The Slovenia Times

Let's Talk About the Quality of Investors, Not the National Origin of Capital



The government recently approved the establishment of a new agency for promoting Slovenia - SPIRIT, which will bring together the existing agencies for tourist promotion (STO), corporate promotion (JAPTI) and technological and innovation promotion (TIA). How will you ensure that this will not be just another cosmetic reorganisation? From past experience it is more than clear that the main problems lay in capability, skill, attitude and not primarily in ineffective organisation?

In this process we want to achieve both greater efficiency and rationalisation. We want to use the good practices from each of the agencies to build a new organisational culture, primarily we want to establish a strong, credible point of entry into the Slovenian economy, this is the key idea.

Will the reorganisation into the SPIRIT agency be supported by a clear and credible strategy, operational projects and understandable content defining what the agency will be able to do? Historically, credibility was the biggest problem of Slovenia, it often happened that we promised or promoted a lot of things, we talked about different projects, strategic partners for some state owned companies etc... In the majority of cases potential investors lost interest because of excessive politicisation of every project, investment, takeover.... Promotion was just not supported by an operational and politically approved action plan?

We wish, of course, the most direct cooperation and communication between SPIRIT and economic policy, not just government but also with the policies of the real sector. To achieve this we adopted an overall strategic and operational document, "International Challenges 2013", where representatives of the government and the economy unified about key markets that will be approached next year. SPIRIT will be the key institution for the implementation of these goals and activities. I must emphasize that the expected composition of the agency council will bring responsibility to both, representatives from companies, the real economy and significant responsibility for key ministries involved in the internationalisation of the Slovenian economy.

Will forming this agency end the ongoing conflict between the Ministry of Foreign Affairs and the Ministry of Economy regarding the "ownership" of the economic diplomacy policy? From the outside, this dispute seems really strange given that both ministries exist within the government?

The fact is that we have quite a large number of institutions that deal with the internationalisation of the Slovenian economy. SPIRIT will definitely be an implementing institution, not the main coordinator or policymaker. This role will be held by the Strategic Council for Economic Cooperation with Foreign Countries, chaired by the Minister of the Economic Development and Technology and attended by the Minister of Foreign Affairs. I think that we came to a good agreement about the role of certain institutions and the system of work. I'm very happy that our colleagues from the Ministry of Foreign Affairs are prepared to do the best they can for the promotion of the Slovenian economy. We have adopted clear project organisation, each project will have an appointed coordinator so there will be no room for misunderstandings.

Short term, Slovenia can boost growth only through penetrating new markets with existing product and service structures. Recently the government adopted short term priorities which include markets like China, Turkey, Kazakhstan.... What will the operational activities be in these markets, how will you organise urgently needed "follow up" activities, traceability, the performance of various visits? Previously we saw alot of flying around the world with little or no success or results?

Firstly I would like to say that I basically agree with you. In the past we were not very successful in defining the goals and monitoring the results of different projects, activities... Because of that we highlighted six key countries in our "International Challenges 2013 Plan"; we will focus on China, India, Azerbaijan, Turkey, Kazakhstan and the Russian Federation. We assessed that Slovenian companies know very well how to establish cooperation, find business contacts in the EU and in the countries of the former Yugoslavia; of course we will not neglect these markets. The criteria why we chose the aforementioned key markets are: size, past and expected growth and last but not least - those countries are so called "government driven countries" and they need or are used to having a strong public sector or government partner on our side. About responsibility for follow up activities, every ministry will have to play their role and provide clear and updated input about projects, companies, conditions, the latest information.... Very important will be the cooperation and the input from the new State Sovereign Holding which will manage the state owned companies.

Will the new agency efficiently connecting the promotion of public and private projects, companies, opportunities register all possible project at the local and state level? Until now the promotion of Slovenia has been just too passive or oriented on general promotion, we were waiting for investors instead of searching for them?

Absolutely, this is one of the basic goals of the new agency. The absolute responsibility for the promotion of foreign direct investments will lie with the SPIRIT agency. From different economic chambers, local communities, state institutions we expect up to date information about all sorts of projects. SPIRIT will become the single entry point, a one stop shop for all investors, greenfield, portfolio...

We talk alot about the credit crunch in the Slovenian banking sector but at the same time as big a problem is the capital crunch. Companies are critically undercapitalised, they don't have adequate assets for development projects, new products. Short term they urgently need liquid funds primarily for refinancing old debts. One solution is definitely to attract more foreign capital but, as we know, we still don't have a clear operational strategy for attracting and implementing FDI. As a result, we are faced with the constant politicisation and failure of projects. When we will see the strategy which will answer how, what, under what conditions we sell something or what kind of partners we will cooperate with on new projects? For example, the latest open "political" question is the possible takeover of Ljubljanske mlekarne by Lactalis. Again we are talking about an undefined "national interest"!

From the point of our jurisdiction I would like to send a very clear message: Slovenia can develop only as an open economy. I think that this theme - do we need or want foreign investors - should not even be open and on the table. I think that we should talk about the quality of investors, not the national origin of capital. Personally, I am very happy that such a renowned group as Lactalis decided to enter the Slovenian market, I'm sure that they considered this move very precisely. I'm also sure that they will continue to cooperate with local milk suppliers. I would like to see more of such investors in Slovenia. I must again point out that we must talk about the quality of investors not about the national origin of the capital.

One of the sectors which is statistically in relatively good shape, in spite of the crisis, is tourism. Despite the favourable statistics which count overnights stays, arrivals in the country, etc ..., we see that situation in tourism companies show quite a different situation: a lot of them at borderline liquidity. Our traditionally strongest destinations are in stagnation, development projects are more or less on hold because of a lack of fresh capital, there is little or no comprehensive destination management, innovative thinking, let me list only the most obvious examples: Bovec, Bled, Bohinj, the Slovenian coast .....?

We are aware of these problems, certainly the statistics shows that Slovenia is an increasingly popular destination, also general tourist income shows that tourists spend more and more in our country. But for the better performance of the industry we need to raise efficiency, productivity, innovation, specifically as we face yet another major problem: many companies are owned by financial holding companies, they in fact demonstrate positive revenue growth, cost of labour, materials and depreciation are under control but sky high are the costs of financing! This means that these companies became cash cows for their owners which are draining the accumulation to cover their failed financial investments from the past. Therefore, I strongly disagree with those who say that Slovenian tourism creates a loss in core operations. But it could easily happen that we will see a decline in the future because those companies are just not able to invest in new quality, new services.

In Slovenia we have a problem with the integration of various projects and finding synergies, consequently the development potential is too fragmented around different projects and locations. For example, recently Slovenia signed the contract to build the South Stream Pipeline but due to lack of credible and up to date information it has already stirred many questions in the local community. Will we use and upgrade this project with additional projects that will bring additional benefits for the local communities and the economy in general? Will our companies be integrated in this huge building operation. Are we able to define, for example, parallel investments in new road infrastructure, upgrading tourist facilities in Kranjska Gora in conjunction with the Nordic Centre Planica? Someone could even ask why we are not planning to rebuild the railway to this popular Alpine region and further to Italy, will we start a second tube tunnel in Karavanke, build a normal road over the Vršič pass? Are we bold and innovative enough in our plans?

At our ministry we have already prepared a response to the Mayor of Kranjska Gora. As an expert in this field I would just say that I am well aware of the scope of the open issues. We must also all recognise that Slovenia signed the Alpine Convention which is very clear about activities affecting the environment. This project will be approached very carefully from all perspectives, sustainable tourism development, energy, in the economy as a whole we must find a compromise that will satisfy all interests. Surely technology, technical knowledge and know how enables the pipeline to be built underground, as I know that is the basic plan. We estimate that this will be a very good opportunity to derive other projects, infrastructure. This is a unique development opportunity and I am convinced that the South Stream Pipeline can bring a lot of positive things, especially for local communities.

Let me finish with the most recent issue. Just few weeks ago the first stage of the biggest event in Slovenia took place - the draw for the European Basketball Championship in 2013. How will Slovenia use this event for comprehensive promotion?

I've followed the project from its initiation when I was only in charge of the tourismpromotion and development in Slovenia. So far we have participated in the candidacy, trying to effectively combine a tourism and sporting event. But I must point out that often our expectations are too high. For example, the last championship in Poland failed to meet expectations and we must analyse why only Slovenia was prepared to invest in the organisation of this event. Definitely things are not optimal and shiny but I think that Slovenian economy must make the effort on their own to use this event for promotion, for inviting partners and show that Slovenia is a country open for business.


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