Slovenia Goes Its Own Way

OLD Yugoslavia is a disaster. Serbia suffers from hyperinflation and sanctions. Bosnia is torn apart by civil war. Parts of Croatia are held by Serb forces. And Macedonia has not gained international recognition because Greek opposition.

But Slovenia, the small, alpine former Yugoslav republic is different. It is forging a new destiny. Bordering Austria, Hungary, Italy, and Croatia, Slovenia's 2 million population is almost entirely literate and enjoys an established multiparty democracy. Slovenia may be one of the most successful states in East Europe to emerge from communism.

Efforts to hold Yugoslavia together faltered in the early 1990s largely due to Serbia's effort to dominate the federation. Negotiations in the federation failed to resolve concerns about the formation of a costly "Greater Serbia." After a Dec. 20, 1990, plebiscite, in which 90 percent of the population voted to go it alone, Slovenia proclaimed its intention to seek independence on June 25, 1991. Slovenia's defense forces repelled a Yugoslav military attempt to cow the seceding state. The European Communi ty-brokered Brioni agreement caused the Yugoslav military to withdraw from Slovenia last summer and turn their attention in a more murderous fashion to Croatia, which declared its independence last June as well. Slovenia implemented its independence and sovereignty on Oct. 8, 1991.

Between then and now, the Slovenian coalition government of Prime Minister Lozje Peterle has moved to consolidate national independence. Recognition has been granted by the EC and the United States; membership has been attained in the International Monetary Fund (IMF), the World Bank, and the United Nations. A national currency, the tolar, was introduced in October 1991 and linked to the German mark. A central bank is established, with a tight monetary policy to reduce inflation; a postal service has bee n created.

The Slovenian government's economic program is helping to privatize the economy; liberalize the trade regime; and invest in telecommunications, the information sector, and transport infrastructure. The desire is to develop a modern economy based on a combination of traditional industries, like textiles, tourism, and new technology. Significantly, the legal framework being adopted will make economic and financial regulations compatible with the EC, with a goal of membership in that organization.

One of the most dynamic developments in Slovenia is Ljubljana's small stock market, the Borza. Borza trades in 30 securities, including a private bank in Croatia. Although the majority of securities are bonds issued by the government, municipal councils or commercial institutions, the potential for more active trading is high. Market capitalization in 1991 was $600 million, and once the privatization program increases momentum the Borza will be a primary beneficiary.

SLOVENIA'S reforms and stability in an otherwise troubled region are attracting foreign investors, 90 percent of whom come from Germany, Austria, and Italy. In 1990, 616 new foreign investments worth $333 million were registered, an increase from 1980. After the independence struggle, foreign investment is expected to recover by 1993.

Slovenia will be challenged as well. Difficulties exist: The banking system needs greater accountability; the ruling coalition is under strain and needs to move ahead with both political (especially a new electoral law) and economic reforms; and the country's population is undergoing an attitudinal adjustment about what is expected of the citizen and state in a free market. Moreover, although the Slovenian government elected in April 1990 announced it intends to privatize the economy, action is lagging. With some 1,600 state-owned companies potentially on the block, privatization could offer the government a considerable revenue upsurge. Still, there are lingering concerns about the social costs that could be incurred by higher unemployment and foreign ownership.

Yugoslavia's fragmentation is a sad and bloody affair. Economic life in the former federation is disrupted, and the UN sanctions implemented at the end of May against Serbia are likely to further destroy the region's economic infrastructure. While Croatia wrestles with the partial occupation of its territory and Bosnia struggles to even claim its "national" territory, Slovenia is cautiously building a better future. That future is linked more to Central and Western Europe, and a distance is being created

from the rest of the former Yugoslav federation - at least for the present, in which the gun, not trade, dictates policy.

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