Download Since foreign demand is the driving force behind the growth

Dr. Mirjana DRAGIČEVIĆ
Full professor
Velibor MAČKIĆ
Junior researcher
Faculty of Economics & Business
10 000 Zagreb
Kennedy square 6
E-mail: [email protected]
Phone: +385 98 221224
Faculty of Economics and Business
Track number: II. Economics
Transitional Economies
Key words: competitiveness, recession, transition paths, competitiveness
diamond
Competitiveness growth in the recession period
/Comparative analysis of Croatia and Slovenia/
1
Abstract
Although, the global recession becomes the threat to future competitiveness growth in
both developed and undeveloped countries throughout the globe, it could be the
challenge, too. It could be the challenge, especially in the case of the countries that
should re-invent their economic growth paths, because in the global competitiveness
rankings they are lagging behind the countries with similar economic heritage and growth
level. And that is the case of the two small neighbouring countries: Croatia and Slovenia.
Both countries, twenty years ago, started different transition paths, and reached different
competitiveness growth levels. Today, they are faced both with the recession and, at the
same time, the problems of re-inventing their competitiveness growth in uncertain
economic surrounding. The purpose of this paper is to carry out the deep comparative
analysis of competitiveness growth in both countries and to research their strenghts and
weakenesses and their ability to cope with the recession and to re-invent their future
competitiveness growth and economic development. The research will start with the
short, but comprehensive, explanation of the economic heritage /before the transition/ and
the analysis of the transition paths. The competitiveness analysis will be based on some
competitiveness indicators, like GCI /global competitiveness index/, BCI /business
competitiveness index/, and on twelve «pillars» that could explain both indexes in detail,
on SWOT analysis for both countries, and on their competitiveness diamonds. SWOT
analysis and competitiveness diamonds will be created by the authors. The proposals for
future competitiveness growth, in the circumstances of the global recession, in both
countries will be explained in the last part of the paper.
2
Introduction
Competitiveness is the driving force of the prosperity in any country. In the global
economy, comprehensive approach should be made to make the country more
competitive. According to the global competitiveness indicators, countries differ in
various aspects, pillars, that constitute the competitiveness. The post-transition countries
are, generally, in the weaker position according to the competitiveness growth and,
compared with the developed ones, have lower global competitiveness indicators.
Although, the competitiveness level was the prior question of the future development,
and was the priority agenda to economic growth, in recent global recession period, the
problems of surviving in the recession, or crisis, or, how to less painfully overcome the
recession, became the priority academic and pragmatic questions in the developed and
less developed countries. Suddenly, the global economy was faced with the huge probles
that during the great depression in the 20th century John Maynard Keynes explained:
"We have involved ourselves in a colossal muddle, having blundered in the control of a
delicate machine, the working of which we do not understand." The statement is as true
now as it was then. And, as Paul Krugman recently said: Some people say that our
economic problems are structural, with no quick cure available; but I believe that the only
important structural obstacles to world prosperity are the obsolete doctrines that clutter
the minds of men. /P. Krugman/. Following these thougts, we tried to re-think the two
processes: the competitiveness growth and the recession period, and found out the
possibility that recession could , not only be the threat, but the challnege too. The purpose
of this paper, in these circumstances is to re-invent the possibility for the competitiveness
growth in the risky and uncertian recession period in the two neighouboring posttransition countries: Croatia and Slovenia. In the first part of the paper, the economic
heritage and different transition paths are shortly explained. The second part will be
focused on the competitiveness analysis in both countries, based on the global
competitiveness indicators, and followed by the SWOT analysis. The competitiveness
diamond for both countries are included. At the end of the paper, some proposal for the
future competitiveness growth in the recession period, according to the two cases that are
in the focus of the analysis are recommended.
1. The economic heritage and transition paths: Croatia and Slovenia
Before the dissolution, of former Yugoslavia Croatia and Slovenia had been the most
developed industrial republics with a per capita GDP which was a third higer than the
Yugoslav average. Unlike other contries in Ceantral and Eastern Europe that had to
operate behind «the iron curtain» and had a command economies, Croatia and Slovenia
as the republics within the Yugoslav confederation (from the Constitution of 1974) were
moving along a so-called «mixed path». The path was marked by selg-government and
social ownership, but also by the market as a factor of allocating goods and services.
3
Even back in 1989, Croatia and Slovenia had the highest liberalisation index (0,41 and
045) of all socialist CEE countries (EBRD, 2000).
Croatia and Slovenia also enjoyed good trade connections with Western Europa. About
50% per cent of production was export oriented. The most prominent in Croatia was the
complex of metal processing, shipbuilding, part of the food industry, the construction
industry, and tourism that earned an average of $5-6 billion a year. In Slovenia it was.....
The high degree of economic liberalisation reflected itself in the civilian sphere in both
countries, Croatiia and Slovenia were open countries with all the achievements of a civil
society which have been exposed to the influence of western culture. According to
everything that Croatia and Slovenia had stood for up 1990, it might be assumed that both
countries could have been the models for sustainable transition to a full market economy
and democratic societies.
But, the circumstances of transition in Croatia, produced much more serious
consequences for the Croatian economy that had been previously anticipated. The
decision to create state /95% fo citizens opted for independence and separation from
Yugoslavia/, initiated a five-year war, which gave rise to the need to provide assistance
for about one million displaced people and refugees, and was marked by huge direct
destruction and indirect economic damage, particularly within the tourism sector. Croatia
entered transition with the huge disadvantages: the loss of the former Yugoslav market
which included 18 million people; large costs caused by war damage, amounting to about
$50 billion /this was two and a half times the GDP of 2001/ and the lack of a system of
international assistance and support such as Phare etc.
Instead of exploiting the advantages of heritage as was done by Slovenia, Croatia had
engaged in a struggle to survive. A dramatic fall in production and the high demand of
budgetary expenditure in the first years threw the economy into a widening budget deficit
and increased money supply which led to growing inflation. In the period of 1990-93,
GDP fell by 40 per cent, and the high inflation rate was 25 to 30 per cent. In such
conditions government decided to reform the economy towards a free market economy.
The macroeconomic stabilisation programme (1993) succeeded in fighting hyperinflation
so that in 1994 the economy experienced the inflation rate of 3 per cent. Although the
economy started to recover and GDP growth rate was 5,9 per cent in 1994, the economic
and social transition was lagging behind, with the slow and conflicting moves of the
ruling political elite.
The choice of the fast privatisation model and the lack of transparency in its
implementation allowed for the direct transfer of the ownership of firms based on
political affiliation and nepotism, "Privatization robbery" The lack of public control and
the sluggishness of the judicial system were characteristic of the first stage of the
transition, when the government had the crucial influence on the new ownership structure
through the Privatisation Fund. As the consequence, the unemployment rate exceeded 23
per cent in 2001 and was the highest unemployment rate among all CEE transitional
countries. ( CRO STAT, 2001).. The standard of living fell and poverty rate grew.
Although 10 per cent of the population lived below the poverty line, high unemployment
rate and the low level of real wages contributed to the fact that 80 per cent of the
population considered themselves poor. (UNDP, 1999; UNDP, 2002).
4
In comparison to other transitional CEE countries, FDI were low, and the whole
transition has been carried out mainly on local resources, capital and knowledge. The
consequence of this was the concentration of power in the hands of privatization profitseekers who were creating their “business empires” assisted by the banking system which
was also controlled by the state. Reforms were externally initiated (USAID, 2000, WB.
2002a), primarly due to the fact that they were only declaratively accepted but not
implemented, vecauese they were opposite to the governance praxis. In 1999. GDP
achieved only 82 per cent of the GDP of 1990, the gross investment rate was 23 per cent
of GDP, with an unfavourable structure for quisk economic recovery and the share of the
foreign debt in the budget was about 50 per cent (CRO STAT, 2001).
Slovenia
Contrary, in Slovenia, the whole transition was carried out gradually and in a transparent
way. Although, the whole political and social situation was different from the beginning,
First, because Slovenia in its path to independence was not hit by the war, and, second,
due to the fact that its government followed the economic, and social strategies that it
created before the independence. They started the transition following the strategy of
creating new economic advantages based on the inherited ones.
Slovenian government did not choose the fast but gradual privatization model, based on
the vouchers. In 1993, vouchers were issued to all Slovenian citizens. 1The first stage of
Slovenian privatisation ended at mid-1997 which was the final deadline for privatisation
vouchers to be invested.. Investment funds collected vouchers worth SIT 335 billion, and
SIT 165 billion were directly invested in shares of companies, the remaining SIT 67
billion of vouchers remained unused. Investment funds have not been given a chance to
convert all the gathered vouchers into shares because of the so-called "privatisation gap",
estimated at SIT 130 to 140 billion (the lack of socially owned capital which is expected
to be covered by the state).
The Slovenian Law on Ownership Transformation (1992) introduced the change from
social to private ownership through a combination of voucher and cash privatisation; it
provided for the allocation of 20 percent of firms' shares to insiders, 20 percent to the
Development Fund for further sale to Privatisation Investment Funds (PIFs), 10 percent
to the Pension Fund and 10 percent to the Restitution Fund.
By the end of 1997, 1,168 companies finished their privatisation, and 240 companies
were still involved in the process of acquiring a second approval of their privatisation
method. 74 companies went into receivership or liquidation, and 69 companies were
transferred to the Slovenian Development Company, to be restructured and then
1
The official start of privatisation in Slovenia was June 1993 when amendments to the Privatisation Law
from November 1992 were passed. On 1 January 1993, 1594 companies were obliged to privatise their
"socially owned" capital which amounted to SIT 804 billion (US$ 8.14 billion).
5
privatised, and 43 companies were still waiting to be granted the first approval. In 1998,
73.24% of the previously socially-owned companies were privatised.
Workers' councils in the firms were then empowered to allocate the remaining 40 percent
to either firm insiders (through insider buy-outs) or outsiders (through a public tender).
More than 90 percent of firms undergoing privatisation opted for the first alternative
(insider privatisation); inside owners ended up holding about 40 percent of the social
capital subject to privatisation, 25 percent went to Privatisation Investment Funds, 22
percent to the Pension and Restitution Funds, while the remaining 13 percent was
publicly sold in exchange for ownership certificates. Insider ownership prevailed mostly
in smaller firms; inside owners obtained at least 60 percent of the voting rights in about
24.4 percent of firms, while their ownership did not exceed 10 percent in about 6.3
percent of (mostly large) firms (Report of the Agency for Privatisation, 1999).
One of the main features of this process was the transition from workers' selfmanagement rights over the "social" capital into majority insider-owned enterprises,
through the redistribution of shares among managers and employees, and managementlabour buy-outs.
Hence, Slovenia's privatisation brought about two large groups of owners: inside owners
(employees, including managers, former employees and their relatives) and outside
owners (Pension and Restitution Funds, Privatisation Investment Funds). Within the
group of insiders, managers ended up holding only minority stakes (3.86 percent) with
the support of the employees as the main mechanism for ensuring their discretionary
power and fighting the influence of outsiders (Prasnikar and Gregoric, 2002; Gregoric,
2003).
Due to the shrinking employee ownership and hence the reduction of the 'hidden' support
for managers in the post-privatisation period, Slovenian managers have started
strengthening their power by expanding their ownership stakes. These increases have
been most prominent in non-listed firms in which the transfer of ownership involves
relatively low prices and mostly remains undisclosed to the public. Further, the remaining
dissatisfaction of managers (at the end of 2002 the optimal or desired ownership stake of
the average Slovenian manager exceeded their actual ownership stake by 10.8 percentage
But , in some research on the consequences of the privatization process, it is stressed out
that the power of insiders and the political pressures have partly shaped the Slovenian
privatisation process. (Bojnec, 1999)
6
General data
Comparative analysis of basic data :Croatia and Slovenia
KEY INDICATORS
CROATIA
SLOVENIA
Total population /millions/ 2007
4,6
2,0
GDP /US$ billions/ 2007
51,4
46,1
GDP per capita /US$/ 2007
11.576
22.832,7
GDP /PPP/ as share /%/ of world
total,2007
0.11
0.08
WEF(2009), pp. 142 and 300.
Macroeonomic indicators
Croatia and Slovenia faced with the global recession
1. Figure 1. External Debt to GDP: napraviti za Hrvatsku I Slov. Sliku poput ove
Croatia and Slovenia have high external debt-to-GDP ratios, well above those in
other emerging market regions. For 2008, Moody’s estimates the external debt/GDP ratio
above 50% in almost every Eastern European country. Latvia’s ratio is seen as the
highest at about 135%, but Bulgaria, Estonia, and Hungary also have dangerously high
ratios above 100%.
Given today’s global risk aversion, sharply slowing economic growth, and Croatia and
Slovenia’s high external vulnerability indicators, these high external debt-to-GDP ratios
seem unsustainable.
Figure 2. Foreign Currency Loans (% of total)_ ponovno napraviti sliku poput
sljedeće
Source: Fitch Ratings, Emerging Europe’s Current Account Deficits: Mind the
Gap!, January 2008
The extent of external imbalances, as shown above, are not the only determinants of the
probability of getting into a financial crisis. But what the indicators above do show is that
both countries are extremely vulnerable to the drying-up of foreign capital inflows.
That’s why the IIF’s projection that net private capital inflows will drop off from some
$254 billion in 2008 to some $30 billion in 2009 is such a major concern. Moreover,
7
given the similar vulnerabilities in both countries, a crisis in one country has the potential
to blow up into a regional financial crisis.
Impacts of the recession on the competitiveness of the real economies
According to the data, the most significant impact in these countries will be on
consumers and businesses in the real economy:
 Weakening demand from key export markets in Western Europe will reduce
demand for both countries goods, according to the fact that they relied on
commodity exports, particularly what? Cro? Slovenia / znači, koji proizvodi I %/,
whose value plunged in the second half of 2008 thanks to falling global demand;
 Unemployment is likely to rise in both countries It is already at high levels in
Croatia (? % 2007).. The commodity and construction sectors are likely to see
major job losses,
Some benefits
While the short-term picture is gloomy, some positive points may emerge:
 Inflation is likely to have fallen sharply in the second half of 2008-2009, in line
with most other regions, thanks to falling commodity and food prices and easing
demand.
 Longer-term, the economies of these regions may be streamlined and consolidated
as a result of the downturn. They may tighten regulation to better control credit
extended by banks, while others may be prompted to encourage economic
diversification away from a reliance on commodity exports;
 Lastly, to put things in perspective, only a small number of countries in these
regions expect to be in recession in 2008 or 2009, in contrast to Western Europe
or the USA. Those most in danger of experiencing shrinking output include
Latvia and Estonia, which entered technical recession in 2008 (two quarters of
negative quarterly real GDP growth).
Future scenarios
The full impact on the real economies of Croatia and Slovenia is only likely to be felt in
2009. The region as a whole will perform better than advanced economies (the eurozone
is expected to contract by -0.5% in 2009) but not as strongly as Africa and the Middle
East, where 2009 growth is set to be 4.7% and 5.3% respectively. 2
Global demand for commodities including oil is expected to slow in 2009 thanks to the
economic downturn. The price of oil is expected to fall further in 2009. Similarly,
economic contractions in most Western European countries will curtail demand for
exports in Eastern European countries and weigh upon current accounts in most
countries.
2
Central and Eastern European real GDP growth is expected to reach 4.2% in 2008 and slow to 2.5% in
2009, while the CIS excluding Russia is expected to reach just 1.6% in 2009.
8
Comparative analysis of the global competitive position of Croatia and
Slovenia
Global Competitiveness Index
CROATIA
SLOVENIA3
CROATIA
SLOVENIA
Rank /out of 134/
Rank /out of 134/
Score /1-7/
Score /1-7/
GCI 2008-2009
61
42
4,2
4,5
GCI 2007-2008
57
39
4,2
4,5
56
40
4,2
4,5
/out of 131/
GCI 2006-2007
/out of 122/
3
Public and media interest in competitiveness has increased in Slovenia since its statistical inclusion in international
competitiveness yearbooks, such as the World Competitiveness Yearbook, published by the Institute for Management
Development and The Global Competitiveness Report (GCR), published by the World Economic Forum (WEF). The
WEF computes the Global Competitiveness Index of about 102 countries of the world and publishes that in their yearly
GCR. Their index is a combination of data obtained from secondary sources (quantitative weight) and through primary
survey (survey weight) on various macro- and micro-economic dimensions of the economy of a country. Slovenia's
rank is very stable in WEF yearbook (31st in 2001, 28th in 2002, 31st in 2003 and 33rd in 2004). WEF tried to describe
which counties have a good development position for the next five years. Like WEF, the International Institute of
Management Development (IMD) also rates the competitiveness of about 60 economies and publishes that in the World
Competitiveness Yearbook (WCY). In the WCY study, the scoring or ranking of the countries is done with the help of
standardized normal scores of 323 criteria grouped into four competitiveness input factors. These are economic
performance, government efficiency, business efficiency and infrastructure. The WCY also uses both primary and
secondary sources to measure the competitiveness score of the countries. IMD tried to describe, which countries have a
good business environment for domestic and foreign investors. Because it measures a short-term competitiveness, the
ranks of the countries are changing more often by years compared by WEF. Slovenia's position in IMD yearbook is
more floating (39th in 2001, 38th in 2002, 40th in 2003, 45th in 2004).
9
Basic requirements
49
38
4,7
5,1
Ist pillar: institutions
74
49
3,8
4,4
2nd
pillar:Infrastructure
51
36
4,0
4,5
3rd
pillar:Macroeconomic
stability
61
33
5.1
5.5
4th pillar:Health and
primary education
41
21
5.9
6.2
Efficiency enhances
62
37
4.1
4.4
5th pillar: Higher
education and
training
48
22
4.4
5,1
6th pillar: Goods
market efficiency
76
50
4.1
4,5
7th pillar: Labor
market efficiency
68
61
4.4
4.4
8th pillar: Financial
market sophistication
63
46
4.4
4.5
9th
pillar:Technological
readiness
47
30
3.7
4.5
10th pillar: Market
size
66
70
3.6
3.4
Innovation and
sophistification
factors
62
33
3,7
4,2
11th pillar: Business
sophistification
72
34
4.0
4.5
12th pillar.
Innovation
50
33
3.4
3.7
Source: WEF,2008., pp.142 and 300
Note: for both countries red mark is for the lower position and green for the higher than overall competitiveness
index.
Slovenia:
10
Since foreign demand is the driving force behind the growth, increasing in
competitiveness of Slovenian industries is extremely important in order to participate in
the international markets. Diversification of export flows and increases in the volume of
exports calls for introduction of improved production programs and innovation in
products and processes. Moreover, investments in human capital and technological
development will increase labour productivity and strengthen the international
competitiveness of the country.
The service sector contributes most to the value added. It is expected that its share is
going to increase further, though Slovenia is still behind the developed economies
according to the share of services in the GDP. On the other hand the shares of agriculture,
construction and manufacturing in GDP are decreasing. The manufacturing industry is
still the most important sector in terms of exports. Moreover, productivity (measured as a
value added per employed) increased most in manufacturing activities where structural
reforms were most intense.
The findings of Benchmarking Slovenia 2000 became one of the guiding tools for
designing the Entrepreneurship and Competitiveness Policy3 of the Ministry of the
Economy for creating conditions conducive to sustainable and strong economic growth
and high international competitiveness of Slovenian enterprises. Based on the
identification of development gaps, the Ministry initiated and supported the development
of the framework conditions in which entrepreneurs and business can take initiatives,
exploit their ideas and build on their opportunities. During the 2000-2003 period
important changes in framework conditions, due to the implementation of this policy,
were achieved: in building up creative environment on the enterprise levels (internal
reorganization in the pursuit of flexible specialization); among companies (clusters and
technology networks); and in regard to supportive systems (technology parks, centres of
excellence, university incubators, linkages between the private-public sector and
academia). The process of building up the environment conducive to innovativeness,
entrepreneurship and technology advances has started successfully and is therefore
irreversible.
Threats: Slovenia
The greatest fear facing the Slovenian economy is an exogenous recessionary shock
which is basically a decline in export demand as the Euroarea economy turnoiled a
recessionary output decline). Germany, which remains Slovenia's largest trade partner,
has already encountered the fastest GDP shrink since the last recession in 2001.
The gains from free trade with the EU27, European Economic Area and European Free
Trade Area have been huge as well as benefits from membership in the European
Monetary Union. Following the accession of EU in 2004, robust output expansion was
encountered and quarterly output growth rates varied from 3,3 percent in Q3 (2005) to
7,6 percent in Q1 (2007) although some economists noted that the economy will
encounter a significant rise in unemployment after the EU accession due to the loss of
exchange rate. Tolar/euro exchange rate parity has been problematic mostly because the
Bank of Slovenia propelled currency depreciation as an attempt to cure the export
industry from a declining competitiveness in regional and global markets.
11
The reason for a particularly mild extent of recessionary impact in Slovenia is the fact
that there has not been a high-mark decline in consumption expenditure which could
deteriorate the stability of output growth. However, the fears of ongoing recession have
been highlighted by Gorenje, one of Slovenia's major export companies, which reports a
25 percent slump in demand in Eastern Europe. The company immediately demanded
government aid.
SWOT analysis: Slovenia
Evaluation of competitiveness became an important instrument for balancing the
development process of the economy. For Slovenia it is important tool for policy
creation. Benchmarking with more developed countries shows the right directions of
development process. Competitiveness can be analyzed from different sides. Existed
studies have focused on several different analytical levels: product, firm, industry cluster,
region and nation. (Porter,…..) The most successful economies are raising the skill
content of their labor force. By reducing transportation and communication costs, EU
memebership links economies and societies into closer, tighter webs. It facilitates the
integration of production under common ownership (transnational companies), allowing
access to capital flows, world markets, skills, and technology.
Competitiveness evaluation of Slovenian economy shows that the problems remain the
same during the enlargement process of the European Union. Competitiveness could be
defined as the quality of the economic and institutional environment for the sustainable
development of private productive activities and the increase in productivity. Today
Slovenia focuses more on policies and strategies, on institutional and also on business
level that maintain the long-term competitiveness. Competitiveness can be seen as the
collection of factors, policies and institutions which determine the level of productivity of
a country and that, therefore, determine the level of prosperity that can be attained by an
economy.
After European enlargement, some CEE countries have benefited more than other
countries. Slovenia has increased the locational attractiveness for business sector and also
improved the institutional competitiveness. Harmonization with EU legislation have
improved the institutions and the legal system. On the other side, Croatia has problems
connected with the enlargement process. Because Croatia stayed outside the first
enlargement process, it has to work much more on its less competitive position in
comparison to Slovenia. The integration process increased the possibilities for
benchmarking. Evaluation of competitiveness is an important tool for economic policy.
Slovenia as a small country can be analyzed from the view of regional competitiveness. It
is about creating a high skills, high productivity and therefore high wage economy where
enterprise can flourish and where opportunities could be found, rather than threats in
changes we cannot avoid. Many governments seriously peruse national competitiveness
rankings produced by WEF or IMD. 4
4
The study of competitiveness strategy is now a very important obligation of government. All new member
countries have high-level official committees to deal with competitiveness, reaching across ministerial
divisions to devise international, national or regional policy.
12
Strengths
Stable macroeconomic environment
Stable political environment
Low country risk
Low corporate income tax
Modern basic information technology and telecommunication infrastructure
Developed public research and technology infrastructure
Availability of good health care services and broad coverage of social welfare system
Excellent geographic location and connections
Bio-diversity, forests and water resources
1.
When compared to the other EU countries, Slovenia’s competitiveness is close to the
level of less developed members of the European Union. However, on the average it is
better than the competitiveness of Croatia and other Central and East European countries.
Slovenian enterprises neglect certain non-price factors of competitiveness that constitute
the key element in modern competition. Exports by Slovenian enterprises are thus still
concentrated on non-differentiated products and services with lower value added but with
an adequate level of quality. The share of exports based on natural resources is too high,
and the smokestack industries contribute one fifth of value added in manufacturing.
Besides, the corporate governance problem, the main barrier to the efficiency and
improved competitiveness of enterprises is the lack of managerial skills that also has a
negative impact on the investment capacities of enterprises. In the future, the
13
competitiveness of Slovenian enterprises will be increasingly based on knowledge and
the adaptability of enterprises and the economy as a whole (IMAD, 2001). Despite
structural changes, the Slovenian economy remains disproportionately dependent on
traditional industries like textiles, clothing, metals and transport equipment. The
relatively low share of labor and capital deployed in industries considered to be the
twenty-first-century vehicle of economic growth – computer and office equipment,
communication equipment, semiconductors and biotechnology – hinders long-term
development and weakens the long-term competitive prospects for the economy.
Simultaneously, new private enterprises are not growing and the share of small
enterprises in the new technology industries remains insignificant. Thus, Slovenia's
industrial productivity lags far behind most advanced economies and, despite
comparatively low wages, the export competitiveness of its manufacturers remains low.
In 1998, gross value-added per Slovenian employee remained nearly three times lower
than in comparable industries in the EU countries (Petrin et al., 2002).
The “Benchmarking Slovenia” project
The aim of the report is to describe the overall ability of the Slovenian society in the
areas that significantly determine its ability to generate growth, employment, and well
being.
In order to improve its competitiveness, Slovenia needs to further reduce the role of the
state in the economy as well as implement reforms for achieving environment conducive
to entrepreneurship, innovation and technological advancement. Therefore, improving
framework conditions for enterprises, and facilitating adjustment processes should remain
at the core of the national policy for growth.
On the other hand it is important to develop further Slovenia’s existing advantages. The
most important strengths of the Slovenian economy are a stable macroeconomic
environment, characterized by stable economic growth rate and overall fiscal balance; a
relatively well developed business environment, characterized by the availability of well
experienced and educated labor force, information-technology and telecommunication
infrastructure and satisfactory research capabilities, relatively low level of corruption;
high social cohesion, characterized by a good network of health care, low percentage of
population below poverty line; and relatively low environmental degradation.
If Slovenia is to reach the international average of competitiveness, the enterprises must
fully exploit the current competitive potential and prospects in order to further strengthen
the country’s competitive position. On the other hand the Government will have to
intensify the development of policies for strengthening and supporting an environment
conducive to both economic efficiency and success.
Proposals for future competitiveness growth: Croatia
14
Future competitive advantages: Croatia
The development potential in Croatia može se sagledati kroz interakciju atraktivnih
uvjeta razvoja u pojedinalnim regijama I konkurentskoj spsobnosti sektora I kompanija
na međunarodnom tržištu. Kao mala država hrvatska je prisiljena voditi strukturne
politike izvozno-orijentirane ekonomije.
Sadašnji atraktivni potencijali Hrvatske su sljedeći:
- Raspoloživost zaštićenih područja visoke prirodne vrijednosti,
- geo-transportni položaj zemlje,
- jadranska obala I otoci specifične globalne privlačnosti,
- naslijeđena industrijska kultura osobito tehničke inteligencije.
Proposals for future competitiveness growth: Slovenia
Conclusion
References
Bojnec, S. (1999), “Privatisation, Restructuring and Management in Slovenian
Enterprises”, Comparative Economic Studies, Vol. 41, 1999.
CRO STAT (2001), Statistical Yearbook, Zagreb: State Statistical Office.
Fitch Ratings, Emerging Europe’s Current Account Deficits: Mind the Gap! January
2008
IMAD (2001), Strategy for the Economic Development of Slovenia 2001-2006, IMAD,
Ljubljana.
IMF (2008), World Economic Outlook,
Moody (2008), Statistical Handbook,
OECD (1998), The Competitiveness of Transition Economies, OECD, Paris.
Petrin, T., Vahčič, A. (2000), Employee Involvement and the Modern Firm: Equality,
Participation, Transition, MacMillan Press, London, pp.102-17.
15
Petrin, T., Vitez, R., Mesl, M. (2002), "Sustainable regional development: experiences
from Slovenia", in Pyle, J.L., Forrant, R. (Eds), Globalization, Universities and Issues of
Sustainable Human Development, Edward Elgar: Paris.
Porter, E.M. (1998), The Competitive Advantage of the Nations, MacMillan Press: New
York.
Porter, E.M. (2008),
Simoneti, M., Gregovic,A. (2004), “Managerial ownership and corporate performance in
Slovenian post-privatization period”, European Journal of Comparative Economics, Vol.
1., n.2., pp. 217-241.
Slovenian Ministry of Economy (2008), Entrepreneurship and Competitiveness policy,
World Economic Forum (2008), The Global Competitiveness Report 2008-2009, Geneva.
Competitiveness Evaluation of Slovenian Economy
16