The Slovenia Times

Slovenian paradox: Alpine over-achiever held back by under-achieving tendencies



Would it be the astonishing natural beauty of a country where you can take a dip in the Adriatic in the morning and hit Alpine slopes after lunch? Or perhaps the environmental abundance where the waters are among the world's cleanest and brown bears roam free in one of Europe's most forested lands? Would she highlight the hardworking, highly-skilled workforce that gives multinationals confidence that Slovenia is a place where they can produce top-quality goods? Perhaps the way to sell Slovenia, she might think, is to focus on how infrastructure combines with innovation to give Slovenia an enviable position in the heart of Europe.

It's not hard to build a strong brand for Slovenia and so it's all the more surprising that Slovenia has not been able to create one. This is one of the many puzzling features of a country that for a newcomer makes Slovenia seem a land of paradoxes and contradictions, not the least of which is how a society so geared toward quality of life ranks near the bottom in the "subjective well-being" category of the OECD Better Life Index (while outperforming in environment, safety, education, housing and life-work balance.) There should be no doubt that Slovenia is a successful country. Many Slovenes may disagree but by any objective measure Slovenia is a society that works. The real question - and here branding can play a role - is why Slovenia is not performing better. Compared to its Balkan neighbours and most of CEE, Slovenia is an overachiever. But several chronic factors - from government corruption to excess state intervention and the population's tendency to be hard on itself - conspire to make Slovenia an under-achieving success story. Turning the question on its head it is tempting to ask - given the entrenched problems, how is it possible that the country is doing so well?

All of this comes into focus by examining Slovenia's position in the global competitiveness rankings issued by the World Economic Forum. Slovenia jumped from 70 to 59 (out of 140) in the 2015-2016 report - strong progress - but still ranks below Rwanda and Azerbaijan. At the same time, Slovenia is the only country in the former Yugoslavia and one of the few in the former communist/socialist sphere, classed as an "advanced economy" as opposed to "emerging Europe".

For all of the things Slovenia is doing right (it ranks 15th in health and primary education and 22nd in higher education and training), there are as many categories in the WEF report where it does poorly. It comes 89th in macroeconomic environment, due largely to debt overhang from its 2013 banking crisis but also, according to the IMF, to excessive state interference and weak corporate governance which has led to inefficient asset allocation. And both foreign and domestic investors will be given pause when considering that Slovenia places 95th in labour market efficiency. Perhaps, most damagingly, Slovenia ranks 67th in the strength of its institutions, a measure of legal and administrative frameworks. The situation is made even more bleak by the fact that the rule of law in general society is outstanding. So it is corruption, waste, cronyism and other factors - among government and bureaucratic cadres - that almost solely accounts for the negative score.

The picture that emerges is of a country with a high standard of living and an energetic workforce but one that is not yet a good place to do business. It is a country where bureaucratic red-tape, economic protectionism and collusion among the government and corporate elite represent the greatest obstacles to success, in particular attracting foreign investment. Put simply, if you are an executive of a multinational looking to build a new plant in Central Europe, Slovenia is a great place to visit - perhaps for a business lunch on the shores of Lake Bled - but you may not want to live here.

Along with institutional reform, Slovenia can also achieve its potential (topping the big leagues of small countries) by fostering the right strategies for success and packaging them in a coherent brand so the world takes notice. The best approach for a country of two million people is to maintain a sharp focus and play to their strengths. First, Slovenia can be a premium boutique tourism destination and an innovator in green technologies. As Andrew Page, the former British Ambassador to Slovenia, told me recently over dinner in London: "If there's one thing that all Slovenes can agree on it is love of the environment." Slovenia may want to think about making this both the brand and the product.

Slovenia can export its world-class expertise in sustainability, for example, by packaging technologies that build upon its greatness in clean water systems. The important thing to remember for a country as small as Slovenia is that it should aspire to be a global leader in one core sector or two or three core products. Currently, Slovenia appears to have things the other way around - it ranks generally high in innovation but does not have a single global household-name product. Slovenia can perhaps learn lessons in the way Finland established a global footprint with Nokia and Estonia gained international fame by becoming E-stonia. Perhaps Slovenia's solution is to develop a world-class electric car; or a breakthrough in wind or solar power; or new technologies in recycling, water purification or protecting woodlands. All of these fields are becoming more important globally due to climate change - and all play to Slovenia's strengths and preoccupations. To succeed, Slovenia may need to do more to build upon its excellent education system, establishing better vocational training so that specialists - German-style meisters - develop a bedrock of deep knowledge for the creation of new things.

Slovenia already has one export that deserves to be a global champion - tourism. Slovenia is simply one of the most beautiful countries in the world but it struggles to turn itself into a leading destination because of the failure to brand itself. I was told recently that Macedonia, which can boast of far fewer attractions, has produced several CNN promotional campaigns - Slovenia only one.
Many of the ideas in this article are also in the government blueprint "Slovenia's Smart Specialisation Strategy" - or S4. The key is to move them from paper to reality. And in order to execute effectively there should be greater willingness to give the private sector a freehand and managerial responsibility. One sentence in S4 should give pause: The state (the document itself puts "state" in bold letters) is responsible for S4 management, namely S4 preparation, supplementations, implementation, monitoring and evaluation.

In the global context, Slovenia is most definitely a success story and Slovenia can and should be proud of this. These proposals are intended to identify ways in which Slovenia might fulfil its potential as one of the hottest niche performers in Europe. It goes without saying that Slovenia will never rival Germany or the UK and that Serbia will eventually overtake Slovenia in economic might simply by virtue of the size of its market. That is not really relevant. Slovenia has only two million people and the challenge ahead is to make them among the richest and happiest two million people in the world. With greater economic openness, robust institutional reform, strong branding strategies and last but not least, a burja of confidence and optimism, the goal can be achieved!


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