Impact of EU Entry Varies Across Individual Industries
Some sectors of the Slovenian economy have been put to a tough test as a result of EU entry. Not all were equally prepared to face it, while analysts expected the industries that were in trouble already before the accession to be hit hardest. A year after, importers seem to have capitalised on advantages of the common market, while exporters feel the increasingly fierce competition there.
According to Andrej Kumar of the Ljubljana Faculty of Economics, a year after EU entry the assets by and large outweigh the negative consequences. The opportunities of the EU's internal market are considerable. Moreover, they are bound to increase with the country's integration into the eurozone
As a result, companies can bring down their operating costs (as they are no more physical and other barriers) and apply for money from the EU's structural and cohesion funds. Moreover, Kumar believes that the EU label increases companies' and individuals' reputation on third markets.
On the downside, pressures of competition force companies into speedy restructuring, concentration and adaption to new requirements, which also brings higher costs. Nevertheless, Kumar expects all those effects to be of temporary nature.
He does not think it is possible to say, in general, whether industries are better off or not. Foreign companies are increasingly aware of the accessibility and attractiveness of the Slovenian market, despite its small size.
Competition is therefore getting stronger and the negative consequences of this affect companies and industries that have been heavily relaying on the domestic market. Problems are also faced by companies that are smaller than their European rivals.
While some sectors have not witnessed much change after EU entry, textile, farming, food and processing industries have had to cope with considerable difficulties. Their troubles result from the small size of companies (making them uncompetitive in terms of economies of scale), poor operating results and small added value.
Furthermore, Kumar also says that it took the troubled industries too long to begin targeting EU markets and to seek opportunities in less demanding markets of the former Yugoslavia.
"In financial services sector, we may expect an increased presence of subjects from EU countries who will be gradually taking over the bulk of business in the financial sector," Kumar told STA. He also believes that this market will remain small in Slovenia.
Individual sectors have not faced changes only due to EU entry, but also due to global economic trends. According to Kumar, changes brought about by the integration into the EU prevail, while global effects "may be connected with China's entry into the World Trade Organisation as well as effects related to the textile industry, oil and steel prices, which are a potential threat to Slovenia's inflation".
Slovenian companies will continue to face increasing competition on the domestic and the EU's internal market. The market will open up for some new members of the WTO, like China, and shortly Russia, Kumar said.
"Solutions lie in changes of contents and a clear definition of targets of active economic and foreign trade policies." Kumar meanwhile believes that is no longer sensible to look for solutions for individual sectors.
He believes Slovenia must create a national economic environment that will encourage competitive growth, development of knowledge, innovation and practical technological advances.
It is clear, according to Kumar, that companies with higher value added, income per employee and greater productivity are in an advantageous position over others in the new business conditions dictated by the EU and globalisation.
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