The Chamber of Commerce and Industry of Slovenia has a clear and bold strategic plan to help Slovenian economy reach export of EUR 50 billion in 2025. The plan includes higher wages for employees, alleviation of the tax burden, and a better supply of well-trained workforce through improved education and smart immigration. We are future-oriented and ready to work on measures that will propel Slovenian economy to new heights, says Boštjan Gorjup, the President of the Chamber of Commerce and Industry of Slovenia (CCIS).
What are your priorities and plans for the next two years?
The strategic orientation of the CCIS continues to be the Three Generation Development Partnership, in which the following goals were set: export of EUR 50 billion, EUR 60,000 per employee, and 2,000 Euros average gross wages by 2025. There are several main goals we want to achieve: in the field of internationalization it will be our commitment to reach EUR 50 billion of exports by 2025, in the field of taxation, our aim is the reduction of the tax wedge. In the field of human resources, we will focus on the mitigation of the human resource gap through the extension of work activity, the adoption of smart immigration policy and a comprehensive adaptation of the school system to cater to the needs of the labour market. Within the strategic orientations, I would like to emphasize the adoption of a rational and progressive social agreement for the medium term and the preparation of a sustainable energy concept. Additional focus will be set on strengthening R & D in conjunction with strategic development in innovative partnerships and the digitization of the economy. The desired result is raising the value added. We will continue strengthening the reputation of the Chamber of Commerce and Industry as a constructive social partner, oriented towards the future.
How is the Slovenian economy doing? What are the main challenges?
In the last 5 years (2014-2018), GDP grew by 3.6% per annum after a period of a double-dip recession (2009-2013) when GDP declined by 2% annually. Current GDP stands at EUR 46 bn. In terms of PPS, Slovenia is 16% below the EU-28 average with EUR 22,000 per capita. The important thing is that net migration figures are positive and that the number of births has increased during the last 10 years. The main challenge is the lack of qualified workers, especially in technical fields and fields where the allocation of working time is uneven. In addition, long-term challenges – such as greying population – remain, which will put pressure on the expenditure side of public finances, especially in the field of pensions and health.
How do you see the Government’s economic policy?
Fiscally, it is slightly expansionary, but public debt is on a declining path (below 70%) and surplus will be achieved in public finances in 2019. More emphasis is being put on domestic consumption, also by lowering the tax burden on wages. Export trends are still quite high, and there is no decline in external competitiveness yet, as wages are rising all over Central Europe. We believe a growth rate between 3 and 3.5% is achievable for Slovenia in 2019, which is more than double that of the EU-28. It is important that the current account surplus remains 6-7% of GDP while companies are the least indebted in a decade, having a great potential to increase the investments.
What is the role of CCIS in the process of digitalization of the Slovenian economy?
The digitalization of the economy is one of the main aims of the EU as well as Slovenia, leading to many strategic and operative initiatives. The ICT Association is an active member of the Slovenian Digital Coalition, it cooperates with the Ministry of Economic Development and Technology, planning to promote the digitalization of the economy and enhance digital competencies. Furthermore, the ICT Association works together with the Ministry of Public Administration to create an innovative business environment by preparing the best legal framework and legislative proposals possible. The ICT Association also heads the activities for the standardization of the electronic documents and establishment of registries, which could jointly form an environment enhancing e-commerce and online business. In addition, it organizes training and conferences on digital transformation as well as other topics to help build digital competencies, based on the ICT Horizontal Network within the Strategic Research and Innovation Partnership (SRIP): Smart cities and communities. Last, but not least, CCIS and the ICT Association are amongst the founders and strategic partners of the Digital Innovation Hub Slovenia, which is a one-stop-shop to support the digitalization of the Slovenian economy.
How do you see the big data approach to business?
Data is becoming a key asset in many new digital business models. In digital platforms (like Booking, Airbnb, Google…) data is sometimes becoming more valuable than the margin on transactions it provides. Likewise, internally in each company, data is the basis for the decision making process. Furthermore, connecting data from different sources, both internally (production data, delivery orders, supply chain information…) and externally (e.g., from suppliers or customers, weather information, traffic information, etc.) can significantly speed up processes, increasing their predictability and flexibility. Additionally, such data can provide opportunities for new business models (e.g., on-line sensor data from products to provide predictive maintenance). Using the data provides business value, not just in terms of higher productivity but also competitiveness, and survival, in the new digital economy.
Where is the place of the Slovenian economy on the global and regional market?
EU-28 is the primary market for Slovenian goods and services. Traditionally, 75% of all exports are sold to this area. Slovenia is part of the CEE value chain, and especially strong as a supplier of metal components for the automotive sector, and the electrical and electronic industries, as well as pharmaceuticals. The transportation sector is also very competitive and a big contributor to the high surplus in the service sector (9% of GDP is surplus in services), also due to Port of Koper and the well-developed network of highways. Slovenian companies spend 1.5% of GDP annually on R&D.
How do you see the challenges in the global market economy, especially the consequences stemming from the China-US trade war?
This year, world’s GDP growth will be about 3.3%, and it’s slowing down mainly due to weaknesses in the EU-28 and lower growth in China, whereas growth in India is going to be close to 7%. World trade is slowing down, not just due to trade wars but also due to structural changes in the value chains that are becoming shorter due to highly automatized production. The US economy, the biggest for now, is doing well. Commodity prices are stable in general, but brent prices have spiked up, reaching USD 70 per barrel in May, though declining in early June. The Iranian crisis may lead to higher crude oil prices. Prices below USD 85 per barrel are manageable for the world economy. Introduction of tariffs on European cars by the US could remain a headwind in the second half of the year if the US is not satisfied within the current negotiation round. This may lead to a temporary disruption in the automotive value chain, mostly due to lower demand from the EU countries where the majority of cars are assembled and exported to the US.
Do you foresee the slowdown of the German economy as something that could affect Slovenia?
Germany’s manufacturing has slowed down, mostly due to the WLTP test, which hurt the value chain of some important domestic manufacturers. Household spending and the construction sector are still doing reasonably well in Germany. It must be taken into account that unemployment is very low in most of the developed countries. Consumers are satisfied and are increasing their spending on discretionary items. Low interest rates also lead to purchases of real estate, cars, and white goods. Car sales dropped in the first 4 months of 2019 in EU-28, by 2.4% year over year. Italy, Spain and the UK are the weakest markets. We believe that demand for Slovenian manufactured goods is still strong in other industries, despite some temporary weaknesses in the automotive value chain in the first half of 2019. We remain optimistic about medium-term prospects.
Investors need more blue-collar workers
What is Slovenia doing to attract foreign direct investors? What are your recommendations for improving the business climate in Slovenia?
Since 2014, the FDI stock has increased, but it is mostly brownfield. By nationality, foreign owners are diverse, mainly originating from the EU-28. Currently, about half of the biggest exporters are foreign-owned. This makes sense as they are part of the regional value chains in a diverse set of industries. Foreign companies acknowledge an attractive R&D environment and tax incentives, a well-trained labour pool and highly educated employees which command several languages. What they are missing is the vocational training for blue-collar employees, lacking practical experience. Young people have less incentive to search for blue-collar jobs preferring to look for white collar instead. In the last 12 months, FDI inflow increased by EUR 1.4 billion, representing 3% of GDP, one of the highest numbers in our history. Several banks and a major insurance company were sold to foreign owners. As of 1st of July 2018, the law on stimulating investments began to come into effect. It does not discriminate between domestic or foreign investors and offers incentives in the form of subsidies, guarantees, reduction in the market price of a particular real estate property. Changes are expected in 2020, which will reduce the tax burden of labour but increase the effective corporate tax rate, probably from 12% currently to 14%. The important thing is that the incentives for R&D and investments will continue to differentiate between companies that develop new products and services and those that don’t.
Photo Barbara Reya