Slovenia strategy overview

Full strategy  (0.3Mb) Approved 7  Nov 2006

Strategija za Slovenijo  (0.6Mb) (SI)

Summary of public comments  (0.1Mb)

The Republic of Slovenia is committed to and applying the principles of multiparty democracy, pluralism and market economics and therefore continues to meet the conditions specified in Article 1 of the Agreement Establishing the Bank. Having just celebrated its 15th year as an independent state, the country is about to take a further step forward with the adoption of the Euro in January 2007. The Government has, however, identified significant challenges for the country over the coming years, particularly in improving competitiveness and economic growth, reforming public administration, and enhancing labour market flexibility.

Slovenia is an advanced transition country, with the highest GDP per capita among the Bank’s countries of operations. The country has recorded solid growth with low inflation and will be the first CEB country to adopt the euro in January 2007. However, the transition is not yet complete and a number of key challenges remain, particularly in large-scale privatization and institutional reform.

Key challenges

Resistance to the sale of profitable government-owned companies has acted as a particular drag on restructuring. The government still owns large shares in companies in sectors such as banking and insurance, telecommunications, and aluminium and steel. Overall, despite ambitious objectives, there has been slow and piecemeal implementation of the reforms.

There has been some progress in improving the business environment, such as the setting up of single access points for entrepreneurs in July 2005, which resulted in a significant decrease of the time and cost of registering as an individual private entrepreneur. The service is expected to be extended to the registration of limited liability companies and general partnerships in 2007. However, the business environment still faces a number of other obstacles.

Slovenia can access a wide range of sources of financing, including international financial markets thanks to its economic success and stability. However, specialised financial instruments, like long term structured finance, equity and quasi-equity offer yet unexploited alternatives to support the private corporate sector, especially SMEs. The very low funding costs of local banks are making it difficult, however, for the EBRD to offer attractive terms for its SME or municipal credit lines.

Since the last country strategy was approved, the Bank activities in Slovenia have remained limited due to the ready availability of debt financing from the banking sector and to the pace of reforms. The Bank has signed projects in the amount of EUR 56.0 million and EUR 28.2 million in years 2004 and 2005, respectively. All of the projects signed in 2004 and 2005 were either SME credit lines to banks and leasing companies or allocations from regional venture capital funds. The Bank’s contribution to the transition process has thus remained minimal overall, particularly in light of the Government’s decision to maintain majority ownership in NLB.

Operational objectives

Looking forward and taking into account the remaining transition challenges and the principle of additionality, the Bank’s activities in Slovenia will be very selective and based on the following operational objectives:

• Enterprise sector
  Provide equity and structured debt for local companies to fund their growth, in particular in the context of cross border expansion. Support foreign direct investment by medium-sized companies with higher risk products not offered by the private sector, particularly in regions of higher unemployment facing specific transition challenges. The Bank will also stand ready to support viable privatisation structures of the remaining state enterprises.
  
  
• Financial sector
  The Bank will offer capital market products to companies and financial institutions such as bonds and asset backed securities. The Bank will work on innovative products and support equity funds for Slovene corporate sector investments in the region. If there is a need, the Bank will also support the privatisation, consolidation, re structuring and, where appropriate, the integration of banking and insurance sectors to better serve the needs of the economy.
  
  
• Infrastructure and environment
  The Bank will strive to facilitate private sector involvement in infrastructure development.

The Bank will continue to ensure that all EBRD operations in Slovenia meet sound banking principles, have transition impact, are additional, comply with the Bank’s Environmental Procedures and incorporate, where appropriate, Environmental Action Plans.