Country profile: Slovenia

Slovenia is committed to growing its home economy through rapid modernisation and the uptake of science and technology. Its belief in the Lisbon Agenda as the pathway to growth is reflected in the priorities it is setting during its presidency of the Union, and the role of Janez Potocnik, a Slovenian, as Europe's science and research commissioner.

Slovenia joined the EU in 2004 and adopted the euro on 1 January 2007. The CIA World Factbook, an American almanac of country profiles, calls the country "a model of economic success and stability for the region." It says Slovenia has the highest per capita GDP in Central Europe, excellent infrastructure, a well-educated work force, and a strategic location between the Balkans and Western Europe.

Privatisation has slowed since 2002, and the economy has one of highest levels of state control in the EU. Structural reforms to improve the business environment have allowed greater foreign participation in Slovenia's economy and lowered unemployment. But foreign direct investment in Slovenia has lagged the regional average, and taxes remain relatively high. The labour market is regarded as inflexible, and some industries are losing sales to more foreign competitors.

Slovenia is ambitious for change. It is the first of the accession countries to take the presidency and is using it to promote a stronger science and research base for the Union.

"Europe has entered a period of new opportunities that have to be used to achieve appreciable progress in strategic areas such as upgrading research infrastructure, establishing the European Institute of Innovation and Technology and the Joint Technology Initiative," said Mojca Kucler Dolinar, Slovenia's minister of higher education, science and technology, at a meeting of the European Parliament's committee for industry, research and energy earlier this year.

Slovenia wants to use its position to conclude the adoption procedure for the Eurostars programme, which is designed to help finance market-oriented industrial research conducted in small and medium-sized enterprises (SMEs). It also wants to progress the Joint Technology Initiatives, a new form of public-private research partnership. Other concerns include developing regional research infrastructure, integrating the Western Balkan countries into the European Research Area, and strengthening the role of women and young people working in science.

The domestic situation

Slovenia is developing rapidly. GDP growth has been more than 5% for the past two years. Unemployment is 5%, according to the International Labour Organisation, and real wage growth was 2.4% in 2007 compared to inflation of 3.4%. A June 2007 forecast by Eurostat said the country's average GDP per capita (in purchasing parity terms) is 84% of the average for the EU25, putting it 16th among the EU27.

Slovenia's R&D intensity (proportion of GDP spent on R&D) was 1.59% in 2006, compared to an EU average of 1.84%. The number of researchers per 1,000 workers is slightly below EU average. The number of scientific publications per million people in Slovenia is above the EU average.

As of 31 December 2006, 13,442 people were in paid employment in R&D (of whom 39.4% were women). Most of them (61.1%) were researchers, divided between the higher education (43.2%), business (32.4%), government (24.0%) and non-profit sectors (28 researchers). This is equivalent to 9.765 fulltime employees.

Slovenia's key industries include automotive components, with 2006 revenues of €3.6bn; chemicals and pharmaceuticals (€4.35bn); electrical and electronic engineering (€3.7bn); information and communications technology (€2.4bn); logistics (€2.5bn), and machining and metalworking (€5.2bn).

The country has a rich network of public research institutes, centres of excellence, science parks, universities and supporting organisations and resources that are best explored through this page, established as part of Slovenia's presidency. To give an idea of the scale of the activity, the Slovenian Current Research Information System lists 717 organisations that are involved in research in some way.

Fiscal regime

Slovenia's fiscal regime is structured to encourage business. The corporate taxation rate is 22% in 2008, shrinking to 21% in 2009 and 20% in 2010. The authorities allow companies to depreciate IT investment by 50% a year, research equipment by 33.3%, and general equipment and machinery by 20%. There is also tax relief of 20% of the amount invested in R&D equipment, as well as a lesser relief for training costs.

There also appears to be a benign environment for business. The Doing Business project, which attempts to provide objective measures of business regulations and their enforcement across 178 countries, ranks Slovenia at 55 in the world. For comparison, Singapore is ranked at 1, Iceland at 10, Germany at 20, Taiwan at 50 and Greece at 100.

Corruption appears not to be an issue in Slovenia either. Transparency International, a watchdog organisation, produces an annual Corruption Perception Index. It uses multiple surveys in each country to measure the amount of corruption that business people and country analysts perceive. It then ranks countries on their score, from best to worst. Slovenia ranks 27th in the world, where lower numbers are better. Denmark is regarded as the least corrupt country in the world, with Norway and Canada in equal 9th place, the US at 20, Cape Verde and Slovakia at joint 49th, and Algeria, Armenia, Belize, the Dominican Republic, Lebanon and Mongolia in joint 99th position.

Foreign investment

The government is encouraging foreign direct investment, with inflows of €303.4m in 2006, and an aggregate investment in Slovenia so far of €6bn. Among the manufacturing companies that have invested are Bosch, Danfoss, Goodyear, Henkel, Johnson Controls, Renault and Siemens.

Grants are available for companies making direct investments in industry and strategic services in Slovenia, although the government has only set aside €5.9m for this purpose. Nonetheless, a company investing €500,000 to create five R&D jobs over three years could attract a grant of between €7,500 and €20,00 per job created.

Austria, Switzerland and The Netherlands together account for more than half of the foreign direct investment in Slovenia. The biggest investors in the country by sector are the financial services industry (at 21% of the total), retail at 17% and business services at 16%. But a group of smaller manufacturing-related investments, in chemicals, tyres, paper, telecoms, transport and similar sectors, combine to provide a healthy 41% of the total foreign direct investment.

The regions

Slovenia is divided into 12 regions, and details of all of them can be explored at this link.

Among the largest regions by population is Savinsjka. It has a long industrial tradition, particularly in making machines and appliances. The region also hosts TECOS – the Slovenian Tool and Die Development Centre, a support centre for the tool and die-making industry.

The Osrednjeslovenska region is in the centre of Slovenia and is home to the capital Ljubljana and its university of 55,000 students. The most developed of Slovenia's regions, its commerce is dominated by the service sector.

The Jugovzhodna region, bordering Croatia, is home to a mix of pharmaceutical companies, machine makers, and other manufacturing sites, which provide almost 40% of the region's GDP.

The Gorenjska region, in the north west of the country, has a mixed economy made up of trade, manufacturing and services.

Local municipalities may offer various incentives, on a case-by-case basis. These could include easy access to industrial sites, utility connections and local tax holidays.

Slovenia also engages in two regional R&D cooperation programmes, INTERREG and PHARE, designed to help less advanced areas of the country and under-represented technology sectors to become more competitive.

Business associations

The Chamber of Commerce and Industry of Slovenia represents 52,000 active members and 15,000 entrepreneurs through a national and regional organisation. It represents the business community, provides support and advice to companies and professional services aimed at strengthening the competitiveness of its members.

It runs the Business Opportunities Exchange System (BORZA), a matchmaking database for local and foreign companies looking for business opportunities and partnerships in the country.

Slovenia also has a Business and Research Association (SBRA), a broad-based group that connects business and research communities in Slovenia with EU institutions and other public and private bodies at EU level. It acts as a lobbying organisation for members' interests, as well as focusing on issues such as increasing competitiveness; encouraging co-operation between Slovenia, the EU and member states in business and research; and helping members become take part in EC programmes.

SBRA also offers partner search facilities through a service run by the Research, Innovation and Business Network for Central and South Eastern Europe.

Companies that are interested in finding out more about opportunities and resources in Slovenia can turn to its partnering website; SLOEXPORT, a database of Slovenian exporters; and INVESTSLOVENIA, an inward investment portal.