Government scheme for attracting inward FDI in 2000
The Government of the Republic of Slovenia adopted in January this year a major programme to attract inward foreign investment.
Slovenia as a location for inward foreign direct investment boasts a number of competitive advantages: favourable geographical position, educated and technologically-minded labour force, good infrastructure connections with important markets in the European Union, as well as a stable political and macroeconomic framework. These advantages shall be exploited to boost FDI inflows and bring about the beneficial impact of FDI on Slovenia's economic growth.
The government's programme, known as the Scheme for Attracting Inward FDI in 2000, has not been solely to list elements and activities to be implemented by Slovenian public bodies with the aim to facilitate and stimulate foreign direct investment. The Scheme should send strong signals to foreign investors that positive changes have taken place - changes to boost competitiveness of Slovenia as a location for inward investment.
The objectives of the Scheme are as follows:
- To prepare a strategic policy for actions endorsed by the Government in the area of inward FDI promotion;
- To create measures that will quickly improve the competitive position of Slovenia as an attractive location for inward FDI, and
- To strengthen the institutional capacity required to facilitate and stimulate inward FDI.
Short-term measures
Amongst the measures designed to boost competitiveness of Slovenia as an FDI location within a short period of time are:
- Abolish existing administrative obstacles that still stand in the way of foreign investors.
- Adapt existing economic incentive schemes so that foreign investors gain more straightforward access, as well as put these schemes on equal footing with comparable government plans available in other countries in Central and Eastern Europe.
- Put in place measures to facilitate access to land for industrial use.
- Strengthen the institutional capacity for encouraging inward FDI by harnessing adequate human resources and budget funds, precisely defining its mission, and setting up FDI promotion activities under the supervision of an expert board.
Inward FDI recommendations
A project called Promotion of Foreign Direct Investment in Slovenia prepared for the Ministry of Economic Relations and Development by the Foreign Investment Advisory Service (FIAS), a joint institution of The World Bank and the International Financial Corporation, has provided another angle as to how Slovenia could be made more attractive for foreign investors.
Concrete recommendations made by FIAS cover three areas:
Changes in laws and policies needed to attract FDI
- Encourage inward direct investment in the post-privatisation phase both by attracting new FDI and by seeking strategic partners abroad interested in investing in existing companies with the aim to boost the restructuring process and facilitate the process of internalisation.
- Open up the privatisation process of state-owned property to strategic and institutional foreign investors. In particular, this applies to infrastructure sectors, companies owned by the Slovenian Development Corporation and other industrial enterprises in state hands, including banks.
- Promote foreign direct investment in the business services sector in particular.
- Enhance the administrative framework primarily in connection with registration and sale of land for industrial use (Land Register, mortgage and pledges recording procedures, etc.)
- Encourage private investors to invest in serviced industrial zones/parks with infrastructure connections provided by the Government.
- Bring workers' participation in management and supervisory boards in line with EU practice.
- Accelerate labour market reforms and reduce labour costs.
- Introduce targeted labour training programmes tailored to provide the workforce for selected sectors and connected with locations situated within industrial zones.
Promoting Slovenia as a place to invest
- On the whole, more emphasis shall be given to the active promotion of Slovenia as an attractive FDI location. In other words, more human resources and budgetary funds shall be allocated.
- A short-term priority shall be servicing foreign investors and facilitating FDI projects (better servicing of potential foreign investors particularly when they visit Slovenia for the first time, facilitating and liberalising various administrative procedures; enhancing servicing capacity within the shortest possible time).
- In the medium-term, the priority should be to attract FDI and activities connected with image building of Slovenia as a location for foreign investment. These activities shall be selective and targeted. Furthermore, networking should include regular contacts with foreign banks, professional consultants, and representatives of foreign countries in Slovenia.
Developing an institutional framework for FDI promotion:
- Establish a separate agency for FDI promotion with a clear legal mandate and an independent governing board.
- Discharge the following tasks: provision of a comprehensive range of services to foreign investors, investment generation through direct mailing, image building of Slovenia as an attractive FDI location, formulating policies aimed at boosting competitiveness of Slovenia as an FDI location.
- Ensure a close co-operation between the FDI Promotion Agency and the Government.
- The Governing Board of the FDI Promotion Agency shall include representatives of the private and public sectors.
- Streamline competence of the FDI Promotion Agency to defining and implementing FDI promotion strategies and policies.
- Carry out operating activities in line with an approved strategic plan, clearly defined objectives, and assess performance by results.
- The FDI Promotion Agency shall be staffed by at least 10 experts with an annual budget of US$2 million.
The above recommendations made by FIAS converge with experiences gained by the Trade and Investment Promotion Office (TIPO) in the course of daily activities carried out over the past several years.
Surveys made by polling Slovenian companies controlled by foreign owners with reference to attracting inward FDI have pointed out the following shortcomings in Slovenia:
- Defensive strategy, i.e. lack of pro-active Government strategy for attracting FDI,
- Low profile of Slovenia as an FDI location primarily due to cumbersome access to land for industrial use, insufficient financial incentives for new investors, and low level of workforce mobility.
The Scheme for Attracting Inward FDI in 2000 follows three lines of action:
- Define strategic policies.
- Improve the legal and administrative framework.
- Put in place concrete measures with prompt effects aimed at improving competitiveness of Slovenia as an FDI location.
Strategic policy
The purpose of the Government Scheme for Attracting Inward FDI in 2000 is to build upon the competitive advantages of Slovenia for foreign investment. Slovenia's goal in winning substantial foreign direct investment is to:
- Create new and keep existing jobs,
- Acquire new technologies and win new markets,
- Keep profitable production and expand/diversify the production range, and
- Include other Slovenian companies in supplier chains for foreign investors (winning contracts for Slovenian companies).
Over a four-year period, annual inflow of FDI could gradually rise from the current level of 1% to 3% of GDP. This is an ambitious goal, which can be achieved only if the following requirements are fulfilled:
- Open up the privatisation process of state-owned property to foreign investors, and at the same time accelerate the process,
- Endorse an aggressive/pro-active policy for new FDI promotion and step up the pace of this promotion after achieving full EU membership, and
- Ensure commitment of the Government and public administration to promote FDI and an entrepreneurial spirit in general.
Although in the short-run the process of privatisation and restructuring is associated with wiping out redundancies, jobs losses are likely to be at least partially compensated by a proactive policy of attracting new inward investment.
By becoming a full-fledged member of the EU, the Slovenian market will be part of the internal EU market. At that point, Slovenia will become more attractive for foreign investors on the one hand, but will be fully exposed to increased competition from other EU Member States on the other. It will be up to Slovenia to ensure that its incentives are effective in bringing in significant foreign direct investments.
When announcing the Scheme, Minister for Economic Relations and Development Marjan Senjur said: "The Government wants to show it supports foreign investments in Slovenia. We want to be competitive as a location for foreign direct investments to other countries in our neighbourhood. Also, the Government is ready to prepare especially tailored sets of incentives for individual major projects".
PULL OUT QUOTES
- The FDI Promotion Agency shall be staffed by at least 10 experts with an annual budget of US$2 million.
- Over a four-year period, annual inflow of FDI could gradually rise from the current level of 1% to 3% of GDP.
- "The Government wants to show it supports foreign investments in Slovenia. We want to be competitive as a location for foreign direct investments to other countries in our neighbourhood." - Marjan Senjur, Minister for Economic Relations and Development