HARRAHQS INVESTMENT PLAN FALLS THROUGH

C O N F I D E N T I A L LJUBLJANA 000156

SIPDIS

DEPT FOR EUR/NCE
VIENNA FOR CQUINLIVAN
USDOC/ITA CHERIE RUSNAK

SIPDIS

E.O. 12958: DECL: 04/01/2018
TAGS: ECON EINV ETRD SI
SUBJECT: HARRAHQS INVESTMENT PLAN FALLS THROUGH


Classified by: CDA Maryruth Coleman for reasons 1.4(b) and
(d)

REF: A. Ljubljana 731


1. (C) On March 31, an advisor to HarrahQs Entertainment
informed Charge that HarrahQs has ended its efforts to
develop an entertainment/casino center in western Slovenia
with the Slovenian state-owned gaming company Hit.
HarrahQs executives sent private letters on March 31 to
Prime Minister Jansa and other top officials informing them
of the decision. According to the advisor, the primary
stumbling block was that HarrahQs and Hit could not agree
on an ownership/management structure that would give
HarrahQs the management control it required to move forward
with the joint venture. The advisor emphasized that
HarrahQs is not blaming anyone and believes that the
Slovenian Government (GOS) negotiated in good faith, though
she opined that from the beginning Hit employees felt
threatened by the project and blocked organizational
compromises by Hit that were necessary for the deal to go
forward. The advisor said HarrahQs would not comment
publicly on the termination of negotiations and hoped to
keep the news low profile. (Note: The matter has not hit
the local press as of April 1. End Note.)

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


2. (SBU) Foreign investment (FDI) has been on the decline
in Slovenia in recent years and the failure of the HarrahQs
JV reflects many of the reasons behind this trend.
HarrahQs proposed one billion dollar investment into the
entertainment project promised to bring over 500 new jobs
and attract a thousand additional visitors per day to the
Nova Gorica region of western Slovenia. But Hit employees
felt that their company would be hurt by participating in
the joint venture and that their jobs were at risk, and
they used the media and their influence with local
political and social leaders to stir up regional fears that
the project would result in overcrowding of the roads,
social problems due to gambling and an influx of foreign
employees to work in the hotel/casino. They skillfully
mobilized the Catholic Church and NGOs to oppose the
project. HarrahQs tried to counteract those fears with
town-hall meetings with local residents, but the company
only made modest progress in changing attitudes and Hit had
no interest in seeking to change these views because Hit
feared the competition that the JV would bring.


3. (C) Prime Minister Jansa consistently expressed support
for the joint venture, but the GOS did not actively promote
the project publicly. Over the past months, political
jostling has intensified in anticipation of the fall 2008
parliamentary elections, and the center-right GOS became
increasingly unwilling to push the HarrahQs project in the
face of regional opposition to foreign investment. During
the last three and a half years, HarrahQs and the Embassy
have worked hard to dispel ungrounded fears and
misinformation and stress the many benefits of U.S.
investment, but entrenched Slovene mistrust of foreign
investment won the day.


4. (SBU) It will take some time to convince conservative
Slovenians that rejecting foreign investment will hurt
their economy over the longer run. We are continuing to
work with pro-investment interlocutors here to change these
short-sighted views but if Slovenia elects a center-left
government in the fall elections, our task will likely be
more difficult. End Comment.

COLEMAN