Government measures

When the Capital Assets Management Agency of the Republic of Slovenia (AUKN) was created last year, it seemed to be a move which would ultimately lead to the reduction of state involvement in business. The independent organisation would, it was announced, review all state assets and determine which should be retained and which should be sold off. Could it be, at long last, that the endless and largely unproductive debates over privatisation in Slovenia would be concluded?

The perhaps obvious answer: no. For the moment, it seems that AUKN is far keener on retaining assets than it is on selling them. Nowhere is this more obvious than in the financial sector. In April, the Agency orchestrated a move which ensured the state took an indirect part in the capital increase at NKBM - an increase in which the government had previously said it would not be involved. It was a move which ensured that the state retained a large stake in Slovenia's second largest bank.

Three pillars

It has now become clear that this highly criticised development was central to the government's plans for Slovenia's financial services industry. That clarity has been provided by the Financial Sector Strategy, discussed by the cabinet last month, currently being reviewed by AUKN, and expected to go to parliament for confirmation by the end of June.

The strategy envisages three separate independent financial pillars in Slovenia - one around NLB; one around NKBM (a pillar will also include insurance firms Zavarovalnica Maribor, Zavarovalnica Tilia and reinsurer Pozavarovalnica Sava); and one around insurer Zavarovalnica Triglav.

The government has keenly promoted the strategy as a real break with tradition. Prime Minister Borut Pahor has gone as far as to label it a "milestone decision". He argues it is centred on a desire not to preserve majority stakes in the companies at any cost but instead as a "tool for having good banks and insurers."

In control

The strategy comes with lots of advice for those companies it concerns. The recommendations to NLB include a need to raise sufficient capital for growth and to form a suitable risk management strategy. NKBM is urged to harmonise its long-term strategy with all shareholders and improve its risk management and cost efficiency. Meanwhile Zavarovalnica Triglav is advised to bolster corporate governance at all its subsidiaries, to seek growth on the regional markets in which it is already present, and to expand its range of life insurance products.

It is that sort of detailed guidance, coupled with the emphasis on retaining controlling stakes, which has disappointed those who believe Slovenia's future lies in privatisation. It is true that the proposals would see the government greatly reduce its stakes in these firms - back to 25 percent plus one share in all instances. But the fact remains that this is only on the condition that the state remains the single-largest owner. Critics therefore believe the strategy is nothing but an entirely unsatisfactory compromise - a way to formally reduce state involvement in finance without really losing any influence.

A bad document

Igor Masten, a lecturer at the Ljubljana Faculty of Economics, has damned the proposal as "a bad document". He believes it has merely confirmed the goal of preserving the state's dominant role in the companies involved and criticises the lack of any clearly stated, economically justified goals.

"Anyone who knows how a strategy is written and justified sees that this is not a strategy," he argues. "It is not justified. There is no evaluation of effects. This is not a strategy."
Perhaps not a strategy in the way Masten defines one. But it is clear it's the government's financial strategy nonetheless - and it's far from being a non-controversial one.