US embassy cable - 04LJUBLJANA501

UNCLAS  LJUBLJANA 000501 
 
SIPDIS 
 
 
DEPT FOR EUR/NCE, EUR/ERA, EB 
USDOC FOR 4232/MAC/EUR/EERIS/CEEBIC/BURGESS/ROGERS 
 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: ECON, ETRD, PGOV, PINR, SI 
SUBJECT: SLOVENIA: COM CALLS ON NEW ECONMIN 
 
REF: LJUBLJANA 349 
 
Sensitive but Unclassified.  Please protect accordingly. 
 
1.  (U) SUMMARY: In a 26 May meeting, new Slovene Minister 
of Economy, Matej Lahovnik, told COM that the Ministry would 
like to make Slovenia even more "internationalized."  He 
advocated a gradual approach to investments and to 
privatization, a process he said should be of equal access 
to both domestic and foreign investors.  He also stated his 
belief that Slovenia will be able to weather the effects of 
high oil prices and to fulfill successfully the ERM II 
criteria. END SUMMARY 
 
2.  (U) COM, accompanied by DCM, PolEconOffs, and Econ 
Specialist called on new Minister of Economy Matej Lahovnik 
to congratulate him on his recent appointment as Minister 
and to seek his insights into the state of the Slovenian 
economy and the impact of EU membership.  Dimitrij Grcar, 
State Undersecretary for Multilateral Affairs, and Metka 
Urbas, Head of Bilateral Department, also participated in 
the meeting. 
 
Internationalization of the Economy 
----------------------------------- 
 
3.  (U) Lahovnik (who is 32 years old and looks even 
younger) briefly explained his economic program, outlining 
two major objectives.  First, he wants to attract more FDI, 
in particular "greenfield" investments.  Lahovnik believes 
that despite a relatively expensive labor force, Slovenia is 
an "attractive destination for foreign investors." 
Slovenia's highly skilled workforce and the desire of 
foreign companies to get a stronger foothold in the EU add 
to Slovenia's attractiveness.  He also sees opportunities 
connected with Slovenia's goal to become a bridge between 
the EU and the Western Balkans.  [Note: several countries 
and companies from the region expect Slovenia to play that 
role. End note.]  As a second objective, Lahovnik wants to 
accelerate the development of small and medium-size 
companies (SMEs) by reducing administrative barriers.  He 
has set in motion a "one-stop-shopping" process for SME 
permitting and applications at the ministry. 
 
Investments 
------------ 
 
4.  (U) Lahovnik did not answer COM's question of where and 
how Slovenia would like to see Americans invest.  Instead, 
he stated that a conservative, gradual approach to 
investment should be followed.  Lahovnik pointed out that 
Slovenia wants to attract more investments in order to 
create new jobs.  He is not against FDI, but does not 
support the takeover of Slovenian blue chip companies. 
Lahovnik admitted it is strange that the U.S. is ranked 12th 
among foreign investors in Slovenia.  [Note: Goodyear and 
Western Wireless International are the two largest US 
investors in Slovenia.  End note.]  He cited several 
difficulties for investors, especially land availability. 
He pointed out that Slovenian investors also "have problems" 
and stated that the government should provide equal access 
to domestic and foreign investors.  Lahovnik was more 
precise on Slovenia's outward investments, which are mainly 
in Southern and Eastern Europe.  Though figures are a small 
percentage of GDP, investments are important so that 
Slovenian companies can penetrate a larger market.  He 
believes that the government needs to provide Slovenian 
businesses with more information on Western European 
markets. 
 
Privatization 
-------------- 
 
5.  (U) "Privatization of infrastructure is not my 
portfolio", quickly explained Lahovnik.  However, he added 
that he is not against privatization and believes that the 
government should not interfere too much in the process.  He 
again stated the need for equal access to foreign and 
domestic investors, although he believes that there is no 
need to privatize all companies. He also added that 
privatization must be done gradually. (COMMENT: Lahovnik 
used the word "gradual" at least a dozen times during the 
meeting.  We saw it as a sign of very typical Slovene 
pragmatism when it comes to economic matters.  END COMMENT) 
 
Introduction of the Euro 
------------------------- 
 
6.  (SBU) Lahovnik said that the introduction of ERM II is 
essential for the Slovenian economy, in particular for 
 
 
tourism.  He understands the threats of the two-year 
probationary period, but does not expect a speculative, 
Soros-like currency attack because Slovenia's economy is so 
strong.  Lahovnik does not believe higher oil prices will 
prevent Slovenia from meeting the Maastricht criteria, since 
"targets are flexible - calculated as an average of best 
performers within the EU, and they will also face similar 
problems."  However, he sees higher oil prices as a problem 
in the long run because they will decrease economic growth. 
 
Comment 
------- 
 
7.  (SBU) COMMENT: While Lahovnik lacks hands-on business 
experience, he has a good understanding of economic 
development.  He seemed somewhat nervous, yet easy going, 
during the meeting.  His two overriding objectives are not 
new in Slovenia, but no one has yet been successful in 
meeting them.  With just six months in office before 
elections, we shouldn't bet heavily on his chances for 
success.  If leading politicians understand and agree with 
his approach, however, he may get another ministerial term 
after the fall elections.  Lahovnik's bio was transmitted 
reftel.  END COMMENT. 
YOUNG 
 
 
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