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Diplomacy in Action

2013 Investment Climate Statement - Slovenia


2013 Investment Climate Statement
Bureau of Economic and Business Affairs
February 2013
Report
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Openness To, and Restrictions Upon, Foreign Investment

While an attractive location for Foreign Direct Investment (FDI), Slovenia also presents challenges to potential investors. A European Union (EU) member since May 2004 and a Eurozone member since January 2007, Slovenia’s modernized infrastructure, major port on the Adriatic Sea, and highly-educated, professional work force combine with access to Central/Southeastern European and EU markets.

The new Government of Slovenia (GoS) which came to power following early national elections in December 2011 has struggled to implement needed economic reforms as the global financial crisis took a painful toll on the local economy – unemployment was 12.2% as of November 2012 and analysts expect a further contraction in GDP through 2013. Public frustration with austerity measures and the “political elite” spilled over into protests and announced strikes around the county at the end of 2012 - some of which turned unusually violent. The pace of reform was also undermined by renewed political instability after a January 2013 report by the semi-independent Commission for the Prevention of Corruption accused both Prime Minister Janez Jansa (head of the Democratic Party of Slovenia) and Ljubljana Mayor Zoran Jankovic (head of the main opposition Positive Slovenia party) of failing to adequately report financial assets. As Jansa’s coalition partners called on him to resign in the wake of the report, it became increasingly likely that Slovenia could again be headed for early parliamentary elections.

In some economically depressed and underdeveloped regions (such as the Prekmurje region near the border with Hungary), Slovenia offers special facilities/services and financial incentives to foreign investors. The country is particularly welcoming of high-tech sector investments that create jobs and are linked to research and development (R&D) activities, for which special tax incentives are available. Although Slovenia has among the highest taxes in Europe, the government introduced tax cuts significantly reducing business costs, eliminated payroll taxes in 2009, and the corporate tax rate was lowered to 17% in January 2013.

Even so, while generally welcoming Greenfield investments, there are a number of informal barriers – including ambivalence toward FDI and the “clubby” nature of the Slovenian elite – presenting challenges for foreign investors. Foreign companies doing business in Slovenia and the local American Chamber of Commerce have cited several areas to improve the investment climate, including: the (GoS) lack of strategy to promote FDI, a sizable judicial backlog, difficulties in obtaining building permits, a high-level of labor market rigidity, high social contributions and personal income taxes coupled with excessive administrative tax burdens, the lack of transparency in public procurement, unnecessarily complex/time-consuming bureaucracy, and confusion over lead responsibility or jurisdiction regarding foreign investment among government agencies.

Unlike others in Central/Eastern Europe, Slovenia never underwent mass privatization, with the result that the percentage of companies owned or controlled either directly or indirectly by the state in key sectors, such as energy, transport, banking, telecommunication and insurance is among the highest in Europe. Large swaths of the manufacturing, construction, retail and tourism sectors are also owned or controlled (at least indirectly) by the state. Like the previous center-left government, which was brought down by internal wrangling over needed changes to the country’s creaking pension system, the current GoS has sought to push through a series of substantial economic reforms, despite opposition in Parliament and from trade unions. It has reached consensus on some issues – including unanimous political support for reforms to the pension system. Should the reform agenda stay on track despite the renewed political instability, Slovenia could see the introduction of long-delayed economic measures, including the sale of state assets. The Minister of Finance has identified the telecommunications, banking and insurance sectors as the first targets of privatization, with additional investment opportunities in the energy and transportation sectors.

The Public Agency of the Republic of Slovenia for Entrepreneurship and Foreign Investments (JAPTI) serves as Slovenia’s agency for foreign investment and promotion. Its mission is to enhance Slovenia’s economic competitiveness through technical and financial assistance to entrepreneurs, businesses and investors. Companies investing in Slovenia may be eligible for financial assistance in the form of grants from JAPTI, in addition to other incentives mentioned above. More information about JAPTI’s services, investment opportunities and incentives is available on their website - www.investslovenia.org.

Note: on January 1, 2013, JAPTI, the Slovenian Tourist Board (STO) and the Slovenian Technology Agency (TIA) were merged into one new agency, the Slovenian Public Agency for Entrepreneurship, Innovation, Development, Investment and Tourism, or SPIRIT Slovenia. The new agency will be led by an agency council and a director, with the government currently making appointments to fill these roles. In the meantime, the above website still functions for investment-related questions and information.

In 2012 Slovenia has held steady in its IMD World Competitiveness ranking, but slipped further on other rankings. The WEF index is particularly critical of Slovenia’s rules regarding foreign ownership and other regulations that have an impact on FDI.

Measure

Year

Ranking

TI Corruption Index

2012

37

Heritage Economic Freedom

2012

69

World Bank Doing Business

2013

35

IMD World Competitiveness Scoreboard

2012

51

KOF’s Globalization Index

2012

28

WEF’s Global Competitiveness Index

2012-2013

56

Conversion and Transfer Policies

Since September 1, 1995, Slovenia has adhered to Article VIII of the IMF Article of Agreement, thus committing itself to full current account convertibility and full repatriation of dividends. Slovenia replaced its previous currency, the Slovenian tolar, with the Euro in January 2007. In practice, to repatriate profits joint stock companies must provide the following: evidence of the settlement of tax liabilities; notarized evidence of distribution of profits to shareholders; and proof of joint stock company membership (Article of Association). All other companies need to provide evidence of the settlement of tax liabilities and the company's act of establishment.

For the repatriation of shares in a domestic company, the company must submit its act of establishment, a contract on share withdrawal, and evidence of the settlement of tax liabilities to the authorized bank.

Expropriation and Compensation

According to Article 69 of Slovenia’s Constitution, the right to possess real property can be taken away or limited, with compensation in kind or financial compensation under conditions determined by law on the basis of public interest.

There are no current expropriation-related investment disputes in Slovenia. National law gives adequate protection to all investments. However, there is an ongoing dispute over private property expropriated by the socialist Yugoslav government for state purposes. After the fall of Yugoslavia, the 1991 Denationalization Act created the basis for denationalizing these properties, returning them to the rightful owners or to their heirs, or else paying some amount of compensation if it was not possible to return the property “in nature.” Some of those rightful owners and heirs are now U.S. citizens. Since the 1993 deadline for filing a claim, roughly 97% of all cases have been resolved, but only about 88% of American-involved claims have been resolved. The Americans’ cases take longer for several reasons, most of which are tied to the fact that the claimants usually do not live in Slovenia. First, the Ministry of Justice must determine the nationality of the former owner at the time the property was seized – a simple question for Slovenes who never acquired another citizenship, but more complicated in cases involving naturalized American citizens. Second, many non-resident claimants fail to engage local attorneys, or only did so at the start of the process and have since let those retainers lapse. Third, simple communication/postal delays mean non-resident claimants take longer to respond to paperwork or other needs of their cases. Finally, there are also concerns that some claims involve property currently controlled or owned by prominent members of Slovene society, thereby creating an additional, though often unseen obstacle to restitution.

Dispute Settlement

Slovenia is a signatory to the 1958 New York Convention on Recognition of Foreign Arbitral Awards and the 1961 European Convention on International Commercial Arbitration. There have been no major investment disputes in the past five years. Investment disputes are handled as all other business disputes as described below.

Slovenia has a well-developed, structured legal system. It is based on a five-tier (district, regional, appeals, supreme, and administrative) court system. These courts deal with a vast array of legal cases including criminal, domestic relations, land disputes, contracts, and other business-related issues and probate. A separate social and labor court system, comprised of regional, appeals, and supreme courts, deals strictly with labor disputes, pensions, and other social welfare claims. Similar to most European countries, Slovenia also has a Constitutional Court that hears complaints alleging violations of human rights and personal freedoms, expresses its opinions on the constitutionality of international agreements and state statutes, and deals with other high profile political issues. In keeping with European legal standards, in 1997 the Slovene Parliament established an administrative court to handle disputes among local authorities, between state and local authorities, and between local authorities and executors of public authority.

The Parliament passed a law on Legal Proceedings in 1999 to speed up court proceedings. The law stipulates a stricter and more efficient procedure for serving court documents and providing evidence. For commercial cases, defendants are now required to file their defense within 15 days of receiving notice of a claim. As a result of EU warnings and GoS programs to reduce case backlogs, the efficiency of Slovenian courts has increased. Backlogs are now reduced to approximately six months. There were, however, 273,198 open cases as of September 30, 2012.

Unless parties have agreed to binding arbitration for disputes, the regional court specializing in economic issues has jurisdiction over business disputes. However, the parties may agree in writing to settle disputes in another court of jurisdiction.

The parties may also exclude the court as the adjudicator of the dispute if they agree in writing that contractual disputes be solved by arbitration, whether ad hoc or institutional. In the former case, the applicable procedure and law must be determined. In the case of institutional arbitration, the type of arbitration must be clearly defined. The Permanent Court of Arbitration within the Chamber of Economy is an independent institution that solves domestic and international disputes arising out of business transactions among companies.

The procedure before the Permanent Court of Arbitration at the Chamber of Economy of Slovenia is governed by the Regulations on the Procedure before the Permanent Court of Arbitration at the Chamber of Economy of Slovenia. Arbitration rulings are final and subject to execution.

Competition is keen in Slovenia and bankruptcies are an established and reliable means of working out firms' financial difficulties.

Slovene law provides three procedural methods for handling bankrupt debtors. The first, compulsory settlements, allows the insolvent debtor to submit a plan for financial reorganization with the Court. The Compulsory Settlement Plan is then voted upon by the creditors and must be accepted by those creditors whose claims represent more than 60% of the total claimed. If the settlement is accepted, the debtor is excused from the obligation to pay the creditor the amount that exceeds the percentage of payment set forth in the confirmed settlement. The payment terms are then extended in accordance with the conditions of forced settlement. Confirmed compulsory settlement affects creditors who have voted against compulsory settlement and creditors who have not reported their claims in the settlement procedure.

The creditor or debtor may also initiate bankruptcy procedures. The court names a bankruptcy administrator who sells the debtors property according to the bankruptcy senate president’s instructions and supervision. As a rule, the debtor’s property is sold by public auction. Otherwise, the creditors’ committee may prescribe a different mode of sale such as collecting offers or placing conditions for potential buyers. The legal effect of completed bankruptcy is the termination of the debtor’s legal status to conduct business, and the distribution of funds created from the sale of assets to creditors according to their share of total debt.

The third method, bankruptcy as forced liquidation, is distinguished from voluntary liquidation (without court intervention) as set forth in the Law on Commercial Companies. Forced liquidation is imposed on a debtor for whom the law determines the liquidation procedure and the legal conditions for ending his existence as a business entity. This would occur, for example, if the management does not operate for more than twelve months, if the court finds the registration void, or by court order.

Performance Requirements and Incentives

Slovenia is a signatory member of the WTO since its inception and to date the government has not violated WTO rules. Legally, all investors, domestic and foreign, are treated the equally. No performance requirements are imposed as a condition for establishing, maintaining, or expanding an investment. There are some incentives offered to potential investors through the "FDI Incentive Scheme." The Inward Investment Cost-Sharing Grant Scheme will co-fund investments in industry, strategic services, or research and development that will result in at least 10 to 50 new jobs. More information and application forms can be found at www.investslovenia.org. On the other hand, the rigid procedures necessary to acquire work permits serve as an impediment for foreign investors. It can take two to three months to obtain a work permit. The Ministry of Labor has established a fast-track procedure for foreigners who are registered in the court registry as authorized persons or representatives of companies, managers of branch offices, and for foreigners who are temporarily sent to work in organizational units for foreign legal persons registered in Slovenia. More information on work permits and employment services can be found at http://www.ess.gov.si.

Right to Private Ownership and Establishment

Private enterprise and ownership are promoted and protected in Slovenia, both by statute and the Constitution. Slovenia’s laws on foreign investment are fully harmonized with EU legislation. As provided for in the Law on Commercial Companies, all business activities within Slovenia are open to domestic and foreign natural and legal persons who may establish wholly or partially owned companies in any legal form provided by the Commercial Companies Act (Limited, General; Joint Stock Companies, Limited Liability Companies, and Partnerships Limited by Shares; and Economic Interest Groups). Foreign investors may freely invest in Slovene companies in most industries except in banking and insurance industries, where a permit from the Bank of Slovenia or Insurance Supervision Agency is needed. Furthermore, current regulations limit the foreign ownership stake in gaming interests to 20%. Foreign investors are permitted to obtain concessions for the exploitation of renewable and non-renewable natural and public goods. In addition, foreign and domestic investors have the same reporting requirements to the Bank of Slovenia.

Some restrictions are also applied to foreign investment in the field of military supply. For example, direct investments made by non-residents in companies or other entities that are engaged in the production of, or trade in, weaponry and military equipment are allowed only if specifically authorized by the Government of the Republic of Slovenia.

Any company registered in Slovenia is granted the status of a Slovenian legal entity under which they enjoy national treatment. Foreign investors are subject to the same legal treatment as domestic companies and enjoy the same rights and obligations. The registration process is rather simple and usually takes between three weeks and one month to complete. Registered foreign-owned companies may also become members of the Ljubljana Stock Exchange.

Foreign-owned companies are entitled to own property in Slovenia. All citizens and enterprises of the European Union or the United States have the same purchase rights and rights of use of land and natural resources as citizens and domestic enterprises. If a foreign citizen or legal person from a third (i.e., non-EU) country decides to establish a company in Slovenia, this company is considered a Slovenian legal person and as such can buy, own and sell real estate. However, while the law provides for these rights, some foreign companies have experienced unexplainable delays in obtaining land even after all the necessary paperwork was in order.

Foreign shareholders are entitled to free and unrestricted transfer of their profits abroad in foreign currency, providing that they meet their tax obligations. The 17% corporate tax rate in Slovenia applies to domestic and foreign companies and is among the lowest rates in Europe.

Credits and guarantees between residents and non-residents are regulated by the Foreign Exchange Act. The law differentiates between commercial and financial credits. Commercial credits are those credits relating to trade and rendering international services that involve a resident as one of the contracting parties. Commercial credits include contractual trade credits (deferred payments and/or advances) and their financing by banks. Factoring operations are also considered to be commercial credits, on the condition that the underlying operations from which the claims arise have the nature of commercial credits. All other operations are considered to be financial credits, including mortgage-backed and consumer loans as well as financial leasing operations.

All credit transactions, except commercial credits with payment delay or prepayments less than 12 months, must be in written form and contain all obligatory parts of the credit business. Authorized banks can undertake credit operations with non-residents for their own accounts and in their own name or in their own name and for someone else's account as his proxy. Institutions other than banks can undertake credit operations with non-residents for their own accounts and in their own name. Residents must report all credit operations with non-residents to the Bank of Slovenia within 10 days of signing the loan contract.

Larger banks in Slovenia also have specialized International Desks, which offer bank services to foreign companies and persons.

The 1999 Law on Banking allows foreign banks to establish branch offices in Slovenia. Since 1999, local borrowers have faced no restrictions with regards to borrowing from abroad, which was strictly regulated before the new legislation. Once Slovenia joined the EU, its banking regulation was entirely harmonized with the banking regulation of the EU.

As of June 2001, all restrictions on portfolio investments by foreigners in Slovenia had been abolished and the purchase of foreign equities by Slovenes fully liberalized.

There is no law, statute, or regulation that specifically deals with mortgage banking services in Slovenia. Since there is not a specific mortgage instrument, borrowers take classic loans with certain specifics related to real estate. The government also adopted a law which increased consumer protection level for loans with real estate collateral. However, the Government has committed itself to creating a mortgage banking system to include property assessments and deeds that will replace the current Land Registry system. Currently there are no special mortgage banks in Slovenia. Accordingly, only a few Slovenian banks offer mortgage loans per se. Nevertheless, banks provide loans that are secured by mortgages. They are frequently granted to corporate clients and entrepreneurs as well as to private individuals.

In order for mortgages to be effective against any owner of real estate, the mortgage must be registered in the Land Registry Book at the Land Registry Office. The Land Registry Book was introduced within the present territory of Slovenia in the 19th century and serves to inform the general public of the owner of land, buildings, and parts of buildings. Within the legal system, the Land Registry Book is connected in part with substantive civil law, which regulates default procedures on real estate.

Even though many banks give priority to the cash flow statements before the collateral of the loan, the use of mortgages to finance real estate developments is common in Slovenia. Mortgages are used as collateral for corporate financing of development projects. The creditor often requires the debtor to own, in equity, one and a half to two times the amount of the loan, depending on the debtor’s credit rating. Once the mortgage is consummated between the creditor and debtor, it is registered in the Land Registry Book. If the debtor defaults on the loan, the law provides for a foreclosure procedure on the mortgaged property.

Slovene banks also offer project financing services for construction and development projects. Under this program, the banks offer up to 70% financing (30% of the project cost is usually required from the investor’s own sources). The banks also offer advisory services pertaining to Slovene regulations on building and sales of real estate as well as transfer of ownership of the mortgaged real estate. As collateral, the bank usually requires a mortgage on the building being built.

Protection of Property Rights

Slovenia has enacted highly advanced and comprehensive legislation for the protection of intellectual property that fully reflects the most recent intellectual developments in the TRIPS Agreement (Trade Related Aspects of Intellectual Property) and various EU directives. Slovenia negotiated its TRIPS commitments as a developing country and implemented its commitments as of January 1, 1996. Slovenia is a full member of the TRIPS Council of the World Trade Organization (WTO) and the World Intellectual Property Organization (WIPO). Slovenia has already ratified the WIPO Copyright Treaty and the Cyber Crime Convention.

Slovenia’s Intellectual Protection Office actively participates in the Intellectual Property Working Party of the Council of Europe, the Trademark Committee and other EU working bodies in formulation of new EU legislation. The Copyright and Related Rights Act amended in 2001 and 2004 deals with all fields of modern copyright and related rights law, including traditional works and their authors, computer programs, audiovisual works, as well as rental and lending rights. The act also takes into account new technologies such as storage and electronic memory, original databases, satellite broadcasting, and cable re-transmission. The 2004 harmonization with the EU legislation introduced a new system of collective management of intellectual property rights following the latest directive.

The 1994 Law on Courts gives the District Court of Ljubljana exclusive subject matter jurisdiction over intellectual property disputes. The aim of the law is to ensure specialization of the judges and the speed of relevant proceedings. Concerning enforcement of the TRIPS Agreement provision, Slovene law provides for a number of civil legal sanctions, including injunctive relief and the removal of the infringement, the seizure and destruction of illegal copies and devices, the publication of the judgment in the media, compensatory and punitive damages, border (customs) measures, and the securing of evidence and other provisional measures without the prior notification and hearing of the other party. Furthermore, these infringements also constitute a misdemeanor with fines ranging from 400 Euro ($520) to 45,000 Euro ($58,500) for legal persons and a range of fines, from 40 Euro ($52) to 2,000 Euro ($2,600), for supervisors of individual offenders provided that the reported offenses are not criminal in nature. In such a case, the Slovenian Criminal Code would apply, which may result in fines or in extreme cases, imprisonment. While Slovene laws regarding intellectual property are clearly defined, there have been complaints by foreign investors about the slow nature of the court system.

Since the enactment of the Law on Copyright and Related Rights Act, there have been relatively few reported prosecutions for infringement violations. Most notable are cases of computer software piracy. In 2004, a long-running software piracy court case ended with a jail sentence and monetary fine. With piracy prosecution still in the early stages of implementation, Slovenia has dedicated resources to the training of prosecutors and public authorities. Slovenia continues to address the preservation of evidence in infringement procedures and border measures by amending existing legislation. Moreover, the Ministry of Culture established the Intellectual Property Fund, the Slovene Copyright Agency, and the Anti-Piracy Association of Software Dealers (BSA) to combat the problem of piracy in a collective manner.

The Law on Industrial Property grants and protects patents, model and design rights, trademark and service marks, and appellations of origin. The holder of a patent, model, or design right is entitled to: exclusively work the protected invention, shape, picture, or drawing; exclusively market any products manufactured in accordance with the protected invention, shape, picture, or drawing; dispose of the patent, model, or design right; prohibit use of a protected invention, model, or design, by any person without consent.

The holder of a trademark has the exclusive right to use the trademark in the course of trade to designate his products or services. The authorized user of a protected appellation of origin has the right to use the appellation in the course of trade for marking products to which the appellation refers.

The patent and trademark rights granted by the Law on Industrial Property take effect from the date of filing the appropriate applications. Patents are granted for twenty years from the date of filing and model and design rights are granted for ten years. Trademarks are granted for ten years, but may be renewed an unlimited number of times. The term of an appellation of origin is unlimited. All patents and trademarks are registered through the Slovenian Intellectual Property Office with all registers open to the public. Patent and trademark applications filed in member countries of the International Union for the Protection of Industrial Property are afforded priority rights in Slovenia. The priority period is 12 months for patents and six months for model and design rights.

Any person who infringes upon a patent or trademark right may be held liable for damages and prohibited from carrying on the infringing acts.

The Law on Industrial Property also provides for the contractual licensing of patents, model and design rights, and marks. All license agreements must be in writing and specify the duration of the license, the scope of the license, whether the license is exclusive or non-exclusive, and the amount of remuneration for the use if compensation is agreed upon.

Compulsory licenses may be granted to another person when the invention is in the public interest or the patentee misuses his rights granted under the patent. A misuse of a patent occurs when the patentee does not work or insufficiently works a patented invention and refuses to license other persons to work the protected invention or imposes unjustified conditions on the licensee. If a compulsory license is granted, the patentee is entitled to compensation. Slovene industrial property legislation fully complies with EU standards.

Transparency of Regulatory System

Foreign companies conducting business in Slovenia have the same rights, obligations, and responsibilities as domestic companies. The principles of commercial enterprise, free operation, and national treatment apply to the operations of foreign companies as well. Their basic rights are guaranteed by the Law on Commercial Companies and the Law on Foreign Transactions.

Generally, the bureaucratic procedures and practices are sufficiently streamlined and transparent for the foreign investor wishing to start a business in Slovenia. In order to establish a business in Slovenia, the foreign investor must produce a sufficient minimum amount of capital (10,000 Euro ($13,000) for a limited liability company and 25,000 Euro ($32,500) for a stock company), establish a business address, and file appropriate documentation with the court. The entire process usually takes from three weeks to one month, but may take longer in Ljubljana due to backlogs in the court.

Slovenia signed a reciprocal taxation treaty with the United States in June 1999. The rate of taxation of profits in Slovenia is lower than in the United States. Slovenia introduced the Value Added Tax (VAT) in July 1999. Slovenian VAT only has two grades, 8.5% and 20%. The standard VAT is 20% with 8.5% for some specialty items such as food products.

In Slovenia, highly concentrated market structures are not illegal per se; however, the abuse of market power is. The Law on the Protection of Competition prohibits acts that restrict competition in the market, conflict with good business practices relating to market access, or involve prohibited speculation. The law, which is fully harmonized with EU legislation, is applicable to corporate bodies and natural persons engaged in economic activities regardless of their legal form, organization, or ownership. The law also applies to the actions of public companies.

Restriction of competition through cartel agreements, unfair competition (i.e., false advertising, promises/gifts in exchange for business, trade secrets, etc.), illicit speculation during times of irregular market situations, and dumping and subsidized imports are all prohibited. The Government may, however, prescribe market restrictions in the following instances: in cases of natural disasters, epidemics, or in a state of emergency; in cases of appreciable market disturbances due to the shortage of goods; or when necessary to satisfy requirements for the products, raw materials, and semi-finished goods of special or strategic importance to the defense of the nation.

The Competition Protection Office (CPO) is charged with ensuring fair competition in the marketplace. Investigations can be initiated by the CPO or conducted at the request of private companies. The CPO can issue a decree against any company found to have violated the Law on the Protection of Competition, although the power to fine companies rests solely in the hands of the courts. Any party trading in goods or services on the market may initiate legal proceedings in cases of unfair competition. Injured parties are entitled to compensation and the injunction of the unfair acts.

The court may issue a penalty of 125,000 Euro ($162,500) to 1,000,000 Euro ($1,300,000) against companies found to have engaged in cartel agreements, abused a dominant market position, committed an act of unfair competition, or engaged in illicit speculation. The managers and directors of the sanctioned company may be liable for a minimum fine of 4,000 Euro ($5,200). Self-employed persons found to have committed any of the legally prohibited actions are liable for no less than 40,000 Euro ($52,000). There are also fines for not complying with the CPO in the range of 2,000 Euro to 4,000 Euro ($2,600 to $5,200) for every week that requested documentation is not submitted. The same range of fines also applies if the sanctions are not carried out.

Efficient Capital Markets and Portfolio Investment

The financial sector remains relatively underdeveloped for a country with Slovenia’s level of prosperity and is significantly affected by the turmoil of the economic crisis. Enterprises rarely raise capital through the stock market and instead must rely solely on the traditional banking system to meet their needs. The shallowness of the sector hinders economies of scale and now that the banks have severely limited their lending, it is severely hindering the growth of the real economy.

The banking sector in Slovenia is marked by a relatively high degree of concentration. The country’s largest two banks, both under state ownership, account for over 60% of the market share, while foreign-owned banks account for less than 30%. The banking sector also suffers from excess capacity, with 19 banks and 3 savings banks in a country of 2 million people. The total assets of the banking sector account for nearly EUR 50 billion, approximately 140% of GDP. At the onset of the worldwide economic crisis, the banking sector was largely able to avoid serious problems. However, the collapse of the Slovene construction sector, coupled with diminished demand for exports (nearly 70% of Slovenia’s GDP is derived from exports), led to severe capital inadequacy issues, as many loans were not appropriately collateralized, and bank assets have been steadily in decline since December 2009.

In the past, a number of Slovene banks have been partially or fully taken over by foreign banks. In addition, a number of Slovene banks have announced mergers. In 2001, French Societe Generale took over Slovenia’s largest private bank, SKB Banka. In October 2001, Italian banking group San Paolo IMI purchased 82% of the Bank of Koper, the fifth largest bank in Slovenia. In spring 2002, the Government sold 34% of the largest commercial bank, Nova Ljubljanska Banka (NLB), to the Belgian KBC Group, with another 5% sold to the European Bank for Reconstruction and Development (EBRD). After nearly a decade, Belgian-based KBC announced their withdrawal from NLB in December in 2012, with the government stepping in to recapitalize the bank. The GOS has announced it is searching for a strategic investor for NLB and NKBM (Nova Kreditna Banka Maribor), the nation’s second largest bank, though politicians disagree on whether to sell the banks in their entirety or maintain a controlling government share.

The Slovenian banking sector has been hit hard by the economic crisis. The largest Slovene banks (NLB and NKMB) have been downgraded several times by credit rating agencies this year due to the large number of non-performing loans in their portfolios, the need for recapitalization, the unstable domestic political situation and the looming threat from the Eurozone.

Banking legislation authorizes commercial banks, savings banks, and stock brokerage firms to purchase securities abroad. Investment funds may also purchase securities abroad provided that certain diversification requirements are met.

The Ljubljana Stock Exchange (LSE) was established in 1990 and is a member of the International Association of Stock Exchanges (FIBV). In 2008, the LSE was acquired by the Wiener Stock Exchange. However, the number of companies listed on the exchange is limited and their trading volume is very light with annual turnover similar to a single day’s trading on the NYSE.

In 1995, the Central Securities Clearing Corporation (KDD) was established. KDD runs the central registry securities and trade clearings concluded on the LSE electronic trading system. The Securities Market Agency (SMA), established in 1994, has powers similar to the SEC in the United States. The SMA supervises investment firms, the LSE, the KDD, investment funds, and management companies, and shares responsibility with the Bank of Slovenia for supervision of banking and investment services.

The LSE uses different dissemination systems, including real time online trading information via REUTERS or the BDS System. The LSE also publishes information on the Internet at http://www.ljse.si.

Slovenia’s legislation on takeovers has been fully harmonized with EU legislation. Slovenia implemented EU Directive 2004/25/ES on takeover legislation in July 2006 by adopting a new Takeover Law. The law has been amended in July 2008 reflecting changes after the country introduced new currency Euro. The law defines a takeover when a party acquires 25% voting rights. It requires a publicly announced takeover offer for all current shareholders. A new public takeover offer must be announced for each additional 10% of voting rights until the acquisition party reaches 75% of capital. The law stipulates that an acquisition party must inform the share-issuer whenever a buyer reaches, surpasses or drops below 5, 10, 20, 25, 1/3, 50 or 75% stake of the target company. The law applies to all potential takeovers. However, informally it appears that acquisitions are blocked or delayed regularly and easily. Never ending and stalled takeovers have hurt Slovenia’s reputation.

A high level of concentration characterizes the insurance sector in Slovenia with the largest company, state-owned Triglav d.d., holding 37% of the total market. The four largest insurance companies in Slovenia account for over 70% of the market share, while the combined market share of foreign insurance companies is less than 10%. Insurance companies invest their assets primarily in non-financial companies, state bonds, and bank-issued bonds.

There have been significant changes in the legislation regulating the insurance sector since 2000. The Ownership Transformation of Insurance Companies Act, designed to accomplish the privatization of insurance companies, was postponed several times due to ambiguity concerning the estimated share of state-controlled capital. Although insurance sector privatization discussions have been ongoing since 2005, no concrete plans have been implemented.

Currently, there are three health insurance companies registered in Slovenia and many other companies offering other kinds of insurance. However, under EU regulations, any insurance company registered in the EU can market its services in Slovenia as well, given that the insurance supervision agency of the country where this company is registered has notified the Slovenian Supervision Agency of the company’s intentions.

Foreign investors have equal rights as domestic investors in all respects, including the ability to obtain credit on the local market.

Competition from State-owned Companies

Private enterprises compete on the same terms and conditions as public enterprises in respect to the access to markets, credit, and other business operations.

State-owned and partially state-owned enterprises are present across industries, since the state retained significant ownership shares in many large companies. Some sectors, however, are more prone to be dominated by state owned companies, such as energy, transport, banking, and insurance that are considered of strategic national interest in Slovenia. However, many sectors of the economy, including the retail, entertainment, construction, tourism, and manufacturing sectors, contain important firms that are either wholly state owned or in which the state maintains a controlling interest by virtue of its holding the largest single block of shares.

Following OECD recommendations, the GoS established a new capital assets management agency (AUKN) in November 2010 to increase transparency and more efficient management of State owned enterprises (SOE). More than 95% of AUKN funds are invested domestically. The Agency is an independent state authority which, in compliance with the provisions of AUKN, is responsible to the National Assembly. The Agency reports annually to the National Assembly of the Republic of Slovenia with regard to the implementation of the Annual Plan of the Corporate Governance of Capital Investments for the previous year. The Annual Plan of the Corporate Governance of Capital Investments is adopted by the Government on the basis of the proposal of the Agency.

The Agency has been heavily criticized since its inception. The new government, elected in February 2012, prepared a plan to replace the inefficient AUKN with a new Slovenian State Holding Company (SSHC). SSHC was formally established by Parliamentary vote in January 2013 after a referendum request was been rejected by Constitutional Court. However, the SSHC will need approximately three months to become operational. In theory, the SSHC will comprise all state funds which hold state stakes in any Slovenian company. The goal, according to the government, is to simplify and shorten administrative procedures for privatization of state assets, though much will depend on the appointed leadership of the new entity.

SOEs are subject to the same legislation as private companies. They must submit their books to independent audit and publish annual report if required, i.e. if the SOE is listed on the stock exchange or if the size of the company meets the required threshold. The reporting standards are comparable to international financial reporting standards. SOEs fully fulfill their legal obligations.

Corporate Social Responsibility

Lately, the notion of corporate social responsibility has been gaining in value, but is not yet common practice. Larger companies have increasingly undertaken corporate social responsibility activities in order to raise their public profile and promote their firms, as such ventures are generally viewed favorably by Slovenian consumers; recent examples include the sponsoring of sports teams and community events. The tax code does not provide strong incentives for corporate social responsibility or philanthropy.

Political Violence

Except for a brief, ten-day conflict in 1991, there have been no incidents of political violence in Slovenia since independence.

Corruption

Corruption, including bribery, raises the costs and risks of doing business. Corruption has a corrosive impact on both market opportunities overseas for U.S. companies and the broader business climate. It also deters international investment, stifles economic growth and development, distorts prices, and undermines the rule of law.

It is important for U.S. companies, irrespective of their size, to assess the business climate in the relevant market in which they will be operating or investing, and to have an effective compliance program or measures to prevent and detect corruption, including foreign bribery. U.S. individuals and firms operating or investing in foreign markets should take the time to become familiar with the relevant anticorruption laws of both the foreign country and the United States in order to properly comply with them, and where appropriate, they should seek the advice of legal counsel.

The U.S. Government seeks to level the global playing field for U.S. businesses by encouraging other countries to take steps to criminalize their own companies’ acts of corruption, including bribery of foreign public officials, by requiring them to uphold their obligations under relevant international conventions. A U. S. firm that believes a competitor is seeking to use bribery of a foreign public official to secure a contract should bring this to the attention of appropriate U.S. agencies, as noted below.

  • U.S. Foreign Corrupt Practices Act: In 1977, the United States enacted the Foreign Corrupt Practices Act (FCPA), which makes it unlawful for a U.S. person, and certain foreign issuers of securities, to make a corrupt payment to foreign public officials for the purpose of obtaining or retaining business for or with, or directing business to, any person. The FCPA also applies to foreign firms and persons who take any act in furtherance of such a corrupt payment while in the United States. For more detailed information on the FCPA, see the FCPA Lay-Person’s Guide at: http://www.justice.gov/criminal/fraud/
  • Other Instruments: It is U.S. Government policy to promote good governance, including host country implementation and enforcement of anti-corruption laws and policies pursuant to their obligations under international agreements. Since enactment of the FCPA, the United States has been instrumental to the expansion of the international framework to fight corruption. Several significant components of this framework are the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (OECD Anti-bribery Convention), the United Nations Convention against Corruption (UN Convention), the Inter-American Convention against Corruption (OAS Convention), the Council of Europe Criminal and Civil Law Conventions, and a growing list of U.S. free trade agreements. Slovenia is a party to OECD, UN and EU conventions on corruption, but generally all countries prohibit the bribery and solicitation of their public officials.
  • OECD Anti-bribery Convention: The OECD Anti-bribery Convention entered into force in February 1999. As of March 2009, there are 38 parties to the Convention including the United States (see http://www.oecd.org/dataoecd/59/13/40272933.pdf). Major exporters China, India, and Russia are not parties, although the U.S. Government strongly endorses their eventual accession to the Convention. The Convention obligates the Parties to criminalize bribery of foreign public officials in the conduct of international business. The United States meets its international obligations under the OECD anti Convention through the U.S. FCPA.
  • UN Convention: The UN Anticorruption Convention entered into force on December 14, 2005, and there are 158 parties to it as of November 2011 (see http://www.unodc.org/unodc/en/treaties/CAC/signatories.html). The UN Convention is the first global comprehensive international anticorruption agreement. The UN Convention requires countries to establish criminal and other offences to cover a wide range of acts of corruption. The UN Convention goes beyond previous anticorruption instruments, covering a broad range of issues ranging from basic forms of corruption such as bribery and solicitation, embezzlement, trading in influence to the concealment and laundering of the proceeds of corruption. The Convention contains transnational business bribery provisions that are functionally similar to those in the OECD Anti-bribery Convention and contains provisions on private sector auditing and books and records requirements. Other provisions address matters such as prevention, international cooperation, and asset recovery.
  • OAS Convention: In 1996, the Member States of the Organization of American States (OAS) adopted the first international anticorruption legal instrument, the Inter-American Convention against Corruption (OAS Convention), which entered into force in March 1997. The OAS Convention, among other things, establishes a set of preventive measures against corruption provides for the criminalization of certain acts of corruption, including transnational bribery and illicit enrichment, and contains a series of provisions to strengthen the cooperation between its States Parties in areas such as mutual legal assistance and technical cooperation. As of December 2009, the OAS Convention has 34 parties (see http://www.oas.org/juridico/english/Sigs/b-58.html)
  • Council of Europe Criminal Law and Civil Law Conventions: Many European countries are parties to either the Council of Europe (CoE) Criminal Law Convention on Corruption, the Civil Law Convention, or both. The Criminal Law Convention requires criminalization of a wide range of national and transnational conduct, including bribery, money-laundering, and account offenses. It also incorporates provisions on liability of legal persons and witness protection. The Civil Law Convention includes provisions on compensation for damage relating to corrupt acts, whistleblower protection, and validity of contracts, inter alia. The Group of States against Corruption (GRECO) was established in 1999 by the CoE to monitor compliance with these and related anti-corruption standards. Currently, GRECO comprises 49 member States (48 European countries and the United States). As of December 2011, the Criminal Law Convention has 43 parties and the Civil Law Convention has 34 (see www.coe.int/greco.)
  • Free Trade Agreements: While it is U.S. Government policy to include anticorruption provisions in free trade agreements (FTAs) that it negotiates with its trading partners, the anticorruption provisions have evolved over time. The most recent FTAs negotiated now require trading partners to criminalize “active bribery” of public officials (offering bribes to any public official must be made a criminal offense, both domestically and trans-nationally) as well as domestic “passive bribery” (solicitation of a bribe by a domestic official). All U.S. FTAs may be found at the U.S. Trade Representative Website: http://www.ustr.gov/trade-agreements/free-trade-agreements.
  • Local Laws: U.S. firms should familiarize themselves with local anticorruption laws, and, where appropriate, seek legal counsel. While the U.S. Department of Commerce cannot provide legal advice on local laws, the Department’s U.S. and Foreign Commercial Service can provide assistance with navigating the host country’s legal system and obtaining a list of local legal counsel.
  • Assistance for U.S. Businesses: The U.S. Department of Commerce offers several services to aid U.S. businesses seeking to address business-related corruption issues. For example, the U.S. and Foreign Commercial Service can provide services that may assist U.S. companies in conducting their due diligence as part of the company’s overarching compliance program when choosing business partners or agents overseas. The U.S. Foreign and Commercial Service can be reached directly through its offices in every major U.S. and foreign city, or through its Website at www.trade.gov/cs.
  • The Departments of Commerce and State provide worldwide support for qualified U.S. companies bidding on foreign government contracts through the Commerce Department’s Advocacy Center and State’s Office of Commercial and Business Affairs. Problems, including alleged corruption by foreign governments or competitors, encountered by U.S. companies in seeking such foreign business opportunities can be brought to the attention of appropriate U.S. government officials, including local embassy personnel and through the Department of Commerce Trade Compliance Center “Report A Trade Barrier” Website at tcc.export.gov/Report_a_Barrier/index.asp.
  • Guidance on the U.S. FCPA: The Department of Justice’s (DOJ) FCPA Opinion Procedure enables U.S. firms and individuals to request a statement of the Justice Department’s present enforcement intentions under the anti-bribery provisions of the FCPA regarding any proposed business conduct. The details of the opinion procedure are available on DOJ’s Fraud Section Website at www.justice.gov/criminal/fraud/fcpa. Although the Department of Commerce has no enforcement role with respect to the FCPA, it supplies general guidance to U.S. exporters who have questions about the FCPA and about international developments concerning the FCPA. For further information, see the Office of the Chief Counsel for International Counsel, U.S. Department of Commerce, Website, at http://www.ogc.doc.gov/trans_anti_bribery.html. More general information on the FCPA is available at the Websites listed below.
  • Exporters and investors should be aware that generally all countries prohibit the bribery of their public officials, and prohibit their officials from soliciting bribes under domestic laws. Most countries are required to criminalize such bribery and other acts of corruption by virtue of being parties to various international conventions discussed above.
  • Similar to many other European countries, Slovenia does not have a bribery statute equal in stature to the U.S. Foreign Corrupt Practices Act. However, Chapter 24 of the Slovene Criminal Code (S.C.C.) provides statutory provisions for criminal offenses in the economic sector. Corruption in the economy can take the form of corruption among private firms or corruption among public officials.
  • The S.C.C. provides for criminal sanctions against officials of private firms for the following crimes: forgery or destruction of business documents; unauthorized use or disclosure of business secrets; insider trading; embezzlement; acceptance of gifts under certain circumstances; money laundering; and tax evasion.
  • Specifically, Articles 241 and 242 of the S.C.C. make it illegal for a person performing a commercial activity to demand or accept undue rewards, gifts, or other material benefits that will ultimately result in the harm or neglect of his business organization. While Article 241 makes it illegal to accept gifts, Article 242 prohibits the tender of gifts in order to gain an undue advantage at the conclusion of any business dealings.
  • Public officials are held accountable under Article 261 of the S.C.C., which makes it illegal for a public official to request or accept a gift in order to perform or omit an official act within the scope of his official duties. The acceptance of a bribe by a public official may result in a fine or imprisonment of no less than one year, with a maximum sentence of five years. The accepted gift/bribe is also seized.
  • While Article 261 holds public officials accountable, Article 262 holds the gift’s donor accountable. Article 262 makes it illegal for natural persons or legal entities to bribe public officials with gifts. Violation of this article carries a sentence of up to three years. However, if the presenter of the gift discloses such bribery before it is detected or discovered, punishment may be omitted. Generally, the gift is seized. However, if the presenter of the gift disclosed the violation, the gift may be returned to him/her.
  • The State Prosecutor’s Office is responsible for the enforcement of the anti-bribery provisions. The number of cases of actual bribery is small and is generally limited to instances involving inspection and tax collection. Although the Prosecutor’s Office may suspect bribery and related corruption practices in government procurement offices, obtaining evidence is difficult, thereby making it equally difficult to prosecute. In addition, in 2010 Slovenia established the Commission for the Prevention of Corruption (CPC), an independent state body, with a broad mandate to prevent and investigate corruption, breaches of ethics, and integrity of public officials. The CPC is not part of the law enforcement or prosecution system of Slovenia and its employees do not have typical police powers. The CPC does, however, have broad legal powers to access and subpoena financial and other documents, question public servants and officials, conduct administrative investigations and proceedings and instruct different law enforcement bodies to gather additional information and evidence within the limits of their authority. While the CPC cannot prosecute cases (only recommend to the State Prosecutor’s Office), it can issue fines for different violations (sanctions can be appealed to the Court).
  • To combat ongoing problems with corruption and nontransparent procedures in public procurement, in 2011 the government established a new Public Procurement Agency. The agency is a central procurement institution for the entire public administration and carries out all public procurements over the established EU thresholds (which varies from sector to sector, i.e. goods and services above 40,000 Euro and works above 80,000 Euros). The agency reports to the Ministry of Justice. Slovenia legislation also provides for non-judicial review of all public procurements by the National Review Commission.

While it is an important problem facing the country, corruption in Slovenia is on a relatively minor scale compared to other former-communist countries in Eastern and Central Europe. 2001 saw Slovenia’s first scandal involving a high public official convicted of accepting a bribe. The second such case occurred in 2010 resulting in imprisonment of a member of the parliament. The small size of Slovenia’s political and economic elite contributes to a lack of transparency in government procurement and widespread cronyism in the business sector. Currently, multiple prominent national and local political figures have been charged or are on trial for corruption in public procurements. The CPC has instituted a new system for tracking corruption in public procurements at the municipal level and in one week’s time discovered 61 violations involving seven municipalities and hundreds of suspect deals in 86 municipalities. As noted above (see first section), a CPC report was at the center of a January 2013 political crisis which could bring down the government.

Bilateral Investment Agreements

Slovenia has signed Bilateral Investment Treaties (BITs) with Albania, Australia, Austria, Belarus, Belgium - Luxembourg Economic Union, Bosnia & Herzegovina, Bulgaria, Chile, China, Croatia, Cuba, Czech Republic, Denmark, Egypt, Finland, France, Germany, Greece, Hungary, Iceland, India, Ireland, Israel, Italy, Kuwait, Lithuania, Macedonia (F.Y.R.), Malaysia, Malta, Moldova, Montenegro, Netherlands, Norway, Poland, Portugal, Romania, Russian Federation, Singapore, Slovak Republic, Spain, Sweden, Switzerland, Thailand, Turkey, Ukraine, the United Kingdom, Uzbekistan, and Serbia. Slovenia is currently negotiating BITs with Iran and Kazakhstan. Slovenia does not have a BIT with the United States due to ongoing discussions between the United States and the EU on how member states without a BIT treaty will accede to the U.S.-EU BIT agreement.

OPIC and Other Investment Insurance Programs

The U.S. Overseas Private Investment Corporation (OPIC) and Slovenia signed a bilateral agreement on April 24, 1994. There are currently a number of OPIC investment finance and insurance programs available in Slovenia, including loan guarantees, direct loans, and political violence and expropriation insurance.

The U.S. Export-Import Bank offers short-, medium-, and long-term private sector as well as short-term public sector programs in Slovenia. In July 1999, the Slovenian Export Corporation (SEC) and the U.S. Export-Import Bank signed a memorandum on cooperation in financing, insuring, and reinsuring exports to Southeast European countries. In January 2007, the SEC restructured to become the Slovenian Export and Development Bank. More information is available on their website www.sid.si.

Labor

In September 2008, the unemployment rate stood at a record-low 3.9% (according to the ILO method). However, when the global financial crisis hit Slovenia in the last quarter of 2008, it pushed the unemployment rate up substantially. In 2012, the unemployment rate hovered around 8.5 percent. The outlook for 2013 is negative. Youth unemployment is disproportionately high – around 15 percent. Since 2008, Slovenia has had significant layoffs and bankruptcies, especially in construction, automotive, textile and other sectors of industrial production. The government’s economic reforms propose to address this problem through a combination of retraining and investment in new technologies. The regions, where the level of unemployment is the highest, are primarily in the northeast.

Slovenia fully harmonized its labor legislation with the EU on May 1, 2004. In line with new legislation, Slovenia has retained strict rules on issuing work permits to non-EU applicants. The 2001 Employment of Aliens Act introduces a quota system for work permits and simplifies the procedure for obtaining work permits for foreigners who have worked and lived in Slovenia over a long period of time.

Slovenia’s wage-setting practice follows the "social partners" model, designed to contain upward pressure by centralizing wage decisions. In practice, however, high wage expectations have pushed Slovenia’s wage levels far above those of its central European neighbors. In addition, growing labor unrest has placed pressure for wages to rise further. However, its well-educated labor force and position as the most productive transition economy allows it to remain competitive in niche markets.

Slovenia adopted an Employment Relationship Act that entered into force in January 2003. The Act defines a full time workweek as 36 to 40 hours (made up of six to eight-hour days including a 30-minute lunch break), increases protection of critical working groups (including women and children), and eases the conditions under which an employer may terminate employees. Still, Slovenia needs to introduce a major labor reform if the country wants to have more flexible labor market in order to compete on the global economy. The government has already begun negotiations with unions and targets labor reform implementation by the end of 2013.

Slovenia’s labor force performs well in the higher value-added activities that utilize its skilled technicians and engineers at a somewhat lower cost than in the developed West. However, Slovenia would benefit from a workforce with stronger managerial skills, most notably in the banking and insurance sectors. Despite the introduction of greater labor market flexibility, the market for workers remains quite rigid and investors will find that termination of workers is more difficult than in the United States. In addition, the labor market remains relatively over-protected, and pay scales in public service are very complicated and do not reward performance.

In February 2010, the government implemented an increase to the minimum wage that will be phased in over the next 3 years. The minimum wage has risen from the level of 460 Euros (USD598) to 510 Euros (USD663) in 2010, 530 Euros (USD689) in 2011, and will rise to 562 Euros (USD730) in 2012.

The current economic crisis caused the government not to fulfill an agreement with the unions on public sector salaries and fueled an ongoing conflict. The unions helped to undermine major economic reform measures proposed by the government in 2011. The failure of these reforms weakened the government and helped to spur early elections in December 2011. Further negotiations in 2012 yielded no progress and unions have organized a series of strikes and protests aimed at galvanizing support for workers’ rights. New union negotiations are scheduled for spring of 2013.

Foreign-Trade Zones/Free Ports/Foreign Trade Zones/Free Trade Zones

There are two kinds of Free Trade Zones in Slovenia: Free Economic Zones and Free Customs Zones.

Free Economic Zones

Free economic zones (FEZ) exist in Koper and Maribor. FEZs may be established by one or more domestic legal persons. The founders must provide the resources necessary for the establishment and commencement of operation, as well as suitable technical, organizational, ecological, and other conditions for the performance of business activities.

The following activities may be performed within free economic zones: production and services; wholesale trade; banking and other financial services; and insurance and reinsurance regarding the above mentioned activities.

After obtaining an appropriate tax authority decision, users of FEZs are entitled to the following benefits:

(i) VAT exemption for imports of equipment, production materials, and services necessary for export production or performance of other permitted activities;

(ii) a reduction in corporate tax rates from the normal 21% to 10%;

(iii) a tax allowance amounting to 50% of invested resources on investments in tangible assets in the FEZ; and

(iv) a reduction in the taxable base amounting to 50% of the salaries of apprentices and other workers formerly unemployed for at least 6 months.

While FEZ Koper is fully operational, only a few companies are present in FEZ Maribor. Despite the lack of success in Maribor, the government adopted an amendment to the Law on Free Economic Zones in January 2010, guaranteeing the FEZs operations through at least January 1, 2016.

Free Customs Zones

As of December 2009, the only free customs zone (FCZ) in Slovenia is the Port of Koper. Under the Customs Act, subjects operating in FCZs are not liable for payment of customs duties, nor are they subject to other trade policy measures until goods are released into free circulation.

Duties and rights of users include the following:

(i) Separate books must be kept for activities undertaken in FCZs;

(ii) Users may undertake business activities in a FCZ on the basis of contracts with the founders of FCZs;

(iii) Users are free to import goods (customs goods, domestic goods for export) into FCZs;

(iv) Goods imported into FCZs may remain for an indefinite period, except agricultural produce, for which a time limit is set by the government;

(v) Entry to and exit from FCZs is to be controlled;

(vi) Founders and users must allow customs or other responsible authorities to execute customs or other supervision; and

(vii) For the purposes of customs control, users must keep records of all goods imported into, exported from, or consumed or altered in FCZs.

The Customs Act also allows the establishment of open FCZs that will allow for more flexible organization and customs’ authorities’ supervision.

In such FCZs, users may undertake the following activities:

(i) Production and service activities, including handicrafts, defined in the founding act or contract, and banking and other financial business transactions, property and personal insurance and reinsurance connected with the activities undertaken;

(ii) Wholesale transactions; and

(iii) Retail sales, but only for other users of the zone or for use within the FCZ.

Slovenia has recently developed land sites designed for Greenfield investments. Most of the newly developed industrial zones have direct access to highways and rail service and well developed infrastructure. Land prices can vary greatly. Municipalities and the State often subsidize infrastructure and land costs, as they would like to increase employment opportunities, reducing the rate for fully equipped land in industrial zones. In Lendava, a town located in the eastern part of the country, the price per square meter of land is roughly 5 Euro, while prices in the vicinity of Ljubljana can run to 50 Euro or more. Potential investors may also count on a full range of free services and concessions provided by local development agencies for start-ups. The assistance may also include help in completing all the necessary paper work (permits) and, in some cases, organizing and financing construction in line with investor requirements. Interested investors can contact the U.S. Embassy in Ljubljana for further information.

Foreign Direct Investment Statistics

Foreign Direct Investment (FDI) in Slovenia is fairly low, despite Slovenia’s overall mix of qualities as an attractive investment location. Total FDI stock in Slovenia at the end of 2011 was € 11.7 billion. As with trade, the bulk of FDI in Slovenia is European in origin. U.S. FDI in Slovenia, as calculated by the U.S. Embassy, is around 5% of the total. N.B.: The Bank of Slovenia (BoS), in its official data, lists U.S. FDI at approximately $55 million or 0.4% of total FDI. However, this amount does not take into account significant investments by U.S. firms, notably Goodyear. This data is not listed as U.S. in origin by the BoS as U.S. funds are often routed through a third country. Goodyear’s investment in Sava Tires, for example, came to Slovenia via a bank in Luxembourg

Foreign Direct Investment in Slovenia - Stock on 31.12.2011 (major investors)

Country   Total Value
(Million Euros)

Share of
Total (%)

Austria 5,705 48.9
Switzerland 925.3 7.9
Italy 754.4 6.5
France   614.2 5.3
Germany 718.7 6.2
Netherlands 498.3 4.3
Croatia 519.6 4.4
Belgium 194.1 1.7
Luxemburg 212.6 1.8
Cyprus 156.1 1.3
...    
US 54.9 0.5
Total 11,676.4 100

Foreign Direct Investment in Slovenia by sector - Stock on 31.12. 2011

Sector  Total Value
(Million Euros)
Share of
Total (%)
Financial intermediation, not insurance 4989.6 42.7%
Wholesale, commission, not motor vehicles 843.6 7.2%
Retail Trade 717.9 6.1%
Electricity, gas, steam, air condition 274.5 2.3%
Real estate activities 786.7 6.7%
Total 11,676.4 100%

Slovene Foreign Direct Investment abroad - Stock on 31.12.2011

Country Total Value
(Million Euros)
Share of
Total (%)
Serbia 1,473.8 24.4
Croatia 1,635.3 27.1
Bosnia and Herzegovina  612.6 10.2
Macedonia 321.5 5.3
Russian Federation 336.1 5.6
Netherlands 154.4 2.6
Germany 182.3 3.0
Liberia 204.3 3.4
Montenegro 166.9 2.8
   
USA 36.6 0.6
...    
Total 6,030.2 100.0

Slovene Foreign Direct Investment abroad by sector - Stock on 31.12.2011

Sector  Total Value
(Million Euros)
 
Share of
Total (%)
 
Financial intermediation, not insurance  851.6  14.1%
Retail trade, not motor vehicles 863.2 14.3%
Wholesale trade, not motor vehicles 440.1 7.3%
Mfr. Of pharmaceuticals 439.5 7.3%
Mfr. Of electric devices 421.0  7.0%
...     
Total 6,030.2   100% 

Major U.S.-based Investors:

The following is a short list in alphabetical order of U.S. firms holding investments or with a presence in Slovenia.

  • 3M
  • Amway
  • ANR-Amer Nielsen Research
  • Caterpillar
  • Coca-Cola Corporation
  • Colgate-Palmolive
  • Cisco
  • Deloitte & Touche
  • DHL International
  • DuPont
  • Ecolab
  • Eli Lilly
  • Ernst & Young
  • Emerson Electronics
  • Goodyear
  • Hewlett-Packard Company
  • IBM
  • Johnson & Johnson
  • Liberty Global
  • Marsh
  • Masterfoods
  • Merck, Sharp & Dohme
  • Microsoft
  • McDonald’s
  • Motorola
  • Oracle Corporation
  • Pfizer Corporation
  • Philip Morris
  • PriceWaterhouse Coopers
  • Procter & Gamble
  • Schering-Plough
  • United Global Communications
  • Wrigley
  • Xerox



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