Slovenia: bad investments, fears over Croatia's competition

With EU membership in July, Zagreb could obscure Ljubljana

08 January, 15:01

(ANSAmed) - Ljubljana, January 8 - Media in Ljubljana are raising fears that Croatia could become more attractive for investors than Slovenia after it becomes a full EU member on July 1. Slovenia is already suffering from a drastic reduction of foreign investments due to the crisis.

Starting next summer, Slovenia will not be the only western Balkan country to be a European Union member, a position it has skilfully used since 2004 as a 'bridge' for investors in the former Yugoslav republics. Croatia could however become the region's new star, financial daily Finance reports, not only for the new EU membership but also due to a more favourable general climate. The paper reported that, in spite of the many difficulties, investments in Croatia are carried out more quickly and in a more ambitious way thanks to tax incentives in industrial areas and a good cooperation between the central bureaucracy and local institutions - while the same cannot be said for Slovenia.

The most significant example cited is the beginning of construction work in one of the largest Ikea stores near Zagreb, an investment worth at least 100 million euros. The Swedish group has said for years it wants to open a similar establishment in Slovenia but has so far failed to do so, reportedly for the high prices of the land where it could build the mall near Ljubljana. Croatia for its part is building new roads around the Ikea store to attract a wider clientele and will even move by some kilometres toll booths at its own expense.

Meanwhile low cost airline Ryanair, which cancelled connections with the airports of Ljubljana and Maribor, has announced it intends to create its 54th base in Europe in Zara, Dalmatia, investing almost 70 million euros.

According to the president of the Slovenian business association, Samo Hribar Milcic, 'Slovenia is less and less attractive for foreign investors and increasingly less competitive'. Since reaching independence in 1991, the country has registered a total of 12 billion euros in direct investments, 49% from Austria. Although Germany, Italy and France are its three main commercial partners, not many investments have come from these countries. Before the crisis, the most interesting sector for foreigners were banks, now in great difficulty, while little capital was invested in industrial production.

The conservative government has said it believes the only investments on which the country will be able to count in the next few years will be foreign, alongside the transfer of European structural funds. This is why it has approved a gradual plan to reduce taxation on incomes, which should decrease from the 20% of few years ago to 15% in 2015. The cabinet is also planning to liberalize the labour market which is currently not very flexible and high cost compared to neighbouring countries like Croatia in another issue making Slovenia less attractive to investors.

A number of privatizations have also been announced and should concern the national Telekom, oil company Petrol and some of the largest banks. (ANSAmed)