Slovenia Keeps Trying to Privatize Even Solid `Socially Owned' Firms

Tiny republic battles obscurity as it seeks foreign investment; Slovenes find many confuse country with Slovakia

THE Slovenian government's latest economic figures leave little doubt that this northernmost former Yugoslav republic is in recovery. The Slovene economy closed 1993 with more jobs, reduced foreign debt, and a surge in industrial production. Inflation is low, foreign reserves are growing, and forecasters expect even better performance this year.

``There's certainly an upswing now and it's clear that we've already reached the bottom of the transitional depression,'' says former economics minister Joze Mencinger, who teaches at the University of Ljubljana. ``It's hard to say if this will be a lasting thing, but we won't see a major drop [in the economy] in the foreseeable future.''

Despite more pessimistic predictions, official estimates indicate that in 1993 the Slovene economy held to zero growth in gross domestic product (GDP), mostly due to a 3.9 percent surge in industrial production in the final quarter of last year. Leading financial organizations had expected GDP to fall by at least 1 percent as the economy recovered from the collapse of the Yugoslav market.

``We expect the recovery to deepen as foreign investors and trading partners take advantage of the increased stabilization of our economy,'' says Jozef Drofenik, head of the Ministry of Economic Relations.

Officials expect many foreign companies to settle in Slovenia and take advantage of new trade agreements signed with the Czech Republic and Slovakia. These agreements remove most barriers to Slovene industrial exports over the next two years. Similar agreements are being negotiated with Hungary and Poland.

``This is a much faster timeframe than the [European Union] agreements with these countries,'' Mr. Drofenik says. ``So if somebody invests in manufacturing in Slovenia, they'll have free access to other eastern markets.'' Manufacturers are able to take advantage of the relatively short road, sea, and rail links with Western Europe, as well as a highly skilled work force.

Slovenia is the richest economy in the region and has the highest standard of living of all the former socialist countries. Per capita GDP stands at $6,100, almost double that of neighboring Hungary ($3,100) or the Czech Republic ($2,800), while its wages remain significantly lower than in the West.

In fact, Slovenia's biggest obstacle when seeking new economic partners is that many foreigners do not know it exists.

``We're a small country with smaller profile,'' admits Privatization Agency adviser Senja Brzin. ``For most people we're literally not even on the map yet.''

Slovenia's four traditional Western partners - Austria, Germany, France, and Italy - now account for 60 percent of its foreign trade, and nearly 90 percent of direct foreign investment in the republic since 1985.

United States companies compose a mere 1 percent share, in stark contrast to other parts of East-Central Europe in which they constitute a significant proportion of total investment.

``Part of the reason is our small market, a population of 2 million,'' Mr. Mencinger says. ``But many foreigners don't seem to realize that we're no longer part of Yugoslavia and the war.... Others simply confuse us with Slovakia.''

In the meantime, the government is embarking on a large-scale privatization program that has been delayed for almost three years by a parliamentary stalemate.

Other delays are the result of the former Yugoslav economic system. Instead of the state owning (and thus selling) enterprises, most were ``socially-owned.'' This has made a coordinated privatization strategy difficult. ``In effect there are no owners,'' says Mrs. Brzin at the Privatization Agency. ``This used to be an advantage because the companies had a lot of freedom in decisionmaking and an incentive for profit. That's why they are so competitive.

``But now this is proving a real disadvantage,'' she says, ``because [the Privatization Agency] can only advise and oversee the process. The rest is up to the company directors.''

Still, by the end of the year the agency hopes to have about 2,500 companies in private hands. Foreign investors are expected to play only a minor role as most small, labor-intensive companies are likely to be purchased by employees and management with privatization vouchers.

``I don't think this will result in any change in efficiency or management either way. Efficient companies will remain efficient. Others will continue to be inefficient,'' says former finance minister Mencinger.

``It's a natural, gradualist way of getting from social-property to capital ownership, so I'm not concerned.... At least it provides an owner.''