Harrah's: The Largest Foreign Investment Thus Far
However, this spending spree is far from over: In November, the largest Slovenian casino operator, HIT, and its American counterpart, Harrah's Entertainment, signed a letter of intent, paving the way for what is to be the biggest greenfield investment ever made by a foreign investor in Slovenia. The two companies plan to build an EUR 800 M mega-gaming and tourism centre in the western town of Nova Gorica. Each would contribute equally to the investment and consequently hold a 50% stake in the joint venture. HIT's chairman, Mr Branko Tomazic, believes that the project will enable the Slovenian company to more than double its clientele - from 1.5 million to 3.1 million a year - and raise its revenues from EUR 240 M in 2004 to EUR 420 M by 2008. Slovenia's gaming legislation has also influenced the make-up of the joint venture between the companies. Harrah's has already called on Mr Bajuk and the government to relax the tax legislation and lift restrictions on new gaming licenses. Harrah's would like to hold more than a 20% stake in the new casino, which however exceeds the allowable limit under Slovenia's current legislation. The latter limits the shareholdings of non-EU firms in the gaming industry to 20%, a barrier that can be surmounted only with the government's help. As the signature of the letter of intent shows, the government is obviously prepared to make an exception in Harrah's case, a fact that will be welcomed by all those critics who have at one time or another lamented the proverbial Slovenian animosity toward foreign direct investment. Mr Tomazic, for once, believes that the government is serious about the investment that would bring at least 2000 jobs. However, two key criteria will have to be met by the government if the Americans are to go into the deal: limits to ownership in gaming companies will have to be abolished and gaming tax cut. Mr Tomazic believes that the search for an appropriate tax environment could prove a major challenge for the government. He portrayed the possibility of Hit still having to pay a 38% gaming tax as unbearable; the tax for the new centre would be set at 12%. The drawing up of a new gaming tax law requires a lot of knowledge, said Tomazic, who doubts the government has it. "A bad law is the last thing we need...It could weaken Hit, and scare away the Americans if it does not meet their expectations." Whether the government can live up to these expectations and make the largest foreign investment ever on Slovenian soil remains to be seen, but at least according to foreign observers, Slovenia must make a real effort to shed its investor-unfriendly image. A respected Slovenian lobbyist in Brussels, Mr Boris Cizelj, for example, believes that Slovenia still views foreign investors with great suspicion, as if they are about to steal something. But not only that: even when investors decide to come to Slovenia, they immediately look elsewhere to invest. Slovenian land is expensive and the country is facing competition from places that virtually give away land so that jobs can be created, Cizelj explains. A little town of Krsko has recently come to feel what this means. The Danish company Rockwool decided not to construct its rockwool factory in Slovenia, but is expected to build it in the Croatian Istria, presumably due to lower land prices, lower, some say, than Slovenia could ever offer. Rockwool's investment in Krsko would indirectly provide 150 new jobs, with the number reaching 250 together with the maintenance services. Hopefully, Slovenian government will be able to learn from this example in order to be able to better attract foreign investments.