The reform programme in which Slovenia embarked since independence in 1991, aimed at restoring macroeconomic stability and establishing a functional market economy, has created a modern, stable, outward-oriented economy, well integrated into the world economy, according to a WTO Secretariat report on the trade policies and practices of Slovenia. Liberalization of trade and investment, driven by commitments in the WTO and preparations for accession to the EU, has been a major feature in this process.

The report says that except for a short-lived crisis in 1992, throughout the transition, Slovenia has experienced robust economic growth of more than 4% a year on average, sustained by exports and investment flows. The consistent pursuit of sound structural and macroeconomic policies, reflected in a decade of broadly balanced budgets, low external debt, and moderate inflation and external current account deficits, increased the resilience of the Slovenian economy to external shocks.

A gradual, but consistent process of structural reforms, including the elimination of price, exchange, and trade controls, and the progressive privatization of “socially owned” enterprises, contributed to the establishment of market structures in the vast majority of economic sectors, the report adds. Since 1998, the pace of structural reform has accelerated, including in capital account liberalization. Slovenia's strong economic performance has brought substantial improvements in its social indicators: the unemployment rate declined to 7% and per capita income (about US$10,000 in nominal terms) is not out of line with the level in EU countries. Yet, important disparities in regional development remain.

The report also highlights that Slovenia's economy is highly dependent on international trade and the country is strongly committed to the multilateral trading system. Slovenia made extensive commitments upon accession to the WTO (binding 100% of its tariff lines; dismantling non-tariff barriers; and making specific commitments in two thirds of activities covered by the GATS). The orientation of Slovenia's economic and trade policies is, however, like that of other central and eastern European countries, largely driven by the goal of accession to the EU. The foreign investment regime of Slovenia is fairly liberal, with a priori no general restrictions.

MFN tariffs have been reduced in recent years, albeit less rapidly than preferential rates. In 2001, Slovenia's simple average applied MFN rate was close to 11%, with an average of 9.5% for non-agricultural goods and 16% for agricultural products (WTO definition). While efforts have been made to reduce tariff dispersion, tariffs remain escalatory, in particular in the food, wood, and textiles and clothing industries. A relatively large gap exists between bound and applied rates. The report notes that this gap can undermine the predictability of Slovenia's tariff regime. Given the large number of preferential agreements signed by Slovenia, exclusively MFN rates apply to only 15% of its imports.

The Slovenian import regime has few non-tariff barriers. Slovenia maintains non-automatic licensing requirements to regulate certain imports affecting public security, safety, health, and the environment; and to administer tariff quotas in agriculture. The only remaining quantitative restrictions per se are those on textiles and clothing, which are to be phased-out under the WTO Agreement on Textiles and Clothing.

Conditions of access to Slovenian markets have also been eased by the complete overhaul of "behind-the-border" legislation in areas such as investment, competition, state aid, and intellectual property rights, as a result of implementation of WTO obligations and EU accession requirements. While Slovenia's sectoral policies have moved towards greater market orientation, the level of government assistance in agriculture has been increasing. The share of agriculture to GDP has been decreasing over the last years (from 5% a decade ago to around 3% in 2000), but there has been an increase in budgetary allocations to the sector. Since 1998, Slovenia's agricultural policies have been aimed at harmonizing support systems with the EU's CAP.

Slovenia's manufacturing sector (which accounts for about one third of GDP) resisted well the loss of Yugoslav markets and the exposure to international competition. Aided by the liberalization of trade and the relatively modern industrial base inherited from the socialist period, Slovenia's manufacturing sector has been able to integrate in, and compete with, neighbouring industrial clusters in the EU. The services sector accounts for more than 50% of Slovenia's GDP. The Government has taken steps to reduce state involvement in the sector and encourage private investment in several activities. Liberalization in the main services activities, such as financial and basic telecommunications services, had began in the late 1990s.

Note to Editors

Trade Policy Reviews are an exercise, mandated in the WTO agreements, in which member countries’ trade and related policies are examined and evaluated at regular intervals. Significant developments which may have an impact on the global trading system are also monitored. For each review, two documents are prepared: a policy statement by the government of the member under review, and a detailed report written independently by the WTO Secretariat. These two documents are then discussed by the WTO’s full membership in the Trade Policy Review Body (TPRB). These documents and the proceedings of the TPRB’s meetings are published shortly afterwards. Since 1995, when the WTO came into force, services and trade-related aspects of intellectual property rights have also been covered.

For this review, the WTO’s Secretariat report, together with a policy statement prepared by the Government of Slovenia, will be discussed by the Trade Policy Review Body on 13 and 15 May 2002. The Secretariat report covers the development of all aspects of Slovenia trade policies, including domestic laws and regulations, the institutional framework, trade policies and practices by measure, and developments in selected sectors.

Attached to this press release are the Summary Observations of the Secretariat report and parts of the government policy statement. The Secretariat and the government reports are available under the country name in the full list of trade policy reviews. These two documents and the minutes of the TPRB’s discussion and the Chairman’s summing up, will be published in hardback in due course and will be available from the Secretariat, Centre William Rappard, 154 rue de Lausanne, 1211 Geneva 21.

Since December 1989, the following reports have been completed: Argentina (1992 and 1999), Australia (1989, 1994 and 1998), Austria (1992), Bahrain (2000) Bangladesh (1992 and 2000), Benin (1997), Bolivia (1993 and 1999), Botswana (1998), Brazil (1992, 1996 and 2000), Brunei Darussalam (2001), Burkina Faso (1998), Cameroon (1995 and 2001), Canada (1990, 1992, 1994, 1996, 1998 and 2000), Chile (1991 and 1997), Colombia (1990 and 1996), Costa Rica (1995 and 2001), Côte d’Ivoire (1995), Cyprus (1997), the Czech Republic (1996 and 2001), the Dominican Republic (1996), Egypt (1992 and 1999), El Salvador (1996), the European Communities (1991, 1993, 1995, 1997 and 2000), Fiji (1997), Finland (1992), Gabon (2001), Ghana (1992 and 2001), Guatemala (2002), Guinea (1999), Hong Kong (1990, 1994 and 1998), Hungary (1991 and 1998), Iceland (1994 and 2000), India (1993 and 1998), Indonesia (1991, 1994 and 1998), Israel (1994 and 1999), Jamaica (1998), Japan (1990, 1992, 1995,1998 and 2000), Kenya (1993 and 2000), Korea, Rep. of (1992, 1996 and 2001), Lesotho (1998), Macao (1994 and 2001), Madagascar (2001), Malaysia (1993, 1997 and 2001), Malawi (2002), Mali (1998), Mauritius (1995 and 2001), Mexico (1993, 1997 and 2002), Morocco (1989 and 1996), Mozambique (2001), New Zealand (1990 and 1996), Namibia (1998), Nicaragua (1999), Nigeria (1991 and 1998), Norway (1991, 1996 and 2000), OECS (2001), Pakistan (1995 and 2002), Papua New Guinea (1999), Paraguay (1997), Peru (1994 and 2000), the Philippines (1993 and 1999), Poland (1993 and 2000), Romania (1992 and 1999), Senegal (1994), Singapore (1992, 1996 and 2000), Slovak Republic (1995 and 2001), Slovenia (2002), the Solomon Islands (1998), South Africa (1993 and 1998), Sri Lanka (1995), Swaziland (1998), Sweden (1990 and 1994), Switzerland (1991, 1996 and 2000 (jointly with Liechtenstein)), Tanzania (2000), Thailand (1991, 1995 and 1999), Togo (1999), Trinidad and Tobago (1998), Tunisia (1994), Turkey (1994 and 1998), the United States (1989, 1992, 1994, 1996, 1999 and 2001), Uganda (1995 and 2001), Uruguay (1992 and 1998), Venezuela (1996), Zambia (1996) and Zimbabwe (1994).

  
  
The Secretariat’s report: summary  back to top

TRADE POLICY REVIEW BODY: SLOVENIA
Report by the Secretariat — Summary Observations

After independence (1991), Slovenia swiftly embarked on a reform programme aimed at restoring macroeconomic stability and establishing a fully functioning market economy. In less than a decade, Slovenia has largely met these objectives, creating a modern, stable, outward-oriented economy, well integrated into the world economy. Liberalization of trade and investment, driven by commitments in the WTO and preparations for accession to the European Union (EU), has been a major feature in this process.

Except for a short-lived crisis in 1992, throughout the transition Slovenia has experienced robust economic growth of more than 4% a year on average, sustained by exports and investment flows. The consistent pursuit of sound structural and macroeconomic policies, reflected in a decade of broadly balanced budgets, low external debt, and moderate inflation and external current account deficits, increased the resilience of the Slovenian economy to external shocks. This was the case particularly during the Russian financial crisis of 1997-98, and the current world economic slowdown. GDP growth in 2001 is expected to be around 3.7%.

A gradual, but consistent process of structural reforms, including the elimination of price, exchange, and trade controls, and the progressive privatization of “socially owned” enterprises, contributed to the establishment of market structures in the vast majority of economic sectors. Since 1998, the pace of structural reform has accelerated, including in capital account liberalization. Slovenia's strong economic performance has brought substantial improvements in its social indicators: the unemployment rate declined to 7% and per capita income (about US$10,000 in nominal terms) is not out of line with the level in EU countries. Yet, important disparities in regional development remain.

Slovenia's economy is highly dependent on international trade. The ratio of merchandise trade (imports and exports) to GDP is one of the highest in the region (around 120%). Early in the 1990s, Slovenia faced with the loss of Yugoslav markets and the breakdown of transport and communications to south-east Europe, reoriented trade towards the EU and associated countries; these now account for over two thirds of Slovenia's trade. Pre-transition trade links have not disappeared though, and by 2000, the decline of trade with countries of former Yugoslavia and Russia had come to a halt. The product composition of merchandise trade, still dominated by semi-finished and intermediate manufacturing goods, is shifting gradually. The shares of textiles and clothing and steel in merchandise exports are declining slightly, while those of automotive products, electronics and pharmaceuticals are increasing.

Slovenia's efforts to further integrate in the world economy is reflected in its participation in various multilateral, regional and bilateral trade initiatives. Slovenia applied for membership of the GATT in 1992 soon after independence; it was the last contracting party to join GATT in 1994, and became an original member of the WTO. Slovenia grants MFN treatment to all its WTO trading partners. Slovenia has also signed free-trade agreements with the European Union (the Europe Agreement) and EU associated countries (EFTA, CEFTA, Baltic countries, Israel, Turkey), as well as with Croatia and the former Yugoslav Republic of Macedonia.

Slovenia is strongly committed to the multilateral trading system. It made extensive commitments upon accession (binding 100% of its tariff lines; dismantling non-tariff barriers; and making specific commitments in two thirds of activities covered by the GATS), and has since joined the Information Technology Agreement, participated in the extended WTO negotiations on financial services, and is in the process of acceding to the Government Procurement Agreement. Slovenia did not take any specific commitments in the extended negotiations on telecommunications services, and maintains some GATS MFN exemptions. It has largely met its regular WTO notification requirements. Slovenia strongly favoured the launch of a new round of trade negotiations at the Fourth Ministerial Meeting in Doha.

The orientation of Slovenia's economic and trade policies is, however, like that of other central and eastern European countries, largely driven by the goal of accession to the EU. Slovenia is included among the first wave of countries for accession to the EU. The harmonization of Slovenia's trade regime involves not only the concordance of Slovenia's tariff with that of the EU (the Common External Tariff), but also extends to regulations on customs, standards, competition policy, subsidies, intellectual property, and other trade-related areas.

The foreign investment regime of Slovenia is fairly liberal, with a priori no general restrictions. All business activities are open to domestic and foreign natural and legal persons alike. There are, however, some restrictions on foreign investment in certain business operations, such as the military supply industry, gaming, and budget-financed pension and health insurance. In the financial sector (banking and insurance), until recently, pervasive capital account and branching restrictions had limited investment. In an attempt to boost investment flows, Slovenia has also recently decided to offer financial incentives (direct financial assistance and tax incentives) to investment, regardless of origin (foreign or national).

Participation in the WTO and the process of accession to the EU provide the basis and a strong anchor for continued trade liberalization in Slovenia. Customs procedures have been simplified. The Slovenian tariff has been rationalized, with the elimination of surcharges, the incorporation of charges in its WTO Schedule, and the concentration of tariff lines in lower tariff rates. Around 96% of tariff lines are ad valorem; however, transparency is still undermined by the existence of a relatively large number of tariff exemptions and the use of mixed duties in agriculture.

MFN tariffs have been reduced in recent years, albeit less rapidly than preferential rates. In 2001, Slovenia's simple average applied MFN rate was close to 11%, with an average of 9.5% for non-agricultural goods and 16% for agricultural products (WTO definition). While efforts have been made to reduce tariff dispersion, tariffs remain escalatory, in particular in the food, wood, and textiles and clothing industries. A relatively large gap exists between bound and applied rates, as a result, on the one hand, of the binding of a large number of lines at the uniform rate of 27%, and on the other hand, of the relatively rapid reduction of applied rates. This gap can undermine the predictability of Slovenia's tariff regime: in 2001, the margin was around 13 percentage points, leaving room for the possibility of increases in applied rates, as seem to have been the case in 1998 for some agricultural products. However, the authorities aim to adopt the EU's bound rates upon accession, which would eliminate the gap between applied and bound rates.

Given the large number of preferential agreements of which Slovenia is a member (15, counting the EU as one), exclusively MFN rates apply to only 15% of imports. Slovenia's trade with its largest trading partners is virtually duty free: for example, the average tariff on industrial imports from the EU is 0.5%, 9 percentage points lower than MFN tariffs. In agriculture, products considered as sensitive are protected by tariff quotas negotiated with each preferential partner, resulting in a wide variety of product- and country-specific preferences. As such access is adjusted on an on going basis, the operation of preferences in agriculture requires the management of hundreds of tariff quotas (carrying mixed duties), contained in 14 different lists, thereby hampering transparency and the efficient use of Slovenia's scarce administrative resources.

The Slovenian import regime has few non-tariff barriers. Slovenia maintains non-automatic licensing requirements to regulate certain imports affecting public security, safety, health, and the environment; and to administer tariff quotas in agriculture. The only remaining quantitative restrictions per se are those on textiles and clothing, which are to be phased-out under the WTO Agreement on Textiles and Clothing. Steady progress has been achieved in harmonizing national standards and technical regulations with international and EU standards. Recent amendments to the government procurement legislation provide for enhanced transparency and the removal of a 10% preference for domestic bidders. In 2001, Slovenia initiated the required procedures for accession to the Plurilateral Agreement on Government Procurement. Slovenia has enacted legislation on trade remedy measures (anti-dumping, countervailing, and safeguard measures), but to date has made little use of it.

Slovenia does not impose duties, taxes or any other charges on exported goods; export taxes were removed by late 1990s. No explicit export subsidies, either on industrial products or on agricultural products, are provided by the Government. Indirect export support in the form of export finance, guarantees, and promotion assistance is available to Slovenian exporters through a number of programmes and agencies.

Conditions of access to Slovenian markets have also been eased by the complete overhaul of "behind-the-border" legislation in areas such as investment, competition, state aid, and intellectual property rights, as a result of implementation of WTO obligations and EU accession requirements. Competition legislation predated the privatization programme, and is written into the Constitution. Policies and impediments that contributed, in the early 1990s, to limited foreign participation in the economy, including the privatization of companies through internal buyouts instead of stock market operations, pervasive capital controls, investment limits in the financial sector, and administrative barriers, were removed in the late 1990s, or are currently under revision.

Despite these efforts, the ratio of FDI to GDP remains well below the average in the region. Experience indicates that an open privatization policy and a stable regulatory environment are more important for foreign investors than financial incentives. The strict application of competition and state-aid rules, which help to level the playing field, is also an important factor for attracting investment. Real efforts in this respect are being made by relevant agencies in Slovenia. Notable progress has also been achieved in bringing domestic legislation on intellectual property rights in line with international standards, and in enforcement.

While Slovenia's sectoral policies have moved towards greater market orientation, the level of government assistance in agriculture has been increasing. The share of agriculture to GDP has been decreasing over the last few years (from 5% a decade ago to around 3% in 2000), but there has been an increase in budgetary allocations to the sector. Recent OECD calculations indicate that the average producer support estimate (PSE) in Slovenia is higher than the OECD average and similar to that of the EU. Since 1998, Slovenia's agricultural policies have been aimed at harmonizing support systems with the EU's Common Agricultural Policy. This entails a gradual shift from price support to direct payments, and from direct market intervention to structural reform. The agriculture sector, comprising a large proportion of small farms located in mountainous areas, is also shielded from international competition by a combination of specific border measures (high tariffs and relatively restrictive tariff quotas).

Slovenia's manufacturing sector (which accounts for about one third of GDP) resisted well the loss of Yugoslav markets and the exposure to international competition. Aided by the liberalization of trade and the relatively modern industrial base inherited from the socialist period, Slovenia's manufacturing sector has been able to integrate in, and compete with, neighbouring industrial clusters in the EU. The reorientation of trade flows posed major challenges to Slovenian enterprises, in particular the need to upgrade facilities and increase productivity. This process was particularly successful in the pharmaceutical, mechanical engineering, and paper and wood industries due to a combination of high investment and privatization. In other sectors, such as textiles and clothing and food processing, restructuring efforts have been slower and performance weaker.

The services sector accounts for more than 50% of Slovenia's GDP. The Government has taken steps to reduce state involvement in the sector and encourage private investment in several activities. Liberalization in the main services activities, such as financial and basic telecommunications services, began in the late 1990s. After the financial crisis in 1992, priorities in the sector focused on restoring the safety and soundness of the system, under the shelter created by restrictions on foreign presence, possibly at the cost of reduced competition. Since 1999-00, however, the focus has shifted towards increased competition and foreign presence. The financial sector stands to benefit from greater openness and competition resulting from capital account liberalization; further reforms would improve its efficiency. A new telecommunications law, enacted in 2001, ended the monopoly rights in the fixed telephony market. Major modernization of the transport and tourism networks is under way. In general, the process of modernization in services industries could benefit from increased foreign presence, in terms of increased transfers of capital, technology and know-how, and hence from enhanced market-access commitments in the WTO.

  
  
Government report back to top

TRADE POLICY REVIEW BODY: SLOVENIA
Report by the Government — Part IV

Future policy directions and objectives

Slovenia is aiming at becoming an active and successful competitor in the global economy, whose competitive strengths will be based on high value-added manufacturing and services, quality, innovation and entrepreneurship. Greater international competitiveness, however, is not a goal in itself. It ensures high economic growth, which in return ensures a strong and prosperous country with high quality of life and social welfare.

The Government is aiming at achieving the above goals with a systematic combination of structural reforms and short-term macroeconomic policy measures, thus encouraging long-term development factors. The long-term strategic directions are encompassed in the “Strategy of Economic Development in Slovenia”, “National Programme for the Adoption of the Acquis" and "National Development Programme 2001-2006”.

Completion of the main structural reforms is based on: (i) wide-ranging stimulation of domestic and foreign investment; (ii) increased labour market flexibility; (iii) state aid system in the direction of incentives for enhancing competitiveness, promoting small and medium size enterprises and transfer of modern technology; (iv) streamlining and greater transparency of administrative procedures; (v) more effective use of public resources; (vi) increasing the role of the private sector on a concession basis through an adapted allocation structure.

The Government will continue its efforts to reduce inflation rates. The targeted inflation rate for 2002 is 6.4 per cent. The aim of the public finance policy is to preserve the share of revenues at about 42 per cent of the GDP. Through a variety of measures, government spending are to be lower and more effective. By keeping the government deficit within sustainable limits, public finance policy will supplement the efforts of other policies striving for stabilisation.

Slovenia is promoting a pro-active industrial policy, which is being implemented through two interrelated programmes. The “Programme for Entrepreneurship and Competitiveness Promotion 2001 — 2006” consists of horizontal measures to enhance productivity growth, competitiveness at the company level, internationalisation of Slovenian enterprises, investment promotion, inter-company co-operation and cluster development. The “Programme Supporting Structural Adjustment and Restructuring” of traditional industries is aiming at supporting selected industries in meeting single market criteria and requirements.

The positive reorientation towards FDIs is reflected in the renewed “Programme for the Promotion of FDI for the period 2001 — 2004”. This Programme identifies three basic priorities: (i) lifting of administrative barriers to investment, (ii) improvement of the supply of industrial sites and (iii) creation of an internationally comparable system of non-refundable incentives.

The affirmation of Slovenia as a springboard for doing business in the successor countries of the former Yugoslavia does provide an opportunity of increasing future FDI inflows into Slovenia as south-east Europe is gradually integrating into the European integration process and Slovenia is already an important investor in the region.

The Government has primarily a role of a “catalyst” in enhancing development process. State policies are to maintain competitive and open markets. Responsibility of the structural adjustment remains with the enterprises. State interventions are organised in integral approaches and carried out in a cost effective manner.

Accession to the EU is perceived not only as a process of regional integration but also an important step forward in the globalisation of Slovenian economy. Slovenia expects to complete the accession negotiations by the end of 2002 and to become a full member of the EU in the year 2004.