Slovenia’s Prospects Improve as new Government settles in
Slovenia’s attractions for foreign investors include its position at the intersection of traditional trade routes, its well-developed physical and ITC infrastructure, and its value chains, supplier networks and clusters. And what matters most when a country is on track to excellence is its ability to evolve. The global economic crisis did not spare Slovenia, but economic growth is back on track thanks to the quality, efficiency and responsiveness of the workforce. Strong FDI flows are expected as the restructuring of Slovenia’s economy gains pace and the perception of the country on international financial markets improves.
The good news for potential investors in Slovenia doesn’t end with bank stabilisation, as company restructuring has started to show results, and the first deals for sales of state-owned enterprises have been sealed. Slovenia’s share of exports on the global market increased for the first time since the crisis began, and the 5.3% and 3.4% y-o-y rise in exports and imports respectively in July are the first signs of economic recovery.
More structural changes will help revive economic growth, and Slovenia’s new government promises to improve conditions for corporate financing by fostering privatisation and better corporate governance of the banking system and the real estate sector. By boosting the innovative capacity of the economy and integrating enterprises into global supply chains, particularly through FDI, the value-added of goods and services will increase as new technologies enable more efficient use of resources without increasing environmental pressures.
In a nutshell, Slovenia’s economic development comes down to a larger inflow of FDI. To attract foreign investors, however, Slovenia has to improve its competitiveness by increasing value-added through greater innovation in the economy and a tangible improvement in the business environment. The Global Competitiveness Report 2014-2015 puts Slovenia in 70th place
out of 144 countries, but its individual rankings confirm the presence of the qualities so important to foreign investors: technological readiness (33rd), infrastructure (35th) and innovation (42nd). When we add in a highly educated workforce and a location close to European supply chains, Slovenia’s innovation-driven economy represents a great opportunity for smart investors.
Significant progress has been made in improving labour market efficiency by strengthening flexibility and other flexi-curity components and by adapting Slovenia’s education system to labour market needs. The number of researchers and population with a tertiary education is a reflection of substantial R&D investment over the past few years, but the transfer of knowledge from the research sector to the business sector to enable faster growth in innovation and economic competitiveness has to improve. More FDI projects are necessary to deploy a third-level educated workforce hit hard by manyyears of economic depression and to decrease the risk of brain drain. As mentioned, Slovenian governments have done a good job in recent years in removing the administrative barriers to doing business. An improved business environment will benefit the economy by attracting not only fresh capital but also new technologies, and convincing foreign investors to increase equity capital in their Slovenian subsidiaries is one of the challenges the new government will soon have to face.