Since foreign demand is the driving force behind the ...



Dr. Mirjana DRAGIČEVIĆ

Full professor

Velibor MAČKIĆ

Junior researcher

Faculty of Economics & Business

10 000 Zagreb

Kennedy square 6

E-mail: mdragicevic@efzg.hr

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/

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.

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 post-transition 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. 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).

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 profit-seekers 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. [1]The 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 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' self-management rights over the "social" capital into majority insider-owned enterprises, through the redistribution of shares among managers and employees, and management-labour 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)

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, 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]

Vrh obrasca

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.

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Comparative analysis of the global competitive position of Croatia and Slovenia

Global Competitiveness Index

| |CROATIA |SLOVENIA[3] |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 |

|/out of 131/ | | | | |

|GCI 2006-2007 |56 |40 |4,2 |4,5 |

|/out of 122/ | | | | |

|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 |61 |33 |5.1 |5.5 |

|stability | | | | |

|4th pillar:Health and |41 |21 |5.9 |6.2 |

|primary education | | | | |

|Efficiency enhances |62 |37 |4.1 |4.4 |

|5th pillar: Higher |48 |22 |4.4 |5,1 |

|education and training | | | | |

|6th pillar: Goods market |76 |50 |4.1 |4,5 |

|efficiency | | | | |

|7th pillar: Labor market |68 |61 |4.4 |4.4 |

|efficiency | | | | |

|8th pillar: Financial |63 |46 |4.4 |4.5 |

|market sophistication | | | | |

|9th pillar:Technological |47 |30 |3.7 |4.5 |

|readiness | | | | |

|10th pillar: Market size |66 |70 |3.6 |3.4 |

|Innovation and |62 |33 |3,7 |4,2 |

|sophistification factors | | | | |

|11th pillar: Business |72 |34 |4.0 |4.5 |

|sophistification | | | | |

|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:

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.

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]

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

|[pic] |

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 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

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.

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

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[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).

[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.

[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 we>@^| Þà. 0 € ‚ „ ª ¬ ® Ø Ú

òäØÏÀ¸ªž•ŠwŠawTwEŠ¸ª:hÃ_I6?CJ]?aJh¿dKhÃ_ICJaJmHsHh¿dKhÃ_I0Jh¿dKhÃ_ICJU[pic]aJmHsH%jh¿dKhÃ_ICJU[pic]aJmHsHh¿dKhÃ_ICJaJhÃ_I6?CJaJh¿dKhÃ_I6?CJaJight) 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).

[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.

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