U.S. STRATEGIC INTERESTS

A Europe that is whole, free, and at peace remains an important national security interest for the United States. Slovenia is economically strong, politically stable, and active in Southern and Eastern Europe. Slovenia’s recent accession to the European Union (EU) and NATO indicates the level of political and economic development the country has achieved during the last decade, and the regional role it can play in furthering the U.S. priorities of promoting stability, market liberalization, and anti-corruption. Slovenia’s strategic location, productive workforce, and solid, growing infrastructure with free access to the world’s second wealthiest market, make it an attractive venue for U.S. investments. As the new gateway to fledgling Southern and Eastern European markets, Slovenia, with its sound economic infrastructure, will continue to build bridges to the region through trade, investment, and direct assistance. Slovenia is the region’s largest investor and plays a leading role in Balkan demining efforts, humanitarian assistance, and peacekeeping operations. The U.S. Government (USG) will continue to encourage Slovenia’s involvement in the region, and to promote it as a regional model of political stability and economic development.

While no terrorist organizations are known to be active in Slovenia, its central location and short Adriatic coastline make it an attractive potential transit country for trafficking in drugs, persons, and weapons of mass destruction (WMD) by criminal and terrorist organizations. It is in the U.S. interest to provide training assistance and equipment, and to engage the Slovenian law enforcement community in efforts to detect, interdict, prosecute, and convict those involved in transnational criminal and terrorist activities. Slovenia already is actively promoting regional law enforcement cooperation, combating criminal activities, and providing technical assistance on economic, political and judicial reforms.

OVERVIEW OF U.S. GOVERNMENT ASSISTANCE

In FY 2004, the USG provided an estimated $4.37 million in assistance to Slovenia:

• $800,000 in democracy programs (including academic and professional exchanges); and 
  
  
• $3.58 million in security, regional stability, and law enforcement programs.

Although no new SEED funds were provided in FY 2004, program implementers continued to use SEED funding remaining from previous fiscal years, as described below.

In FY 2004, a total of 17 Slovenes traveled to the U.S. on USG-funded exchange programs.

U.S. ASSISTANCE PRIORITIES

Democratic Reform Programs: In FY 2004, the main priorities for U.S. democratic reform assistance in Slovenia were support for programs to prevent trafficking in persons, promotion of grassroots democracy, the development of non-governmental organizations (NGOs) and volunteerism in the country, and support for human rights and ethnic tolerance.

Economic and Social Sector Reform Programs: Slovenia is not a recipient of economic and social sector reform assistance. The Embassy has leveraged regional development assistance funds to host conferences promoting corporate governance through USAID’s Partnership for Financial Stability (PFS) program and has cooperated with other USG agencies, including the U.S. Export-Import Bank, Department of the Treasury, Department of Labor, and the Securities and Exchange Commission, to encourage development of the private sector and financial institutional supervisory development.

Security, Regional Stability, and Law Enforcement Programs: In FY 2004, U.S. security-related assistance focused on helping Slovenia become a fully integrated member of NATO by achieving its NATO Force Goals. To this end, the USG provided the Government of Slovenia (GOS) with $2 million in Foreign Military Financing (FMF) and $950,000 in International Military Education and Training (IMET) funds.

SECTORAL ASSESSMENTS

Democratic Reform

Slovenia has a well-functioning, multi-party democracy, independent judiciary, free press, excellent human rights record, and solid civilian control of the military. Slovenes showed their democracy in action when they voted in the October 2004 parliamentary elections for the first change of government in the 12 years since independence. The result is a coalition government led by the Slovene Democratic Party (SDS). Parliament confirmed SDS leader Janez Jansa as Prime Minister on November 9, 2004. In 2005, Slovenia will chair the Organization for Security and Cooperation in Europe (OSCE). The Slovenes’ experience with democratization will be valuable as they guide the agenda of the OSCE to deal with the challenges of change in the Balkans and the countries of the former Soviet Union.

According to the United Nations Development Program (UNDP), Slovenia continues to register one of the lowest levels of citizen participation among developed countries. Although the GOS has made some efforts to increase cooperation with NGOs, civil society remains under-developed. Nonetheless, the number of NGOs continues to increase. Approximately 18,500 organizations are officially registered under one of several categories that define NGO activity in Slovene law. According to Embassy sources, about half are active. Most NGOs have weak organizational structures, small memberships, suffer from chronic resource shortages, and require continued external support. There is a growing recognition, however, of the importance of NGOs to society in promoting democracy and economic development. Ten of the largest NGOs have joined forces to lead informal negotiations with the GOS on a strategic partnership agreement. The negotiation team hopes to sign the agreement with the GOS next year. It would be valid from 2005-2008 and benefit all NGO’s. While there are multiple long-term goals, increased government funding is the central objective of the negotiations. Revision of current NGO legislation is another key objective. A significant part of the Embassy’s activity, described below, has been to support the growth of the NGO sector. Slovene NGOs often do not cooperate effectively with each other due to their competition for limited funds. In future programs, the Embassy will continue to encourage greater cooperation and will support common objectives of public awareness, coordination with government authorities, and increased private and corporate fundraising.

In FY 2004, the U.S. Embassy awarded SEED-funded Democracy Commission grants to 17 Slovene NGOs in the fields of NGO development, human rights, media responsibility and monitoring, alcohol-use prevention, mental health, youth debates, the environment, economic education, domestic violence, and trafficking in persons. Examples of activities supported by these grants include promotion of integration and equality for Roma, establishment of public web sites highlighting the role of NGOs, educating refugees about their legal rights, and conducting public information campaigns on the challenges facing mentally disabled people. A top priority this year has been the prevention of trafficking in persons. The U.S. Embassy provided one of its largest grants to the Slovene NGO "KLJUC." Partially as a result of its successful training of prosecutors and of previous USG-supported activities, "KLJUC" was able to receive a much larger grant from the GOS and expand its work.

Economic and Social-Sector Reform

Slovenia ranks at or near the top on most economic indicators among the 10 states that entered the EU on May 1, 2004. A recent EU review praised Slovenia’s macroeconomic performance, characterizing the country as being at the top of its accession class. With its export-oriented economy, Slovenia boasts a per capita GDP exceeding $13,800 (more than $17,000 on a purchasing power parity basis); unemployment stands at about 6.6 percent; and annual real GDP growth is estimated to be 3.6 percent in 2004. Measures to reduce inflation have been successful, lowering the annual rate from 7.5 percent in 2002 to an estimated 3.3 percent in 2004. The GOS is on track to meet the Maastricht criteria for a 2007 adoption of the Euro as its official currency.

Structural challenges need to be addressed, including privatization of state-owned companies, improved transparency in government procurement, and a more streamlined and efficient judicial process. After a banner 2002 for foreign direct investment (FDI) – due primarily to the $900 million takeover of Lek Pharmaceuticals by Switzerland-based Novartis -- FDI has plummeted. Privatization procedures in key sectors, including banking, insurance, and telecommunications, have either been stopped or have yet to be carried out. The public sector continues to play a determining role in the economy, either directly, as sole proprietor, or indirectly, through shareholding. Transparency in government procurement remains an area of concern, particularly for foreign companies. The U.S. Embassy believes that in order for Slovenia to maintain long-term, steady economic growth and keep its competitiveness in a much more international environment, greater FDI will be necessary. Without a sincere effort to address structural issues, however, investors will continue to overlook Slovenia in favor of its neighbors to the east and south.

The U.S. Embassy has leveraged regional development assistance funds to host conferences promoting corporate governance through USAID’s Partnership for Financial Stability (PFS) program and has cooperated with other USG agencies, including the U.S. Export-Import Bank, Department of the Treasury, Department of Labor, and the Securities and Exchange Commission (SEC) , to encourage private-sector development and supervisory oversight of financial institutions. Democracy Commission funds helped several social service organizations encourage civic action by promoting volunteerism, public awareness of their activities and the populations they serve, and greater public support for and involvement in their social programs.

Security, Regional Stability, and Law Enforcement

Slovenia achieved one of its longstanding foreign policy objectives in March 2004 by joining NATO, a milestone in its transformation from a territorial defense model to one of collective defense and Euro-Atlantic integration. The active-duty Slovenian Armed Forces (SAF) became fully professional in October 2003, and the last conscripted reservists are expected to be phased out by 2010. Slovenia increased its contributions to international peacekeeping missions during FY 2004, including a platoon-sized deployment of special operations troops to ISAF in February and a subsequent rotation in August. Significant deployments to KFOR and SFOR round out Slovenia’s international efforts by promoting regional stability in Southeastern Europe. GOS officials have made public statements pledging to increase defense spending to two percent of GDP by 2008. The GOS is focusing both domestic defense spending and international assistance funds on achieving its NATO Force Goals. In terms of combating terrorism, Slovenia ratified the Convention on the Suppression of Terrorism Financing in July 2004, thereby making it a party to all 12 international anti-terrorism conventions.

International Military Education and Training (IMET) and Foreign Military Financing (FMF) funds remain the primary U.S. security assistance programs benefiting Slovenia. The $950,000 allocated to Slovenia for IMET in FY 2004 was used to train a record 57 military and civilian defense personnel. Although the $2 million allocated for FMF in FY 2004 equaled just half the amount of each of the previous two years respectively, formerly frozen FMF funds from prior years have been disbursed for a variety of projects since Slovenia’s accession to NATO. All FMF expenditures are tied to Slovenia’s Force Goals, with a focus on making the SAF fully interoperable with NATO Allies. The largest portion of FMF funds has been used for communications, command control, computers, and intelligence (C4I)-related projects. The largest single FMF case in Slovenia since the program began has been an English language school (ELS) in Ajsevica, where allies from NATO and Partnership for Peace partners receive language training. The GOS will gradually begin to take over both funding and operation of the ELS in FY 2005. About $1 million of FY 2004 FMF funds have been earmarked to help build Slovenia’s Nuclear, Biological, and Chemical Battalion, expected to be fully operational by 2009.

COUNTRY PERFORMANCE MEASURES

ECONOMIC & DEMOCRATIC REFORMS, 1991-2004

Data are drawn from EBRD, Transition Report (November 2004) & Freedom House, Nations in Transit 2004 & Freedom in the World 2004. Ratings are based on a 1 to 5 scale with 5 representing the most advanced.
Latest year observation refers to 2004 economic reform data and 2003 democratic reform data; i.e., 2004 data for democratic reforms are not yet available.

ECONOMIC STRUCTURE AND HUMAN DEVELOPMENT, 1990-2004

World Bank, World Development Indicators 2004 (2004); UNICEF, Social Monitor 2004 (2004); EBRD, Transition Report (November 2004); and UNDP, Human Development Report (2004).

TOTAL USG FUNDS BUDGETED: (INCLUDING ACCOUNTS OTHER THAN SEED) $4.37 m

non-SEED Total:$4.37 m Dept. of Defense    International Counterproliferation Programs $0.29 Total DoD: $0.29 Dept. of State    Export Control & Related Border Security Asst. (EXBS) $0.37    Foreign Military Financing (FMF) $1.97    International Information Programs (IIP) $0.02    International Military Educ. & Training (IMET) $0.95    Public Diplomacy Exchanges $0.78 Total State: $4.08