SLOVENIA HAS LIMITED STRATEGIC ECONOMIC AGENDA

C O N F I D E N T I A L SECTION 01 OF 02 LJUBLJANA 000760 SIPDIS SIPDIS E.O. 12958: DECL: 12/11/2017 TAGS: ECON ETRD EINV PREL SI SUBJECT: SLOVENIA HAS LIMITED STRATEGIC ECONOMIC AGENDA Classified By: CDA MCOLEMAN E.O. 12958, reason 1.4 (b, d) Summary -------------- ¶1. (C) On November 29, EmbOffs accompanied Katherine Uhre, Senior Advisor of EEB's Commercial and Business Affairs Department, on a series of meetings with Slovenian officials from government economic agencies and commercial groups that highlighted Slovenia's disappointing lack of strategic economic vision. Officials from the Ministry of Economy (MOE) and the recently privatized Slovenian Chamber of Commerce and Industry had no plans to take advantage of Slovenia's six-month EU Presidency, starting on January 1, to try to boost foreign direct investment (FDI),although it is focused on promoting Slovenian companies abroad. They also could not list their top five priorities for 2008 and could offer no specific plans to bolster U.S.-Slovenian economic ties. Chamber of Commerce officials emphasized their struggle to attract members and identify member needs with a downsized staff and limited financial resources. The head of the Public Agency for Entrepreneurship and Foreign Investments (JAPTI) Peter Jesovnik touted Slovenia's commercially strategic geographic location and presented a more active, concrete agenda, but also pointed out that JAPTI's small budget and staff constrain its activities. Finally, President of the American Chamber of Commerce Tomaz Lovse offered no specific plans to achieve his group's objective to promote a future Slovenian economy more open to foreign investment. End Summary. Ministry Narrowly Focused on Promoting Exports -------------- - ¶2. (C) Petra Grilc, Head of the MOE's Bilateral Department, explained to Uhre and EmbOffs that Slovenia wants to become a more service-based economy, highlighting tourism as one of the potential leading sectors in this transformation. In response to a question from Uhre, Grilc could not list the ministry's top five priorities for promoting investment opportunities in Slovenia. She noted, however, that the GOS is focused on increasing its exports. It is in the process of opening Slovenian commercial representative offices in Brazil, China, and Russia to promote Slovenian small and medium enterprises (SME) abroad. Next year, it plans to possibly open additional offices in the Persian Gulf region. Grilc asked whether creating a representative office in the ;U.S. was worthwhile. She said that the MOE is working with the Slovenian Chamber of Commerce and Industry on a "20-20-20 plan" for 2008 to send 20 Slovenian commercial delegations abroad, host 20 foreign business delegations in Slovenia, and organize 20 commercially focused conferences and workshops. The MOE has no plans to send a Slovenian delegation to the U.S. in 2008, but it intends to send one to Canada. Good Intentions Frustrated by Limited Resources -------------- -- ¶3. (C) At the Slovenian Chamber of Commerce and Industry, Deputy Director Matej Rogelj confirmed that the Chamber is in the process of signing a contract with the MOE to coordinate the 20-20-20 plan. Rogelj said that the Chamber wants to focus on promoting business delegations to and from Slovenia but needs funding from the Ministry of Economy to finance these delegations. He explained that the Chamber cannot independently finance all its activities now that it is no longer a government entity authorized to compel all Slovenian companies to be dues-paying members. He noted that the Chamber's new "voluntary" membership is much smaller, and it has struggled to retool its mission, drastically reduce its staff, and attract new members. Area Director Marko Jare admitted that the Chamber had no specific plans to take advantage of Slovenia's EU presidency and will "follow the lead" of the GOS in this regard. He also said that the Chamber has no plans to conduct a "road show" during the presidency to promote Slovenian businesses, citing a lack of time and money. Jare asserted that Slovenian companies need to better tap EU funding programs and that the Chamber hopes to develop services to help companies take advantage of these opportunities. Rogelj confided at the end of the meeting that the Chamber and the MOE have not worked well together to establish more U.S.-Slovenian commercial relationships. ¶4. (C) In contrast to officials at the MOE, Peter Jesovnik, Director of JAPTI, radiated energy and enthusiasm for attracting more FDI to Slovenia. He told Uhre and EmbOffs that Slovenia's strategic location between Western and LJUBLJANA 00000760 002 OF 002 Central Europe makes it ideal to serve as a connector between these regions, especially suited for service sector industries, transportation and logistics concerns, shared service centers, and regional headquarters for multinational corporations. He noted that the proposed Harrah's Entertainment-HIT joint venture to build an entertainment center aimed at attracting regional customers was "perfect in this sense." Jesovnik touted a developed infrastructure, educated labor force, and the intersection of two major European railway corridors as Slovenia's best assets. He also mentioned that JAPTI had headed the GOS effort to establish eight special business zones in Slovenia that offer free land to industrial developers willing to invest in establishing a public-private partnership. Jesovnik professed that the biggest obstacle to attracting FDI to Slovenia is the negative "signal" sent by the lack of tax incentives and the refusal by many GOS officials, especially Minister of Economy Andrej Vizjak, to negotiate tax breaks with potential foreign investors. He also pointed out that JAPTI had very limited staffing and resources to carry out its agenda. Where's the Action Plan? -------------- ¶5. (C) Tomaz Lovse, the newly-elected President of the American Chamber of Commerce, opened his meeting with Uhre and EmbOffs by praising the success and benefits of Slovenia's slow, voucher-style approach to privatization: steady economic growth, a developed and engaged domestic private capital market, continuing Slovenian ownership and headquartering of key companies, and the lack of Russian-style oligarchs. He then turned to criticizing the GOS for its failure to target the "right kind" of FDI, allow more management buy-outs (MBOs),and revoke tax laws unfriendly to foreign residents and investors. Lovse asserted that GOS officials have wrongly focused on trying to attract "strategic investors" in Slovenia's blue chip companies, because they fail to understand that this approach will transform these companies into foreign subsidiaries. He contended that the GOS should instead concentrate on facilitating "portfolio investments" in these companies so that the companies retain their headquarters in Slovenia while attracting private capital. Lovse also blamed the GOS for fostering close collaborations among Slovenian banks, companies, and prominent political officials that have inflated business costs in Slovenia. For example, he claimed that Slovenia pays the highest cost per kilometer for building new highways in the EU because of a collaboration between the politically well-connected manager of Slovenia's largest construction company and its largest bank. Lovse neglected to offer, however, any concrete plans by AmCham to try to redress these problems. COMMENT -------------- ¶6. (C) The meetings suggest that the GOS still lacks a strategic economic vision to attract more FDI to help sustain its impressive post-independence track record of economic growth. MOE officials appear to focus mainly on domestic economic issues, and scant resources hamper their efforts to to manage bilateral and multilateral economic relations. The MOE seems to have no interest in trying to capitalize on Slovenia's upcoming EU Presidency. END COMMENT. ¶7. (U) Katherine Uhre has cleared on this cable. COLEMAN