Author: Mateja Bertoncelj
Foreign investors need a favorable business environment
»Without fresh capital, we won’t come out of the crisis. We lack the domestic capital, so foreign investments seem to be the only option. The government must continue privatization,« said Vojmir Urlep, CEO of the company Lek, at the FDI Summit Slovenia 2014.
It is clear that requirements of foreign capital for investments are not at all different from the requirements of the domestic capital, everyone needs a supportive business environment, says the economist Matija Rojec from the Faculty of Social Sciences in Ljubljana.
In recent years Slovenia has not done much to make Slovenian environment more conducive to foreign investors. The main obstacles for investments are the same as in 2008: high taxes, lack of payment discipline, high labour costs, inefficient judicial system, inflexible labour market – difficult firing of employees and corruption, note Matija Rojec and Andrej Jaklič in their study Slovenia as a location for foreign investments in the eyes of foreign investors.
Foreign owned companies are more successful
Production companies owned by foreign capital are more successful than those in Slovenian hands. Revenues per employee are higher by 35%, assets by 8%, added value per employee by 19%, operating profit by 39%. But it should be noted that these figures are not entirely comparable, because foreign companies in question are predominantly large modern facilities and part of multinational corporations, which facilitate their access to the markets, says Rojec.
Our key advantages are knowledge and skills
Slovenia’s key advantage over countries in the region is highly qualified workforce. But this can be quickly lost. Hubert Kosler from the company Yaskawa warns: »Our engineers are very good. But due to high taxation, we cannot pay them as well as they deserve. We help them to progress and to establish the connections with foreign companies, but then it happens that we lose them just because we cannot pay them enough.« Vojmir Urlep also points out that qualified workforce is not just the domain of Slovenia; it can be obtained elsewhere, even at a lower cost.
Additional motivations for foreign investors who already own companies in Slovenia are also high quality organization of businesses and effective achievement of planned results. »But we must not forget, that they are so good, because in addition to the capital foreigners bring also their know-how,« says Aleksander Zalaznik from Danfoss Trate.
Commitments on Sales must be stronger than the term of one government
Attracting initial investments is difficult because we are not able to offer a large market. Therefore, it is necessary to make an extra effort to find good owners for existing, especially state-owned companies. Vojmir Urlep from Lek points out: »Our government must continue privatization and include all companies that have the potential to attract strategic investors who know how to market the products. We must make it clear that foreign capital is welcomed, and continue transparent privatization. Government promises are not enough. Paper can hold anything, but it is actions that count. We also need to make it clear that privatization is not only a decision of the current government, but that it will be continued also by the next one.«We need foreign investments because without them, Slovenia will not be able to remain a country with a high standard of living. »Public administration is inefficient, restructuring is the answer; but it will lead to further unemployment, so new jobs are badly needed,« says Aleksander Zalaznik.
Actively searching for investors
In search of fresh capital one has to be active. David La Rose from IBM spoke yesterday about his experiences: »It is necessary to pick up the phone, call those who invest and visit them. Presidents of the Croatian and Serbian government called me with the question what should they do to convince me to invest in their countries. And now we are helping them to become more efficient and to determine where their strengths lie.« When looking for investors it is also necessary to connect different ministries.
Opportunity lies in relocation back to Europe
Medeja Lončar from Siemens Slovenia indicates: » Slovenia has a good opportunity to attract foreign investments. At the moment, many multinational corporations are moving their production from China and India back to Europe. Countries such as Romania, Slovakia, Croatia, have lower labor cost, but we are more innovative and should be able to capitalize on the advantage. Due to changing technologies we are facing a new technological revolution. In Slovenia, companies are too small to dictate new global trends. But their innovativeness can be realized in connection with capitally strong companies, as did Pipistrel with Siemens in the development of an electric aircraft. It is important to find niches where we can work with the big ones.«
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