C O N F I D E N T I A L LJUBLJANA 000190

SIPDIS


E.O. 12958: DECL: 03/23/2015
TAGS: PREL PGOV ETRD SI
SUBJECT: SCENESETTER FOR DEPUTY SECRETARY ZOELLICK'S VISIT
TO LJUBLJANA


Classified By: COM Thomas B. Robertson for Reasons 1.4 (b) and (d)


1. (SBU) SUMMARY. Your visit comes as Slovene Prime
Minister Janez Jansa completes his first 100 days in office,
and the gentlemen's agreement to temper public criticism of
the new government terminates. Jansa continues to enjoy
strong personal popularity, upwards of 66% in recent polls,
despite taking up several controversial issues, such as tax
reform, privatization, and labor reform, early on. Jansa and
his foreign minister, Dimitrij Rupel, have also set a more
positive tone on relations with the U.S. than has been heard
in Ljubljana in several years.


2. (C) Slovenia's foreign affairs agenda in 2005 is
dominated by its role as Chairman in Office (CiO) of the
OSCE. This is a job Slovenia willingly took on, and it is an
area where firm encouragement from the U.S. should help it
find the right path through difficult times. One of Jansa's
top domestic priorities is to "get the government out of the
economy," and to attract more foreign direct investment.
Success in this endeavor will require some finesse as the
government, through various holdings, has a controlling
interest in more than half of the economy. END SUMMARY.

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DRAWING CLOSER TO THE US
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3. (C) Your first visit to Ljubljana as Deputy Secretary is
a chance to acknowledge Slovenia's growing appreciation of
its obligations as a member of NATO and ally of the United
States. You should encourage both Jansa and Rupel to stay
the course. Public opinion is a mine-field where Iraq is
concerned, but Jansa has done a credible job thus far laying
the groundwork for possible, eventual Slovene participation
in a NATO operation inside Iraq.

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OSCE - SPECIAL INTEREST IN KOSOVO
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4. (C) This visit is another opportunity to re-inforce our
message on the way forward in the OSCE. Rupel has said that
as CiO, he wants to "revitalize, reform and rebalance" the
OSCE. In practice, Rupel has demonstrated a preference to
mediate the problems within the OSCE rather than provide the
strong leadership needed to work out of them. Amo

ng specific
goals for its Chairmanship, the GOS has made resolving the
regional problem of Kosovo in 2005 a top priority. The GOS
understands that Kosovo's status will be resolved within the
framework of the Contact Group and the UN. For the GOS,
however, getting it right on Kosovo is so important it will
not be put off this campaign in the context of the OSCE. In
its view, ensuring peace and stability in Kosovo is key to
ensuring a prosperous future for the region, and, thus, for
Slovenia. To that end, Rupel will use his bully pulpit as CiO
to press the international community to deal with standards
and status in parallel and in earnest. Slovenia has strong
economic interests in Kosovo as well, with nearly 30 million
Euro in exports in the first half of 2004. Rupel has already
visited Kosovo twice since becoming foreign minister in
November, and he is likely to have made his third visit by
the time of your meeting.

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FDI - NEED ACTION BEHIND THE RHETORIC
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5. (C) While Slovene business has been very aggressive in
entering regional markets, Slovenia has not been as welcoming
to foreign investment. Many Slovenes tend to see FDI as the
potential sell-off of the national patrimony. Foreign
investors are viewed as unlikely to have the best interests
of Slovenia or its workers in mind. The government must do a
much better job of explaining the need for it to divest
itself from the economy in order to ensure a bright economic


future for Slovenia. PM Jansa has stated publicly he wants
to attract more FDI, and this has been echoed by members of
his government, but they have not yet elaborated a strategy
or plan to take this idea beyond rhetoric.


6. (C) Despite the government's weak performance, there has,
in fact, been one new major investment since Jansa took
office. Denver-based United Global Telecom purchased
Slovenia's number one cable provider, Telemach, for
approximately $95 million in March 2005. At the same time,
the largest U.S. investor to-date, Western Wireless
International (WWI), is preparing to exit the market in
failure. Unfortunately, the Government of Slovenia does not
appreciate the damage to its own reputation this failure
represents. Our latest discussions with the GOS on the WWI
situation are not encouraging. Barring a solution between
WWI and Slovene wireless telecom provider, Mobitel, the GOS
believes the WWI case is weak and seems prepared to go to
court and defend itself.

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THE ECONOMY - NO PAIN, NO GAIN
--------------


7. (C) Slovenia is, in a sense, a victim of its own success.
Well ahead of its neighbors in economic development at the
time of independence, Slovenia has not had to make difficult
or dramatic changes to its system to sustain a comfortable
standard of living for its citizens. It has experienced
steady economic growth of 3-4% over the last several years.
Continuing this growth and controlling inflation are critical
as Slovenia prepares for its top economic priority - adopting
the Euro by 2007.


8. (C) With all that Slovenia has going for it: a talented
workforce, good infrastructure, a secure environment and a
stable government, we are watching business opportunities
pass right over Ljubljana and make Bratislava the first stop
in the region. Part of this is poor marketing: Slovenia, a
tiny country which did not exist 15 years ago, has failed to
aggressively place itself on the world map (as Slovakia has
done so successfully.) Beyond that, however, complaints of
current investors as well as Slovene business owners are
increasing. There is growing frustration with high labor
costs and an inflexible work force, a glacially slow legal
system and a general lack of transparency in the bureaucracy.
Rather than positioning itself as an open and friendly
destination for investments, Slovenia is viewed as an insular
and difficult environment in which to do business. For
Slovenia to realize its goal of being the leading edge of
stability in prosperity in south eastern Europe, it must
recognize and believe in the need to attract vibrant new
investment. To do this, it must undertake to reform its
labor system and minimize the bureaucracy of establishing
businesses. It must also get out there and sell itself to
potential investors.
ROBERTSON


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2005LJUBLJ00190 - Classification: CONFIDENTIAL



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