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The government, with significant ownership stakes in companies as diverse as Slovenske železnice (Slovenian Railways), Ljubljana's airport and the port of Koper, is in a good position to carry out a merger between these stalwarts of the country's logistics sector. The idea of a Slovenian logistics holding dates back to the previous government of Janez Janša. Talks have been initiated with Deutsche Bahn (DB), a German railway operator and a logistics giant in its own right, about a strategic partnership, with the possibility of DB taking over the Slovenian holding in the future.

While bundling the logistics services now performed by separate companies into a single holding would certainly make the latter more attractive to foreign investors, it is by no means certain that the merger could be completed in a reasonable period of time. However, the end result of a merger would be a company that would have all the necessary infrastructure to perform intermodal logistics services.

Given the geographic position of Slovenia at the northernmost tip of Adriatic, acting as the most attractive gateway to Central Europe for Asian exports, this is an opportunity that should not be missed. That is why the current government picked up where the previous left off, continuing talks with DB, which has the necessary know-how and experience to catapult the country's logistics sector to a faster growth path, in the opinion of most experts.

Southward push

There would be something in the deal for both parties. Taking a historical perspective, one can see why DB might be the perfect partner for a Slovenian logistics holding. In 1856, a railway link between Vienna and Trieste was opened in what was then the Habsburg Empire. The strategic importance of that feat was hard to overestimate; the railway gave the land-locked empire access to the Adriatic, with Trieste serving as its window to the world.

What DB and its logistics subsidiary Schenker would gain from the merger with the Slovenian holding is clear: a port in the North Adriatic perfectly situated as the gateway for Asian exports into Europe. Although DB already services ports in the north of Europe, it takes the ships from Asia a week or so more to reach Hamburg or Rotterdam than Koper, making the latter a jewel in the crown of any logistics holding.

Juggling cargo

The entry of a major foreign logistics firm in Slovenia would give a boost to the country's logistics sector. Experts warn that not enough value is added to the logistics chain by Slovenian firms, which mainly act as providers of transit services, clogging the highways with heavy trucks and polluting the environment. With DB on board, boasting considerable financial clout, investment in logistics centres, offering services with higher added value, could finally take off.

That is not to say that Slovenian firms are not investing. The port of Koper has plans to build three distribution centres, two in Slovenia and one in Romania. Intereuropa recently opened a similar centre, handling cars, in Russia. Aerodrom Ljubljana, the operator of Ljubljana's airport, has ambitions to set up an intermodal logistics centre, integrating rail, sea and air transport. The government has decided to support these efforts by making logistics centres a priority of its policies in the field of transport and logistics.

All of the abovementioned firms would be a part of the holding. Luka Koper and Aerodrom Ljubljana managed to increase their revenues and profits last year, while Intereuropa posted a loss, mainly as a result of the cost of its biggest investment, a car distribution centre near Moscow.

Railway to hell

Observers say that the weakest link would be Slovenske železnice, a loss-making enterprise that simply cannot compete on the European market. In 2008, the state-owned railways had a loss of nearly EUR 24m, mainly in international cargo transport. The company transported 4.9 percent less cargo than the year before, mainly because the prices it charges for its services are too high. Militant trade unions and the state's cavalier attitude towards railway infrastructure are the main reasons for the decline of this once proud firm.

The opening of the European rail services market was therefore the last thing Slovenske železnice needed. Austrian competitors such as RCA and GKB are chipping at their market share, aggressively courting new customers. If the government were able to sell the company to DB as a part of the logistics holding, that would be a coup. The only question left unanswered is whether the Germans are willing to take the risk.