Ambassador Robertson's Remarks to the Alumni Club of the Bled School of Management

Ljubljana, Slovenia
November 22, 2004

Thank you for having me here today. It's a pleasure to be here and to have an opportunity to meet with so many young entrepreneurs and executives. You are the future of this country and have an opportunity and a responsibility to spearhead change and take Slovenia to greater progress and prosperity. These are exciting times to be in Slovenia, and I don't doubt that much of the successes that will come will be from the efforts many of you here will make.
First of all, let me say that I should be sitting there where you are, and listening to you tell me about the Slovene economy, its successes and its challenges. Not the other way around. As the new American ambassador, I have much to learn here, and I don't doubt that you have much to tell me. But I've been asked to kick this off, so that's what I'll do, and I hope you will not be bashful to tell me where I'm wrong .... and where I might be right.
A little over two months ago, when Secretary of State Colin Powell swore me in as U.S. Ambassador to Slovenia, I said that one of my 2 or 3 highest priorities in the coming years is to support US business in Slovenia and the region and to assure that it has a level playing field in seeking investment opportunities here. I believe there are great opportunities for the U.S in Slovenia. And I am excited to be here at this time of great change, most notably with entry to the EU and NATO and the recent elections.

I know from my preparations to come here that Slovenia has been tremendously success since independence. It has the right mix of qualities to support continued economic growth. I would guess, however, that as Slovenia continues to extend its reach beyond the borders of Southeastern Europe into the larger realm of the EU and global competition, greater trade diversity and increased FDI will be critical for Slovenia to maintain its competitiveness. Why should investment in and trade with Slovenia be important to the USG? After all, Slovenia is a very small market - smaller than many medium sized cities in the United States. The answer is simple: Investment in and trade with Slovenia is important because stability and security in this region depend on a strong economic foundation. As you and your leaders understand, and American business increasingly understands, Slovenia can be the gateway to greater markets and development in the entire region to the Southwest.
Foreign Direct Investment
I'd like to focus my remarks today on Foreign Direct Investment, or FDI. FDI is an important element of any successful and growing economy, including the United States. Slovene economists have told me that for Slovenia to maintain long-term, steady economic growth and keep its competitiveness in a much more international environment, greater FDI is going to be necessary. With its overall stock of FDI of roughly 5 billion Euros, Slovenia ranks near the bottom in Central Europe, even when accounting for its small size. While there have been times of significant inflows of FDI (such as 2002), on average, the numbers are very low. Slovene companies are gradually expanding abroad, thanks to your role as economic leaders in southeastern Europe. But my guess is that in order to continue to pursue its economic development and grow its successful companies, restructure firms that need assistance in an environment of dramatically increased competition, and build Slovenia up as a place for international firms to do business, Slovenia will need to attract an increasing amount of FDI.

U.S. Share
In addition to low overall FDI, U.S. participation in the Slovenian market has been relatively small. With total U.S. investment in Slovenia at less than 10% of the total, we can obviously do better. Now, I'm very aware that one of the challenges Slovenia faces is raising its profile in the U.S.: where it is, why it's a good place to invest and live, what opportunities exist (It's not the Balkans anymore, thank you). While the numbers for U.S. trade and investment are low currently, I think there is general agreement with the Slovenian Trade and Investment Promotion Agency (TIPO), that Slovenia has the "right mix" for U.S. investors. Slovenia has an ideal strategic location, a highly educated and dedicated workforce, excellent infrastructure, and good quality of life.

Benefits of FDI
What I hope will be understood by Slovenia and Slovenians is that U.S. FDI can bring excellent benefits both to Slovenia and the investor. The investment in Kranj by the U.S. tire manufacturer Goodyear is a great example of this. Goodyear, in its venture with Sava Tires, has done well here in Slovenia. Since its initial investment in the late 1990s, Goodyear has made it very clear that it wants to be in Slovenia for the long run. It helped turn around a struggling company (thereby ensuring the stability of jobs for Slovenians), continues to reinvest profits here and has created one of the most efficient factories that Goodyear has worldwide (and it is a $25 billion company!).

PPPs
One additional area of FDI opportunities that I want to highlight is Public-Private Partnerships, or PPPs. My understanding is that PPPs can be thought of as "joint-ventures" between the public sector and the private sector to provide a project or service traditionally provided by the public sector. In my meetings with both public and private sector people recently, I have heard more and more talk about these types of opportunities, and I see them as one very promising way of increasing the amount of FDI in Slovenia. They can provide a step-by-step approach to increasing the share of private investment in state enterprises. I understand that the European Bank for Reconstruction and Development (EBRD) has been encouraging about PPP opportunities here. In addition to bringing more investment to Slovenia, PPPs could help take pressure off of a strained government budget.

Hindrances to FDI in Slovenia
In order to keep the Goodyear here in Slovenia and encourage others to follow in their footsteps, however, there are a number of issues that Slovenia needs to address. These are challenges that I believe the new Government of Slovenia will have to wrestle with in the coming months if it wishes to attract U.S. or other foreign firms to the Slovenian market.

As I said at the outset, foreign investors need to see a fair and level playing field for ALL investors. In order for this to happen, I would argue that the new Government needs to work to 1) improve transparency, 2) increase the pace of privatization of state-owned or controlled industries, 3) reduce the lengthy procedures and high costs of establishing a business, and 4) work to ensure a speedy, efficient, and transparent judicial process.

1) Transparency in procurement and tender processes is obviously critical to ensuring a level playing field. This is a fundamental requirement for any firm that is considering investing in or doing business anywhere. Without transparency, a firm cannot compete in a fair and equitable manner and, I would argue, the end consumer does not get the best deal.
2) Privatization of state-owned or controlled industries is something that has been on the Government's agenda for years. I would argue that now is the time to make this happen, perhaps in a step-by-step manner via the PPP route. In the end, as with transparency, a decrease in state-ownership and a corresponding increase in competition will ultimately benefit the consumer.
3) In addition, many have told me how critical it is for the government to reduce the costs, procedures and time that it takes to set up a business here in Slovenia. Among the new and old members of the EU, Slovenia stands out as problematic in this area. As in most countries, economic growth and job creation comes in large part from the small and medium business sector. In order to encourage this part of the economy, the Government should be doing all it can to ensure the ease of establishment of the future engines of Slovene growth. It's interesting to note that Latvia, another similarly sized new EU member, is recognized in a recent survey by the World Bank as one of the top 10 easiest places to do business. I find it also interesting to note that Latvia did not have the advantages that Slovenia did in the early days of its independence.
4) It will also be critical for the new Government to tackle another difficult problem that is hindering growth of FDI: the judicial system. I've met with the senior members of the Slovene judiciary and understand from U.S. businesses and others that have experience with the Slovene legal system that the judicial process here is slow and inefficient. I've heard of fairly straightforward labor disputes taking in excess of six years to be resolved. In order to attract an increased level of FDI to Slovenia it will be essential to streamline this system.

In closing, I want to express my sincere optimism about the economic future of Slovenia. The potential is here, but it is up to you, the entrepreneurs and executives of Slovenia to insist that the absolute best conditions possible exist for Slovenia to reach its full economic promise. I also want to offer the full cooperation of the U.S. Embassy to work in partnership with you to strengthen economic and commercial ties between our countries. With some effort, I know we can reap the rewards of the global marketplace.