SLOVENIA: COM CALLS ON NEW ECONMIN

UNCLAS LJUBLJANA 000501

SIPDIS


DEPT FOR EUR/NCE, EUR/ERA, EB
USDOC FOR 4232/MAC/EUR/EERIS/CEEBIC/BURGESS/ROGERS

SENSITIVE

E.O. 12958: N/A
TAGS: ECON ETRD PGOV PINR SI
SUBJECT: SLOVENIA: COM CALLS ON NEW ECONMIN

REF: LJUBLJANA 349

Sensitive but Unclassified. Please protect accordingly.


1. (U) SUMMARY: In a 26 May meeting, new Slovene Minister
of Economy, Matej Lahovnik, told COM that the Ministry would
like to make Slovenia even more "internationalized." He
advocated a gradual approach to investments and to
privatization, a process he said should be of equal access
to both domestic and foreign investors. He also stated his
belief that Slovenia will be able to weather the effects of
high oil prices and to fulfill successfully the ERM II
criteria. END SUMMARY


2. (U) COM, accompanied by DCM, PolEconOffs, and Econ
Specialist called on new Minister of Economy Matej Lahovnik
to congratulate him on his recent appointment as Minister
and to seek his insights into the state of the Slovenian
economy and the impact of EU membership. Dimitrij Grcar,
State Undersecretary for Multilateral Affairs, and Metka
Urbas, Head of Bilateral Department, also participated in
the meeting.

Internationalization of the Economy
--------------


3. (U) Lahovnik (who is 32 years old and looks even
younger) briefly explained his economic program, outlining
two major objectives. First, he wants to attract more FDI,
in particular "greenfield" investments. Lahovnik believes
that despite a relatively expensive labor force, Slovenia is
an "attractive destination for foreign investors."
Slovenia's highly skilled workforce and the desire of
foreign companies to get a stronger foothold in the EU add
to Slovenia's attractiveness. He also sees opportunities
connected with Slovenia's goal to become a bridge between
the EU and the Western Balkans. [Note: several countries
and companies from the region expect Slovenia to play that
role. End note.] As a second objective, Lahovnik wants to
accelerate the development of small and medium-size
companies (SMEs) by reducing administrative barriers. He
has set in motion a "one-stop-shopping" process for SME
permitting and applications at the ministry.

Investments
--------------


4. (U) Lahovnik did not answer COM's question of where and
how Slovenia would like to see Americans invest. Instead,
he stated that a conservative, gradual approach to
investment should be followed. Lahovnik pointed out that
Slovenia wants to attract more investments in order to
create new jobs. He is not against FDI, but does not
support the takeover of Slovenian blue chip companies.
Lahovnik admitted it is strange that the U.S. is ranked 12th
among foreign investors in Slovenia. [Note: Goodyear and
Western Wireless International are the two largest US
investors in Slovenia. End note.] He cited several
difficulties for investors, especially land availability.
He pointed out that Slovenian investors also "have problems"
and stated that the government should provide equal access
to domestic and foreign investors. Lahovnik was more
precise on Slovenia's outward investments, which are mainly
in Southern and Eastern Europe. Though figures are a small
percentage of GDP, investments are important so that
Slovenian companies can penetrate a larger market. He
believes that the government needs to provide Slovenian
businesses with more information on Western European
markets.

Privatization
--------------


5. (U) "Privatization of infrastructure is not my
portfolio", quickly explained Lahovnik. However, he added
that he is not against privatization and believes that the
government should not interfere too much in the process. He
again stated the need for equal access to foreign and
domestic investors, although he believes that there is no
need to privatize all companies. He also added that
privatization must be done gradually. (COMMENT: Lahovnik
used the word "gradual" at least a dozen times during the
meeting. We saw it as a sign of very typical Slovene
pragmatism when it comes to economic matters. END COMMENT)

Introduction of the Euro
--------------


6. (SBU) Lahovnik said that the introduction of ERM II is
essential for the Slovenian economy, in particular for


tourism. He understands the threats of the two-year
probationary period, but does not expect a speculative,
Soros-like currency attack because Slovenia's economy is so
strong. Lahovnik does not believe higher oil prices will
prevent Slovenia from meeting the Maastricht criteria, since
"targets are flexible - calculated as an average of best
performers within the EU, and they will also face similar
problems." However, he sees higher oil prices as a problem
in the long run because they will decrease economic growth.

Comment
--------------


7. (SBU) COMMENT: While Lahovnik lacks hands-on business
experience, he has a good understanding of economic
development. He seemed somewhat nervous, yet easy going,
during the meeting. His two overriding objectives are not
new in Slovenia, but no one has yet been successful in
meeting them. With just six months in office before
elections, we shouldn't bet heavily on his chances for
success. If leading politicians understand and agree with
his approach, however, he may get another ministerial term
after the fall elections. Lahovnik's bio was transmitted
reftel. END COMMENT.
YOUNG


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