[Congressional Record Volume 141, Number 76 (Tuesday, May 9, 1995)]
[Extensions of Remarks]
[Page E969]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


                  SLOVENIA: A MODEL FOR EASTERN EUROPE

                                 ______


                         HON. JAMES L. OBERSTAR

                              of minnesota

                    in the house of representatives

                          Tuesday, May 9, 1995
  Mr. OBERSTAR. Mr. Speaker, on February 16 I stood on the floor of 
this House, during debate on the NATO expansion bill, and asked that 
any efforts to bring Eastern Europe into the Western community not 
ignore the former Yugoslav Republic of Slovenia.
  A country of just over 2 million people, independent for less than 4 
years, Slovenia has successfully thrown off the economic shackles of 
the Socialist Yugoslav system and is leading the newly emergent 
countries of Eastern Europe and the Balkan States in conversion to a 
free and open market economy.
  In per capita terms, Slovenia is the 20th largest exporter in the 
world, exporting over $7 billion in goods each year, which accounts for 
60 percent of Slovenia's GNP. Slovenia now enjoys a lively trade with 
the United States, shipping $229 million worth of goods to the United 
States each year and importing some $180 million in United States goods 
annually.
  It is with great pride, then, Mr. Speaker, as a Slovenian-American, 
that I return to the floor today to bring my colleagues more accolades 
over Slovenia's accomplishments. This time, the praise comes from none 
less than the Journal of Commerce, which headlined an April 6 editorial 
``A Model for Eastern Europe.'' I commend this article to my colleagues 
and to the leadership of our various executive branch departments. I 
ask that you remember to include Slovenia and its hard working, 
enterprising people when making decisions on our country's future 
relationship with the transitional economies and governments which have 
replaced the former Communist regimes of Eastern and central-
southeastern Europe.
             [From the Journal of Commerce, April 6, 1995]

                       A Model for Eastern Europe

                           (By Timothy Ashby)

       Eastern Europe has had its share of bad news recently. 
     Painful economic reforms and factional strife in Russia, 
     political turmoil in Poland, continuing ethnic warfare in 
     parts of former Yugoslavia--all have made Western businessmen 
     cautious about trade and investment in the region.
       Yet one small country, Slovenia, has emerged as an economic 
     and political model for the old socialist bloc. Slovenia's 
     accomplishments over the past year read like a wish list for 
     its neighbors.
       1994 exports were more than 14% greater than the previous 
     year, and now account for 60.4% of gross domestic product. 
     Manufacturing production increased 6.8% last year while 
     unemployment fell 1.5%.
       The tolar, Slovenia's national currency, appreciated 11% 
     against the deutsche mark in 1994. The country has a very low 
     debt service ratio of only 5.5%.
       At $6,957, Slovenia has the highest GDP per head of all 
     former socialist bloc republics in Eastern Europe, nearly 
     twice that of the Czech Republic. GDP grew more than 5% in 
     1994 and the country enjoyed a healthy current account 
     surplus of $2.6 billion at the end of last year.
       Foreigners made direct investments of $72.3 million last 
     year.
       Three factors account for Slovenia's success. The first is 
     its geographical location. Lying at the crossroads of Western 
     and Eastern Europe, Slovenia borders European Union members 
     Italy on the west, Austria on its northern border, Hungary to 
     the northeast and the Republic of Croatia to the east and 
     south. Slovenia also has a coast on the Adriatic Sea, where 
     the major Port of Koper serves as a gateway for international 
     seaborne trade with all of Central Europe.
       The second factor is political stability. Prime Minister 
     Janez Drnovsek presides over a Western European-style 
     coalition government. Slovenia is a healthy young democracy, 
     with parties in its Parliament running the gamut from 
     Christian Democrats and Greens to reformist communists.
       Despite rivalry between the parties, an unusually high 
     degree of consensus over economic policy has been achieved, a 
     fact foreign investors find reassuring. All sides are 
     committed to the transformation to a Western-style market 
     economy, but also to maintaining a strong social safety net 
     and to forcing money-losing state enterprises to become 
     competitive in the private sector.
       Slovenia's carefully conceived strategy for creating a 
     modern free market economy is the third reason for its 
     success. The government has adopted a gradualist approach to 
     economic restructuring, striking a pragmatic middle ground 
     between the Czech Republic's shock therapy methods and the 
     meandering reforms undertaken by some former Soviet 
     republics.
       To lessen the political and social impact of widespread 
     redundancies, privatization has been undertaken at a slower 
     pace than in other former socialist countries. The government 
     occasionally intervenes and provides help to ailing companies 
     by guaranteeing finance-for-debt rescheduling in return for 
     moderation in dividend distribution and wage increases.
       By the end of 1994, a quarter of all Slovenia's state-owned 
     enterprises had been privatized. The process will be 
     accelerated during 1995 to achieve the goal of placing 50% to 
     65% of public assets in private hands. Preference is given to 
     privitization via management and employee buyouts. While 
     initially criticized by some as a method that would do little 
     to attract foreign capital and technology, many privatized 
     companies have established joint ventures both domestically 
     and internationally. As a result, Slovenia has not suffered 
     from a lack of investment in new plant and capital equipment.
       Domestic savings play a major role in the modernization of 
     Slovenia's industrial sector. The growth in all areas of 
     demand has stimulated a continuous expansion in industrial 
     capacity. Much of this is fueled by the capital city's 
     Ljubljana Stock Exchange, which together with the rest of the 
     private financial services sector contributes 3.2% of the 
     country's GDP. Slovenia's growing number of financial 
     institutions, as well as its beautiful Alpine landscape, 
     justify its nickname, ``the Switzerland of Eastern Europe.''
       Compared to many of its neighbors, where red tape can 
     seriously impede foreign direct investment, Slovenia has 
     implemented one of the least restrictive investment climates 
     in Eastern Europe. Foreign investments in any form enjoy full 
     national treatment--that is, they have the same status as 
     Slovene legal entities. All sectors of the economy are open 
     to foreigners operating through joint ventures. Legal 
     entities established and registered in Slovenia, even if they 
     have 100% foreign ownership, may own real estate. The 
     Slovenian Parliament is considering legislation to change 
     real estate and other business-related laws to harmonize them 
     with the EU.
       With a 30% flat tax on corporate profits, Slovenia has one 
     of the lowest tax burdens in Europe. The tax rate is further 
     reduced to 20% in the case of reinvestment, which actually 
     lowers the tax rate to 24%. All foreign investors are 
     guaranteed free transfer of profits and repatriation of 
     invested capital, while no restrictions are placed on foreign 
     shareholders in Slovene enterprises who want to transfer 
     their profits abroad in foreign currency.
       Germany, Austria and Italy now account for 65.9% of all 
     Slovenian foreign investment. Businessmen in these countries 
     see great profit potential in Slovenia because of its 
     proximity to major markets, its political stability and the 
     high probability that it will become an early member of both 
     the European Union and NATO. U.S. businesses, which account 
     for less than 1% of FDI in Slovenia, have not yet awakened to 
     these investment opportunities. Even Australia, which 
     contributed 2.3% of the country's foreign direct investment 
     in 1994, invested more in Slovenia--with a population of only 
     2 million--than in giant but strife-torn Russia.
       Slovenia's lesson for other developing countries is that 
     political and economic stability can only be attained by a 
     true commitment to democracy and the creation of a free 
     market. As Slovenia rapidly approaches the time when it will 
     be ready for membership in the European Union and NATO, its 
     eastern and western neighbors can point to it as an example 
     of one of the world's great success stories.
     

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