Slovenia's food market, has not come without
a price for the country's largest dairy, which is expected to end the year with a loss of SIT
600m (EUR 2.5m). This is something that the Anglo-Serbian investment company Salford
will have to accept as a prospective buyer of Ljubljanske mlekarne.
Salford made its interest in the dairy official as it met representatives of stakeholders
commanding a combined 54.07% share in Ljubljanske mlekarne. Negotiations on a possible
deal were to officially start on Monday, 9 October.
The company wrapped 2005 with a net operating loss of SIT 1.09bn (EUR 4.56m).
Ljubljanske mlekarne officials put part of the blame for this on the EU accession-related drop
in food prices. Since May 2004, these decreased by some 6%, dairy products included.
EU entry furthermore signalled an end to high export subsidies for dairies and bilateral free
trade agreements with countries emerging from the former Yugoslavia. What is more, the so
far closed Slovenian dairy market had to open up for products by powerful multinationals.
These new conditions forced Ljubljanske mlekarne to streamline its operations and bring
them in line with EU standards. Company officials say much has been invested in new
technology and adapting to new environmental, veterinary and healthy food requirements.
Officials say Ljubljanske mlekarne has recently focused its efforts on changing the structure
of its sales on foreign markets, introducing new products on the home market and new
marketing policies.
The company currently employs 720 workers and bought 272 million liters of milk from
Slovenian farmers last year. Its production facilities in Ljubljana and Maribor and the cheese
dairy in Kocevje process 60% of the milk bought in Slovenia.
Its subsidiary in Tuzla, in Bosnia-Herzegovina, broke even for the first time last year when it
purchased 19 million liters of milk off Bosnian farmers. The Bosnian dairy employs 144
people.
In Slovenia, Ljubljanske mlekarne commands a market share of between 55 and 65% for
milk, 25% for yogurt, more than 60% for fresh cheese and more than 20% for cheese.
Salford was the only bidder that answered the invitation offering a majority stake in
Ljubljanske mlekarne. Investment companies NFD Holding, Zvon Ena Holding Zvon Ena ID,
food company Jata Emona and Mlekodel, which manages stakes held by farmers, are selling a
combined stake of 54.07%.
Petrol, Lukoil Set to Launch Joint Venture This Year
Slovenian energy company Petrol and Russian oil firm Lukoil are planning to launch their
retail joint venture, Petrol Lukoil, this year. Vladimir Nekrasov, first vice president of Lukoil,
told Slovenian journalists in Moscow
Slovenian energy company Petrol and Russian oil firm Lukoil are planning to launch their
retail joint venture, Petrol Lukoil, this year. Vladimir Nekrasov, first vice president of Lukoil,
told Slovenian journalists in Moscow on Sunday, 8 October that there were no holdbacks on
Lukoil's side; if Petrol has none, the company will be set up this year.
Petrol chief executive Marko Kryzanovski headed to Moscow on Monday, 9 October for what
his spokeswoman Katja Ujcic said were talks with Lukoil. Speaking for STA, Ujcic would not
say how far the talks were, she said more news would be available after the visit.
28
Petrol and Lukoil signed the deal on a joint venture on 28 August. Headquartered in Slovenia,
Petrol Lukoil will sell oil derivatives in Central and Southeastern Europe. Petrol will own
51% and Lukoil 49%.
Lukoil expects the joint venture to increase sales of oil derivatives in Southeastern Europe,
where the company is projected to up the number of filling stations to 1,200 by 2009.
According to Nekrasov, who expects Petrol Lukoil to penetrate new markets, one of the main
benefits of the tie-up with Petrol is its good knowledge of the markets of the former
Yugoslavia.
Asked why Lukoil had decided to forge a partnership with Petrol instead of acquiring it,
Nekrasov said that Petrol had not been for sale. What is more, the offer for cooperation came
from the Slovenian side.
"We calculated that the most efficient way was to set up a joint venture. It pays off for us, so
it also pays off for Petrol," Nekrasov said, stressing that Lukoil was not interested in Petrol as
a whole, just its oil business.
Nekrasov did not exclude the possibility that either of the partners might increase its stake in
Petrol Lukoil eventually. This has not been discussed yet, but if it makes business sense it
might happen, he noted.
The statement comes after Slovenian business daily Finance reported in early October that
Petrol would offload its stake in the joint venture, including the service stations, by 2009,
when the term of the current management expires.
The report said that Lukoil was evaluating the value of Petrol's assets while Petrol's experts
were appraising the service stations that Lukoil will contribute.
Petrol denied the report, saying that a sale was not a part of any deal. The company claimed
that no appraisal of the assets was being carried out.
Nekrasov confirmed that Lukoil would be paying cash for the difference between the stakes
of the two partners.
Petrol's contribution to the joint venture is its network of filling stations in Slovenia, BosniaHerzegovina and Serbia, while Lukoil has stations in Serbia and Macedonia.
Daily Dnevnik Sells Its Stake in Publisher DZS
The daily Dnevnik has sold its entire 7.82% stake in publisher DZS, the daily's largest owner,
DZS management said
The daily Dnevnik has sold its entire 7.82% stake in publisher DZS, the daily's largest owner,
DZS management said on Monday, 9 October.
According to the DZS, Dnevnik sold the stake in late September in order to secure funds for
expansion.
The DZS management also said that Austrian bank Hypo Alpe Adria Bank acquired 8.47%
stake in the DZS on 2 October.
The DZS holds a 51.05% stake in the daily. It signed in late May a deal with German media
conglomerate WAZ on establishing a 50:50 joint venture which will take charge of DZS's
stake in the daily.
Semenarna Ljubljana to Celebrate 100th Anniversary
From its humble beginnings as a small stand selling seeds, Semenarna Ljubljana has grown
into a group of companies that employs over 560 people in Slovenia and abroad
Semenarna Ljubljana, a company producing and selling plant seeds and seedlings, celebrated
its 100th anniversary on Tuesday, 10 October. From its humble beginnings as a small stand
selling seeds, Semenarna Ljubljana has grown into a group of companies that employs over
560 people in Slovenia and abroad.
29
Semenarna Ljubljana's goal is to turn itself from a leading provider of plant seeds and
environmentally friendly products and services for the agriculture sector as well as gardening
enthusiasts in the country, to a regional leader. Its chain of retail stores Kalia figures highly in
these plans.
Its biggest retail chain "Vse za dom in vrt" (Everything for the Home and Garden) has 36
stores around Slovenia, with new centres planned in Novo mesto, Maribor, Nova Gorica and
Ljubljana. The chain also has 18 stores abroad.
Based in Ljubljana, Semenarna Ljubljana has subsidiaries in Croatia, Kosovo, Serbia,
Hungary and Bosnia-Herzegovina. It also has buyers in Italy, Russia and other states of the
former Soviet Union, Turkey, Czech Republic, Slovakia, Bulgaria, Romania and Albania. The
aim of the management is to double the company's revenues over the medium term to 100
million euros.
In 1906 merchant Maks Sever started selling seeds on a stand in the centre of Ljubljana.
According to reports, in only three years he managed to squeeze out all the Austrian and
Hungarian competitors. In 1910 he added wholesale to his activities and opened offices in
Zagreb and Trieste in 1919.
Family Business Gains Control of Clothes Company Elkroj
The family-run Rednak leather fashion company from Sostanj has become the majority owner
of clothes company Elkroj from Nazarje, after it acquired a 51% stake, reported daily
Dnevnik
The family-run Rednak leather fashion company from Sostanj has become the majority owner
of clothes company Elkroj from Nazarje, after it acquired a 51% stake, daily Dnevnik
reported on Tuesday, 10 October.
Damjan Rednak of Rednak refused to reveal the price paid for Elkroj, however, he said that
taking into account Elkroj's situation its shares were overpriced.
Rednak explained that the investment was risky, as Elkroj had SIT 2bn (EUR 8.3m) in
outstanding liabilities. Nevertheless he is certain that Elkroj's future operations would be
smooth, while the settlement of the past outstanding liabilities would take years.
The Rednak company generates around SIT 1.5bn (EUR 6.3m) in turnover yearly and
employs 200 people, while Elkroj has 280 employees and around SIT 2bn (EUR 8.3m) in
annual turnover.
Rednak explained that his company is not planning to reduce the workforce at Elkroj; instead,
it might even employ new people since Elkroj is not lacking orders.
Moreover, it is planning to expand Elkroj's programme and strengthen the cooperation with
existing partners such as fashion giants Hugo Boss and Escada. They also want to keep
Elkroj's trademarks Carier and Elkroj.
Rednak does not intend to make any changes in the management of Elkroj, so the current
company's chairman Stefanija Glusic will keep her position.
However, Elkroj will have to reduce radically it operating costs, in line with Rednak's
business philosophy, Rednak added.
Krka Reports 23% Rise in 9-Month Sales Revenues
Pharma company Krka has reported sales revenues of SIT 120bn (EUR 500m) for the first
nine months of this year
Pharma company Krka has reported sales revenues of SIT 120bn (EUR 500m) for the first
nine months of this year, which is 23% more than in the same period last year. The company
said strong growth in sales of prescription medicines in eastern Europe contributed the most
to the surge in total sales.
30
According to a press release from the company on Tuesday, 10 October, the results are a
continuation of Krka's strong performance in the first half of the year.
The company did not disclose its profit for the first nine months, explaining that additional
results for the period would be presented after the meeting of the company's supervisory
board, which is scheduled for 15 November.
The Russian market led the way in terms of sales growth for Krka, with sales growing by 45%
to SIT 25.7bn (EUR 107.2m). Sales in the whole of eastern Europe rose by 37% to SIT
34.1bn (EUR 142.3m).
Sales on markets of central Europe stood at SIT 30bn (EUR 125m), which is 26% more than
last year, with sales in Poland registering the quickest growth, as they rose 30% to SIT 17.4bn
(EUR 72.6m).
Sales in western Europe and oversees markets rose 22% to SIT 17.8bn (EUR 74,3m), while
sales in SE Europe were up 19% to SIT 19.5bn (EUR 81.4m), Krka said.
The domestic market's share in total sales continued to diminish as it registered growth of
only 3% to SIT 18.7bn (EUR 78m).
The sale of prescription medicines, which grew by 25% to SIT 91.7bn (EUR 382.7m),
accounted for 81% of total sales in the first months of the year.
Alpina Eyeing Acquisition of Fellow Footwear Maker Peko
Only months after it was acquired by the asset management firm Infond Holding 2, Slovenian
footwear maker Alpina is looking to consolidate its market position with the takeover of the
Trzic-based footwear company Peko
Only months after it was acquired by the asset management firm Infond Holding 2, Slovenian
footwear maker Alpina is looking to consolidate its market position with the takeover of the
Trzic-based footwear company Peko.
Alpina and Peko are similar companies which can harness synergies and "create something
better" together, Alpina director Matjaz Lenassi told STA on Tuesday, 10 October. The
product lines are complementary, as Peko is strong in fashion footwear and Alpina in sports
wear, he added.
The tie-up would cut purchasing costs and take advantage of the retail chains that are spread
around the countries of the former Yugoslavia, he said.
According to Lenassi, Alpina has already asked the state (which owns 82% of Peko) for due
diligence, but there has been no reply yet. He said due diligence is necessary if Alpina is to
publish a takeover offer.
Peko was on the edge of bankruptcy a few years ago, but it has since recovered, posting net
profits of SIT 168m (EUR 701,000) for 2005, a 33% rise over the year before.
The company is on the list of state property for sale in 2006 or 2007 that parliament passed
late last year.
The business daily Finance wrote that the state would probably soon publish a call for bids
considering that there is at least one company expressing interest.
Infond Holding 2 acquired Alpina in June, buying the shares of the state-owned Restitution
Fund (SOD) and Pension Fund Management (KAD), the European Bank for Reconstruction
and Development (EBRD) and financial group Maksima Invest. It paid SIT 1.76bn (EUR
7.3m) for the 56.56% stake.
Krka Temporarily Banned from Selling Perindopril in the UK
According to Krka, the products which contain perindopril are produced in a procedure that
was arrived at independently and hence do not breach the relevant patent in Great Britain
Slovenian drug maker Krka and its Polish subsidiary Krka Polska have been temporarily
banned from advertising and selling drugs that contain a type of the active ingredient
31
perindopril on the UK market following a temporary injunction issued by the Patents Court at
the London High Court.
Krka said in a press release on Tuesday, 10 October that the drug with the active ingredient
has not been for sale in the UK yet. It had planned to start marketing it at the beginning of
August under the permit obtained by Krka Polska, but decided to suspend the launch.
The temporary injunction is based on a lawsuit filed by France's Les Laboratoires Servier and
Servier Laboratories of Fulmer Hall from Great Britain in July.
The two companies accuse Krka of breaching a patent for producing one of the interim
components of perindopril. Krka has labelled the charges as well as the temporary injunction
as unfounded.
According to Krka, the products which contain perindopril are produced in a procedure that
was arrived at independently and hence do not breach the relevant patent in Great Britain.
Salford Offering EUR 31.5m for Stake in Ljubljanske Mlekarne
The British investment fund Salford, the only bidder to submit an offer for the purchase of the
Ljubljanske mlekarne, is offering SIT 7.55bn (EUR 31.5m) for a 54% stake in the dairy, Radio
Slovenija reported
The British investment fund Salford, the only bidder to submit an offer for the purchase of the
Ljubljanske mlekarne, is offering SIT 7.55bn (EUR 31.5m) for a 54% stake in the dairy,
Radio Slovenija reported on Tuesday, 10 October.
Salford was the only company to respond to a call for bids for the 2,369,175 shares which
financial firm NFD Holding is selling along with asset management firms Zvon Ena Holding
and Zvon Ena ID, food company Jata Emona and Mlekodel, which manages the shares held
by farmers and cooperatives.
The SIT 3,189 (EUR 13.3) per share that Salfords is offering is the lowest price that the
sellers listed in the offer, the radio report quoted a representative of Salford as saying
following negotiations that took place on Tuesday, 10 October.
Gorazd Cuk, the head of Zenos, which represents Salford in Slovenia, said that Salford wants
a good, competitive dairy which would play a leading role in Salford's network of dairies in
the region.
According to the radio report, the negotiations focused on the technicalities, while the actual
talks about the sale would not start before November.
The prospective arrival of Salford on the Slovenian market has been met with mixed
emotions. Ales Kuhar, agricultural economist at the Biotechnical Faculty has said that Salford
was "the best out of a list of bad possibilities".
He claims Salford is a better prospect than an Austrian or Italian dairy company which - in the
case of a takeover - might even close down this largest Slovenian dairy, or at the very least
they would seriously cut its production capabilities.
Pressure to Keep Dairy in Slovenian Hands Increases
Farmers are increasing their efforts to keep the largest Slovenian dairy, Ljubljanske
mlekarne, in Slovenian hands amidst talks on the sale of a majority stake in the company to
British investment fund Salford
Farmers are increasing their efforts to keep the largest Slovenian dairy, Ljubljanske mlekarne,
in Slovenian hands amidst talks on the sale of a majority stake in the company to British
investment fund Salford.
Salford is reported to be offering SIT 7.55bn (EUR 31.5m) for a 54% stake in the dairy that is
being sold by financial firm NFD Holding along with asset management firms Zvon Ena
Holding and Zvon Ena ID, food company Jata Emona and Mlekodel, which manages the
shares held by cooperatives.
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Opposed to the sale of the majority stake to a foreign firm, the interest groups of local
communities and farmers at the National Council on Wednesday, 11 October succeeded with
a motion with which the upper chamber of parliament calls on the government to prevent the
sale in order to protect the national interest.
Peter Vrisk, a representative of the interest group of farmers and the head of the Chamber for
Agriculture and Forestry, told fellow councillors that the lives of 40,000 to 50,000 people
depend on Ljubljanske mlekarne. This matter "cannot be left to the capital market," he said.
Although Mlekodel, which owns nearly a quarter of the dairy, is one of the companies selling
its stake, the nine cooperatives that it represents came out of a meeting with Agriculture
Minister Marija Lukacic willing to reconsider the move.
"The cooperatives are willing to reconsider...if we find a common solution that would allow
them to acquire a majority share of Ljubljanske mlekarne," Lukacic said after the meeting
with the heads of the cooperatives on Wednesday, 11 October.
She said the various options of keeping the dairy in Slovenian hands would be considered,
with concrete decisions to be taken when the matter will be discussed together with the staterun pension Fund management (KAD), the Association of Cooperatives and cooperatives that
are not part of Mlekodel.
HSE and German Power Giant to Vie for Projects in Macedonia
Holding Slovenske elektrarne (HSE) has signed an agreement with Germany's biggest power
producer RWE Power to carry out joint investment projects in Macedonia
Holding Slovenske elektrarne (HSE) has signed an agreement with Germany's biggest power
producer RWE Power to carry out joint investment projects in Macedonia.
The deal foresees the two energy leaders making a joint bid in response to the Macedonian
government's call for invitation for investments in the country's network of hydro power
plants, HSE said in a press release on Wednesday, 11 October. The agreement was signed on
Tuesday, 10 October.
According to HSE, Macedonia has called for bids for the construction of two power plants
and the operating of further three. HSE and RWE plan to make a joint offer, taking part in a
pre-qualifying process this month.
Moreover, Slovenia's No 1 power producer said the agreement with the German partner paved
the way to cooperation in other countries in Southeastern Europe.
According to HSE chief executive Joze Zagozen, one of the holding's key objectives is to
upgrade its existing production portfolio so as to include appropriate production facilities in
SE Europe. He is confident that the HSE would benefit from cooperation with an acclaimed
partner such as RWE.
Director General of Slovenian Railways Resigns
The supervisory board has already accepted his resignation
Joze Jurkovic, the director general of the Slovenian Railways, stepped down on Wednesday,
11 October quoting personal reasons. The supervisory board of the cash-strapped company
has already accepted his resignation, the STA has learnt.
Jurkovic, a lecturer at the Ljubljana Faculty of Engineering and mayor of the town of
Skofljica, will be succeeded for the time being by his deputy Branko Omerzu, the company's
PR office told STA on Wednesday, 11 October.
According to the Slovenian Railways, Jurkovic's resignation has nothing to do with the
company's performance and indebtedness, or Jurkovic's bid to win another term as mayor of
Skofljica at the local elections.
Jurkovic was appointed to the post in June 2005, when he took over from Boris Zivec.
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Slovenia's state-owned railways operator generated a loss of SIT 531m (EUR 2.2m) in the
first half of the year. The company's debts stood at SIT 60bn (EUR 250m) earlier this year.
Meanwhile, head of the company's supervisory board Peter Verlic told STA that the
supervisors also granted the management's request for a SIT 1bn (EUR 4.2m) liquidity loan.
This is the second time the company has had to resort to this stopgap measure this year,
having taken out a SIT 3.2bn (EUR 13.4m) loan in June.
Verlic added that he was hoping the supervisors would convene a session as soon as possible
to discuss the situation at the company.
Meanwhile, the head of the Railways' works council Silvo Berdajs welcomed Jurkovic's
decision to resign. In his opinion, the move will contribute to putting the company's
operations back on track.
Mlinotest Managers Reject Pekarna Blatnik Takeover Bid
The management board of bread and pasta maker Mlinotest has rejected a takeover offer by
Pekarna Blatnik, a family-owned bakery, saying that the information provided in the offer
does not enable a reliable assessment of the impacts of a potential takeover
The management board of bread and pasta maker Mlinotest has rejected on Thursday, 12
October a takeover offer by Pekarna Blatnik, a family-owned bakery, saying that the
information provided in the offer does not enable a reliable assessment of the impacts of a
potential takeover.
Arguing that the bid, published by Pekarna Blatnik on 3 October at SIT 1,600 (EUR 6.69) per
share, does not contain a clearly defined strategy, Mlinotest's management board member said
that they did not intent to sell their shares.
The management board of the Ajdovscina-based bread and pasta maker also rejected
speculations that the failed negotiations of a merger between Pekarna Blatnik and Mlinotest
were entirely its fault.
"Decisions on potential mergers are taken by the owners of our company," the management
board said, pointing out that its competences involve the possibility of providing an
independent valuer. According to Mlinotest, this possibility was discussed with Pekarna
Blatnik but abandoned because of the bid.
Mlinotest moreover stressed that the last audited book value of its shares - from the end of
2005 - stood at SIT 2,313.21 (EUR 9.65).
After failed talks on the possibility of a merger between the two companies, Pekarna Blatnik
published a bid for all 2,389,177 Mlinotest's shares. The bid, open until 2 November, will be
considered successful if at least 75% of the total of 2,389,177 Mlinotest shares are acquired.
Zito Enters Takeover Battle for Mlinotest
Zito already owns 17.04% of Mlinotest
Zito has spiced up the takeover battle for fellow bread and pasta maker Mlinotest, announcing
that it would publish a takeover bid that trumps the offer by family-owned bakery Blatnik.
Blatnik is offering SIT 1,600 (EUR 6.69) per share in a hostile bid that comes after merger
talks with Mlinotest collapsed.
The bid, open until 2 November, will be considered successful if at least 75% of Mlinotest is
acquired.
Zito, which already owns 17.04% of Mlinotest said on Friday, 13 October, 13 October, it
would make its bid in ten days.
Whereas Blatnik says the aim of the acquisition is to consolidate the sector and seek
synergies, Zito has not specified why it seeks to acquire Mlinotest.
Zito gained almost 2% in early trading on the Ljubljana Stock Exchange on the news, whereas
Mlinotest was level at SIT 1,400 (EUR 5.84) in the absence of a single deal.
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The fate of both bids will be decided by the financial firm Vipa Holding, which owns 25.09%
of Mlinotest, as well as the state-owned Pension Fund Management (KAD) and Restitution
Fund (SOD), which hold a combined 21.6% stake.
Zito is the third-largest shareholder.
Adria Airways Begins Operations with Second Cargo Plane
Slovenian flag carrier Adria Airways on 9 October launched flights with its second SAAB
340A cargo turboprop
Slovenian flag carrier Adria Airways on 9 October launched flights with its second SAAB
340A cargo turboprop, the company said on Friday, 13 October.
The flights are in line with Adria's strategy for expanding cargo flights, as the company
expects to transport 40% more cargo this year than in the last. This is the second SAAB 340A
in its fleet.
The plane can carry up to 3.86 tonnes of cargo on shorter routes and flies at a maximum speed
of 500 kilometres per hour at a height of 7,500 metres.
It is equipped with modern navigational equipment, enabling it to land in reduced visibility. It
was first operated by a hired crew, while it is now already flown by Adria's crews.
Adria's head of cargo transports Boris Rigler said that the carrier plans to further enlarge its
cargo fleet.
"Due to the extremely high demand for cargo transports and the expected 10% yearly growth
in the sector, Adria intends to purchase a jet plane of a higher capacity," Rigler added.
Adria launched its first cargo route in September 2005, servicing Ljubljana and BosniaHerzegovina's capital Sarajevo.
The company then opened additional routes to Germany's Frankfurt in November 2005, to
Croatia's Zagreb, Belgium's Liege and finally, in October 2006, to Serbia's Belgrade.
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SLOVENIA IN BRIEF
Bozic Presents Bid for Galileo Seat to German Counterpart
Slovenia's efforts to host the seat of the supervisory authority of Europe's satellite navigation
system Galileo were on the agenda as Slovenian Transport Minister Janez Bozic held talks
with his German counterpart Wolfgang Tiefensee on Monday, 9 October.
Demining Fund Wants to Expand Activities Outside SE Europe
The Slovenian-run International Trust Fund for Demining and Mine Victims Assistance (ITF)
wants to expand its activities outside of SE Europe as part of its 2006-2009 strategy, the
fund's director Goran Gacnik told the press on Tuesday, 10 October. According to Gacnik, the
ITF is currently active in Albania, Bosnia-Herzegovina, Croatia, Macedonia, Serbia and
Montenegro in SE Europe, as well as operates in Azerbaijan, Georgia and Armenia.
Brussels Says Sale of Mercator not Case of State Aid
The European Commission ruled on Tuesday, 10 October that a contentious 2005 sale of state
stake in retailer Mercator was not a case of state aid, the business daily Finance reported on
Wednesday, 11 October.
College of Polymer Technology to Open in Slovenj Gradec
A new College of Polymer Technology, the first independent higher education institution in
the Korosko region, is expected to welcome its first 60 students in Slovenj Gradec next year.
Ambassador to NATO Relieved of His Duties
The government on Thursday, 12 October relieved Slovenia's Ambassador to NATO Matjaz
Sinkovec of his duties. Sinkovec's successor has not been appointed yet, but media reports
suggest Foreign Ministry State Secretary Bozo Cerar would take up the post. Sinkovec was
relieved of his duties because of his appointment to the top post at the Slovenian Intelligence
and Security Agency (SOVA).
Slovenia, Montenegro Sign Crime Prevention Accord
The interior ministers of Slovenia and Montenegro signed on Friday, 13 October, 13 October
in Budva an accord on cooperation in the fight against organised crime, which is designed to
improve the efficiency of crime prevention and make it easier to arrest suspected criminals.
Six Slovenian Poets Available to English Readers
English publisher Arc Publications, which specialises in poetry, has published an extensive
collection featuring English translations of six modern Slovenian poets. The project, a result
of a cooperation between the European network Literature Across Frontiers and the Centre for
Slovenian Literature (CSK), offers poems by Vida Mokrin-Pauer, Maja Vidmar, Uros Zupan,
Peter Semolic, Natasa Velikonja and Gregor Podlogar, all born after 1960 and without serious
previous English language publications.
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