7

Jože Colarič, President of the Management Board and Chief Executive, Krka

Slovenia has made important progress in economic development ever since its independence. It is true that the global crisis has affected our economy, but we still have numerous good companies which know how to make the best of the new circumstances for entering new markets and developing new products. The Slovenian business space is relatively small and this is why the companies, if they wish to make progress, need to focus on export markets where there are still many opportunities for the fast and flexible. We cannot expect any help from a third party in doing this; orientation towards new products, services and their selling is the key factor for good business transactions.
In any case an encouraging and stabile business environment can also aid economic growth. I believe that it is vital in the given circumstances that the government enables investment reliefs and stimulations for development investment. Moreover some administrative obstacles should be overcome. Also encouragement and enabling of education can help increase employment; here the support of university education programmes in demand by industry is necessary. And last but not least, one of the important factors for economic growth is also a stable and predictable legal environment.

Nina Zidar Klemenčič, Lawyer and Founder of Attorney's Office Zidar & Klemenčič

One of the main challenges and risks the Slovenian business environment presents is the lack of transparency and lack of adequate regulation and control, especially when it comes to the issues of competition and state owned enterprises. With the added issues of legal uncertainty in commercial relations, the Slovenian business environment at this point probably does not present itself as very attractive to foreign investors.

Dr Sašo Polanec, Professor of Economics at the Faculty of Economics, University of Ljubljana

It is no exaggeration to say that the Slovenian business environment is extremely bad. With the exception of a highly skilled labour force - especially in the fields of technical education - and a fairly good infrastructure (telecommunications, electricity and gas supply, roads), we have problems in virtually all areas influenced by the government. One of the worst problems is fairly high labour taxation, which includes highly progressive labour income tax and unlimited proportional social contributions levied on gross wages (in 2008 the government changed income tax rules to feature marginal tax rates exceeding 100 percent for some levels of income). These can, in total, amount to two thirds of total labour costs for highly skilled workers. We can expect that this burden will further increase due to an inability to pass pension and healthcare reform. The government has introduced extensive social safety nets, which reduce the incentive to work for less skilled workers. Moreover, firms are facing rigid firing rules, fairly high severance payments, and long notice periods. All of these labour market problems are effectively the result of the highly powerful trade unions. One of the large problems is also informal economy and tax evasion. The government is unable to create a level playing field in many industries, such as construction and catering, where players that are willing to evade VAT can expand their business. Further, there is pervasive corruption among high government officials, influencing the legislation, public procurement and state-owned companies' procurement decisions. Finally, government is plagued by inefficient bureaucracy, while firing rules prevent the dismissal of public employees. The government also continues to intervene through ownership shares in many large partly state-owned companies in industries like banking and insurance. In short, we need significant changes in the business environment and they require efficient government.

Professor Dr Danica Purg, President of the IEDC Bled School of Management

The current business environment in Slovenia is characterised by the country's excellent geographic position in the heart of Europe, which offers interesting opportunities in the field of logistics. As an EU member Slovenia has direct entrance to a consumer market of more than 300 million people. The country is developing from an economy based on a skilled workforce and favourable labour costs, to an economy driven by innovation and high value added products and services. Slovenia also has a great, not fully exploited potential in agribusiness and in tourism. Current research by IEDC-Bled School of Management shows that the environment creates opportunities for a number of so-called "Hidden Champions": highly innovative and specialised companies holding a leading position in the European, and in some cases even in the world, market. Slovenia could attract even more international business and stimulate a greater entrepreneurial mindset if the political leadership introduced a more favourable and supportive tax regime and legislation.

Dejan Turk, President of the Board, Si.mobil

At present the business environment in Slovenia is by no means encouraging. After years of successful growth and new system adaptation the Slovenian economy, just like all others, is afflicted by the economic crisis. It is true that the crisis was inevitable, but besides the general decline in growth we are troubled by other obstacles which are limiting the competitiveness of the Slovenian economy. Many necessary legislative changes should have been adopted years ago. And so today we are faced with limiting taxation laws, rigid employment legislation, unsettled reforms and so on. These all limit us when it comes to coming out of the crisis as quickly as possible. Moreover the unstable political circumstances do not aid the orderly business environment. However, despite all this I can say that I am an optimist. Good and stable companies with clear ownership are making an effort to work well and to stay in the market. We are thus going to give the Slovenian economy and the greater public new strengths.

Dr Cvetka Dragoš Jančar, Director and Co-founder of Barsos Medical Centre

Our activity is in a slightly privileged position. However, the surrounding events are nevertheless forcing us to behave in a more modest manner. Now is not the time to show off prosperity, be it privately or in terms of business. But now is an appropriate time for the inner strengthening of a company which includes education and equipment updates. We especially fortify those activities at which we have always excelled. We hope that good times for all will come, but the thought that things could be much worse is comforting. As a doctor, I am bothered by the fact that, on a daily basis, we search for a culprit other than ourselves for our problems. I expect more positive encouragement and the rise of morality not only from health institutions, but also from other institutions. All in all, we should not let bad things remain bad without at least trying to make a small change ourselves.

Dr Roman Glaser, President of the Board of Directors, Perutnina Ptuj

What stands out in the Slovenian environment in an extremely positive manner are its favourable location in a geostrategic sense which we well exploit in Europe and elsewhere; efficient and stable infrastructural connections with the region; hard-working employees at all levels and consequently top end quality products on both the global and European scale. In this regard also the food industry stands out, creating both tourist and culinary attractiveness. The Slovenian business environment is relatively stable and settled with developed market mechanisms. It is distinguished also by a high degree of technological development and consumer awareness which demands constant development and progress from the business world. Regardless of all the potential there are also factors in Slovenia that negatively affect business. We deal with ourselves too much; the business environment is unfriendly due to negative experiences from the past and the post-transition stigma of entrepreneurship and management. Also we do not have a proper address to turn to within the institutions at the higher level, which is especially manifested in the current period of the political crisis. The public expenses are too high and competitiveness is too low which are both consequences of unrealised structural reforms.

Biljana Weber, Director General, Microsoft Slovenija

We can find numerous dynamic and innovative companies in the Slovenian business environment that develop products and services for the most demanding international markets as well as the domestic one. But still there are many opportunities open which are not exploited enough. These opportunities are offered by modern information and communication technologies during the process of new product planning and development as well as its marketing. One such opportunity is surely the internet. McKinsey establishes that companies which know how to use all the internet opportunities grow twice as fast as those which pay little attention to it. In the most developed countries, the internet contributes 3.4 percent to the gross domestic product which is more than the energy or agriculture sectors for example. We wish that individuals, companies and organisations in Slovenia would make full use of these advantages. Therefore we need a business environment that is going to be friendlier towards business ideas and is going to be supported with a modern and branched internet infrastructure which is going to enable innovations, technological development and a determined penetration into foreign markets.

Matjaž Rakovec, President of the Management Board, Triglav Insurance Company (Zavarovalnica Triglav)

Due to the integration in the international environment, the global financial crisis has profoundly affected Slovenia too. Its effects in the shape of increasing unemployment and a decline in purchasing power are visible in many fields, insurance companies included. In spite of the still unstable economic circumstances, developments in the Slovenian bank sector and weather events, we at Triglav Group still carry out and exceed the goals of the strategic period. Despite the demanding circumstances we are doing business well and stably. This is confirmed by the long-term bank deposit rating and financial strength rating A of Standards & Poor's agency which is at the same the highest rating among the financial institutions in Slovenia. With the proper strategy, excellent business is possible even in difficult times. Despite this we in our industry expect some unpleasant factors in the future that are going to affect business transactions. These are especially economic stagnation and consumer behaviour changes which do not only mean the stagnation of purchasing power, but also radical and long-term changes in behaviour. This is the reason I believe that those who are going to succeed will be companies with the knowledge of how to get even closer to the consumer. However, we need to persist with the necessary reforms; retirement and health system reform is especially urgent. These are - together with the stable ownership, owners' support and expert employees - the key factors for successful business of Triglav Insurance Company and Triglav Group.

Manja Skernišak, Member of the Board of Nova KBM Bank

Slovenian economy is still faced with problems that are primarily structural in nature. In 2009, the Slovenian GDP fell by 7.8 percent while in 2010 we recorded a modest increase of 1.2 percent. Part of the Slovenian economy, which is export-oriented, based on demand in foreign markets expands and improves operating results. Part of the economy, which has been in the past linked to the expansive growth of the construction and real estate sectors, but in the absence of new investment projects and reduced finances is facing liquidity or solvency problems. In order to restart the economic growth, the Slovenian economy needs new investments and their strengthening using the capital which will not increase its financial leverage. Even in the times of crisis, Nova KBM endeavors to remain an important partner for Slovenian companies. Good ideas, business plans and projects will be supported with adequate funding in the future.

Tine Kračun, Director and Founder, Institute for Strategic Solutions

Slovenia is in an excellent geo-strategic position, where on the one side we are a member of the European Union and integrated in other important "western" spheres of influence, and on the other side we hold the added value of market and society knowledge of the Western Balkans. Slovenia needs to take advantage of this position by starting to export knowledge and attract foreign investors by presenting itself as the starting point for regional expansion. In order to do this, we need to institutionalise and thus further develop the knowledge of Western Balkans and open ourselves to foreign investors. We need to invest in education and promote intellectual services to international corporations.
At the Institute for Strategic Solutions we recognise that through scholarship funds and other regional cooperation projects we share and develop and thus ensure progress of economy and society. Slovenia's economic future lies in promoting regional acceleration of economic cooperation and sustainable development.

Janez Škrabec, Director and Founder, Riko Group

The original sin of the current Slovenian business environment I see in the fact that the state is strongly and overly involved in the economy and controls too large a share of GDP. This is already a problem when we have a well functioning government since the state is not and cannot be the optimal owner of companies. When we have a poor functioning government this borders on disaster. All other problems arise from this original sin.