The Slovenia Times

An Important Role



When the economic crisis hit in 2009, none of the countries of the Western Balkans suffered as grave a decline in economic growth as did Slovenia. The country has lagged behind on other economic measures too - notably the "open to investment" criteria where its performance is worse than every other nation in the region.

Not all bad

At first glance Slovenia's performance looks uninspiring when compared to the rest of the reason. But in many important respects the country deserves a pat on the back. In the Balkan constellation, the Slovenian economy has played a part which can for the most part be assessed as mutually beneficial and constructive. Notably, many Slovenian companies first "went international" on the regional Balkan markets thus guaranteeing their continued existence and in some instances gaining the necessary experience to approach other markets. Slovenian investment in Serbia can well be described as strategic; a significant number of Slovenian companies are already taking advantage of the duty-free export to the Russian Federation, with which Serbia has signed a free-trade agreement.

Opportunities lost

Clearly, a picture like this is bound to obscure some inconsistencies. The headline figures show that the news is not all good and so too does a closer look at some specific areas of the economy. For instance, exports have centred on more or less the same Slovenian flagship products for decades. Medicines, automobiles, home appliances. Despite good connections and apparent advantages compared to other countries, many contacts have been lost or insufficiently utilised. Another problem is that Slovenian firms tend to compete among themselves on all markets and often get stuck with small deals. What is also lacking is financial support and clear access to international development funds through which infrastructure, communal and development projects could be supported.
Significant problems and lost opportunities have in some cases led to the dissolution of business values. Such is the case in the Slovenian construction sector, which has lost its reputation along with a series of deals.

Looking forward

So what does Slovenia need to do to improve what it offers itself and the region? The simple answer is to set up a more encouraging environment for economic success. The complicated part is doing it.

The Western Balkans - an overview

Croatia, Slovenia's biggest trade partner in the region, is so close to EU membership that it has already started to publicly support the joining of Serbia and Bosnia and Herzegovina (BiH). It has the best developed economy in the Balkans, although the growth is largely a consequence of the increase in total and public investment based on the lending boom. The negative corollary and long-term risk lies in significant foreign debt.
Along with Albania, Kosovo holds the status of the poorest country in Europe. It has a predominantly agricultural economy and an excessive informal sector. Economic growth is mostly based on the private sector and trade.
Despite a highly rated business environment and open economy, Macedonia still fights a low living standard, unemployment and negligible economic growth.
Montenegro, much like Kosovo, enjoys the privileges of the Euro. It has an open trade regime and a relatively efficient legal framework for business and investment.
Serbia, Slovenia's biggest investment destination in the region, is pestered by a relatively high inflation rate and a drop of its currency Dinar by a third in relation to Euro since 2008. On the bright side, this contributed to 26 percent export growth in 2010. A huge problem is the nation's unbelievable brain-drain. Allegedly, half a million young qualified experts have left the country.
With a combination of rapid growth, low labour cost and low tax rates, Albania presents itself as the new China. Yet it is still one of the poorest European countries, with the fewest investments in the region.
Bosnia and Herzegovina (BiH) remains an internally divided market and hence the lowest assessed market in the Balkans with respect to economic freedom. It is in the club of European countries with soaring unemployment (estimated 43.1 percent in 2010).

Matej Rogelj is the deputy director at the Chamber of Commerce - Centre for Competitivness


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