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
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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
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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
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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

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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?
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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
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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