Germany is the most important business partner for Slovenia. German-Slovenian economic relations continue to follow a positive trend, with a trade turnover of nearly 12 billion €, and are influenced by the high level of exports of Slovenian companies to Germany. Also, with regards to direct investments, Germany invests in the amount as high as 1,86 billion € and belongs to the top of most important foreign investors.
According to their own calculations, German companies generate almost 15% of Slovenian sales, account for 20% of the total of Slovenian exports and employ around 8% of all Slovenian workers. On the average, the value added per employee increases by 25% above the Slovenian average value and amounts to 37,776 €. Nowadays, the region of Central and Eastern European countries counts as one of the most important economic spaces for Germany, as well as its business partner and investment destination. Therefore, since 2006, the German Foreign Chambers of Commerce (AHK) have been conducting a joint survey on the economic and investment situation in the countries of Central and Eastern Europe (CEE). The latest survey of all German Foreign Chambers of Commerce took place in February 2019 and interrogated 15 Central and Eastern European countries.
The Survey of the German-Slovenian Chamber of Commerce (AHK Slovenia) on the economic situation in Slovenia for 2019 showed, that Slovenia has convincingly and successfully surpassed 14 Central- and Eastern Europe (CEE) countries as the best location for Research and Development. Thus, Slovenia meets all the conditions for digital transformation, implementation of the industry 4.0 at all levels and likewise opens up new opportunities for cooperation. The annual survey evaluates the economic situation, economic politics, attractiveness for investments in Slovenia and the situation on the labor market.
For many years, Slovenia has been an insider tip for German investors. According to Gertrud Rantzen, the chairwoman of the German-Slovenian Chamber of Commerce, 80% of German investors believe in the Slovenian market. Thus, future expectations for investments of German companies are high.
Most investments are expected to be bound to the field of digitalization; over the next three years, approximately 130 Million € are expected to be invested in digitization processes.
Despite the fact that Slovenia is currently dominating the period of dynamic growth driven by the export activity of companies, Slovenia still faces a number of challenges. The economic situation isn’t ideal and a number of fields need to be further investigated on. Among other things, the problem is the increasing labor shortage of skilled workers, especially in the production activity. One of the reasons is the expansive investment policy of local companies and the trend of emigration to other European countries.
»Companies will employ less workers than in the previous years, however not because they don’t need experts, but because too few of them are available!« said Thomas Uihlein, member of the board of directiors of the German-Slovenian Chamber of Commerce and Director of the Aviation Academy Fraport Slovenia d.o.o.
There remains also a challenge within the taxation system. “The taxation system is in need of flexibility and change, especially in the field of labor costs” said Valerija Špacapan Friš, Vice-President of the Board of Directors of the German-Slovenian Chamber of Commerce and Director of Schenker d.d.
The most important results of the survey:
Despite its traditional shortcomings, Slovenia can continue to maintain its leading position among Central and Eastern European Countries. However, additional efforts are needed to improve the business environment and to be at the top level. This year’s results demonstrate improvements in various important location factors that are essential for an investment-friendly environment. Nevertheless, the government still needs to face a lot of tasks and challenges, which need to be tackled and implemented immediately. This not only includes the swifts and consistent implementation of privatization measure and the creation of an investment-friendly climate through:
1. Tax relief for investments, especially for small investments in research and development
2. Further steps to tax relief, especially through the introduction of additional tax levels
3. Introduction of the social cap to reduce labor costs
4. Flexibilization of labor law to adapt to new ways of working through digitization and artificial intelligence
5. Comprehensive reforms (tax, health, employment and retirement reform) as a whole package
6. Investments in education and the educational system, in order to counteract the
shortage of skilled workers.
Slovenia remains the right choice for German companies. 80% would select Slovenia as their investment location again. However, it is urgently necessary for Slovenian politics to establish structural reforms in order for Slovenia to stay competitive with regards to other European Countries of the European Union and to become more attractive to highly qualified skilled workers. German companies in Slovenia are of great importance regarding Slovenian economic growth and further contribute significantly to Slovenian export growth.
Photo: AHK Slovenia