The Slovenia Times

Foreign capital - a choice or a necessity?



Dr. Tanja Mihalič, professor at the Economics Faculty of Ljubljana University says there are two key questions facing Slovenia's tourism sector. Firstly, does it want to improve the existence of foreign brands on its market; improve access to its market; and introduce some new knowledge? And does it need foreign capital or has it enough of its own?

Mihalič says the answers are fairly clear: "All of us in the tourist industry, including our government, are of the opinion that we need to open up to foreign investments and make it easier for foreign investors to enter our market."

The financial crisis has certainly bolstered that argument. Back in 2006, the share of tourism in the national gross domestic product was estimated at 5.5% and it was mainly reliant on domestic capital. In the previous investment cycle that ended in 2006, EUR 50m was invested in the sector and plans for the following investment cycle from 2007 to 2013 were to invest a further EUR 146m. Then the worldwide economic downturn hit.

"In the last year there hasn't been a lot of interest amongst investors," says Marjan Hribar, Director General at the Directorate for Tourism in the Ministry of the Economy. "Due to the economic crisis there weren't that many investments in the tourist industry".

Failed attempts

In short: foreign capital is needed. In the past there was a lot of talk of big foreign companies coming to Slovenia. In 2007, for instance, US company Harrah's Entertainment announced plans to build a joint venture with Slovenian Hit Group. Their mega-entertainment park in Nova Gorica was expected to be the largest of its kind in central Europe. It would have included hotels with over 650 top-class rooms, a 2000-seat congress centre, over 3000 gaming machines and 120 gaming tables. The deal, however, never went through.

"We have to recognise that Slovenia, in regards to foreign investment in tourism, was not the most successful," says Dimitrij Piciga, head of the Slovenian Tourist Organisation.

There were some success stories - the Kompas buyout by the Croatian, and the Austria Trend Hotel in Ljubljana. But they were nowhere near enough.

Where is the future?

So the question now is how to increase the number of success stories.

"At the moment, I think that Slovenia is best prepared for possible investments in the so-called cultural heritage management - castles - as a potential on the world market," argues Piciga. "We have the advantage that there aren't that many investment possibilities of this kind."

Although the financial crisis has made investors wary of parting with their money, the government is not giving up on attracting such capital.

"Some time ago we put together a brochure called Invest in Slovenian Tourism," says Hribar. "In there we have over 30 projects that we constantly offer to potential foreign investors."

Those projects cover the whole of Slovenia and range from wellness centres and golf courses, to castles.

Show me the money

But is having outlined projects enough? Everybody knows what elements attract foreign investors - one being the grace period for tax on profit.

"For the time being, even though we studied the situation thoroughly, these are not the elements that we are prepared to offer," says Hribar. "It is not the right time to do so and if we did that, it would be discriminatory to others that are already on the market."

"What we want to offer is a stable economic environment, safety, geographical location and similar advantages."

Slovenia will have to wait and see if that is enough.

More from Nekategorizirano