And the Winners Are ...
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The awards ceremony, complete with enian musicians playing Bizet's Carmen, were preceded by an exciting round table discussion about the current business climate for investors, which was attended by some leading experts in the field, including Peter Kraljič of the McKinsey & Company consultancy group.
Not attractive enough
The significance of the FDI awards soon became clear as the round table discussion took off. The problems of investing in Slovenia vary and were highlighted from different perspectives at the round table - consultants, professors, CEOs of multinational companies and foreign investors all took a part in the debate.
Kraljič argued that the general business climate in Slovenia is poor; regarding business efficiency, the country is in the bottom half for out of 57 countries polled. In contrast, Franjo Bobinac, CEO of Gorenje, one of Slovenia's biggest companies, suggested high taxes put investors off. This is also one of the reasons why Gorenje has moved some of its production to Serbia and the Czech Republic where, according to him, tax incentives for FDI are more favourable.
Mr Bahan Eldin Abdullah, chief financial officer at Iskraemeco, also singled out the high cost of labour, saying that latest reports suggest Slovenia has the highest social contributions in Europe, making gross wages and costs to the employer much higher than elsewhere.
The panellists agreed that there are also some "soft factors" that affect the low level of FDI. Marjan Svetličič, professor at the Faculty of Social Sciences in Ljubljana, suggested there is a general misconception by the Slovenes that foreign investors crowd out local investors.
Multinationalty matters
There may be a low level of FDI, but the Slovenean economy has grown regardless and "...we mustn't forget that Slovenia also invests abroad, which speaks for the strength of our economy," said Kraljič. He asserted that a positive sign for Slovenia is that it has more outflows than inflows.
Mr Svetličič agreed, adding that when FDI is compared to Slovenian multinational companies, the differences disappear. Supporting the expansion of Slovenia's companies abroad is especially important since companies cannot survive in small countries.
It was concluded, however, that Slovenia cannot promote the tion internationalization of its companies and discourage foreign investment at the same time. Furthermore, the government needs to introduce policies that support more foreign investment.
The government representative at the table, Darja Radič, State Secretary at the Ministry of Economy, had a lot of explaining to do. Agreeing there is still a lot that needs to be done, Radič emphasised that the government is working on resolving some of the problems mentioned in the discussion. Although there are currently no tax incentives specifically for FDI, the government has introduced tax relief measures for research and development as well as a special tax relief for the underdeveloped Pomurje region ,that, the government hopes, will stimulate foreign companies to invest there.
Thinking about the future
As the discussion drew to a close, the panellists moved away from analysing problems to looking to the future. Being a high-cost country, Slovenia is not high on the ladder of attractiveness for manufacturing. Thus, it was suggested that it should increasingly opt for different types of FDI, such as tourism, health, or education.
Another possibility for Slovenia is to become a centre for holding companies operating in the Balkan countries, possibly introducing specific tax havens for holding companies.
One could get a sense that the brain-storming could have gone on forever. Aut after more than an hour of vigorous debate, it was time to mellow the senses. The panel was removed, the music was set and a ballerina came out. The hard world of tax incentives, business expansions and high labour costs seemed miles away. The stage for the winners of the evening was set.
Serious commitment
The number of foreign investors may be small, but those who are in Slovenia have made serious long-term investments; their commitment has to be recognised.
The winners of the 4th annual FDI awards were XAL (Xenon Architectural Lighting) and Wolford, both from Austria. Together they employ 320 people in Slovenia, and their combined investment is worth over EUR 8 m. Interestingly, their main investments are in Pomurje, where not many Slovenian companies have found interest to operate so far.
XAL is a fast-growing company from Graz that specialises in manufacturing illumination and lighting systems for shops, offices, hotels and other spaces. The company has operations around the world and the expansion of its production into Slovenia's northeastern region of Pomurje is of a particular importance for the country. The region is one of the most under-developed, and the company's investment of EUR 1.5 mllion and creation of 50 jobs is a great boost to the region.
In less than a year, XAL has invested additional EUR 2.5 m in production halls; the expansion of the company's facilities means that 100 new jobs will be created over the next three years.
"We have had great support from local authorities. We are thankful to JAPTI as well; their support enabled us to act quickly", said Michael Engel of XAL, upon receiving the award.
Wolford, the second winner, is also from Graz and is a famous international hosiery brand, selling its product in over 60 countries around the world. Its investment in Slovenia is worth EUR 4.6 ms, going into the production of high-end ladies' hosiery in Murska Sobota, the administrative centre of Pomurje. This is company's first investment in a factory outside Austria. The number of new jobs is expected to reach 170 over the next three years which should further help to improve the economic development of the region.
"We have invested in Pomurje where we find motivated people, quality thinking and a good proximity to Austria", said Alois Gether of Wolford.