Slovenia WT/TPR/S/98
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II. TRADE POLICY REGIME:  FRAMEWORK AND OBJECTIVES
(1) OVERVIEW
1. In less than a decade, Slovenia has established the foundations of a democracy with the
introduction of stable institutions and a multi-party system, and has made substantial progress in its
transition into a market-oriented economy.  Market structures now exist in the vast majority of
economic sectors.  Liberalization of trade and investment has been a major feature in this process,contributing to attracting foreign direct investment, in particular from western Europe, and
revitalizing trade links with European and other market-oriented partners.
2. Trade liberalization has proceeded at the unilateral, regional, and multilateral levels.  After
independence in 1991, Slovenia gradually dismantled the most restrictive aspects of the trade regime
inherited from the former Socialist Federal Republic of Yugoslavia (SFRY): quantitative restrictionson imports were eliminated, export measures removed, and MFN tariffs significantly reduced.
Reforms were implemented in the background of negotiations for membership in the WTO and the
European Union:  in 1994, Slovenia became a contracting party to the GATT, ratified the Uruguay
Round Agreements in June 1995, and became an original Member of the WTO;  it was the first
country of the former SFRY to join the WTO.  In parallel, Slovenia concluded trade agreements with
its European partners (EU, EFTA, CEFTA, and Baltic countries), and officially applied for
membership of the European Union.
3. Accession to the European Union is currently one of Slovenia’s main economic and political
priorities.  The requirements for accession involve the adaptation of legal and economic structures to
EU standards.  In late 1997, in recognition of its progress in laying the basis for a market-oriented
economy, Slovenia was included in the first wave of countries in central and eastern Europe to start
membership negotiations with the EU.  As part of the pre-accession process, Slovenia has engaged inthe approximation of its legislation with that of the EU, with a wide-ranging impact on its trade-
related rules and regime.  Legislation on customs, government procurement, competition, standards,
and state aid has been harmonized with EU legislation.  The Government of Slovenia has stated its
commitment to ensure that changes in legislation are compatible with WTO rules and principles.  As
part of its preparations for EU accession, Slovenia is gradually reducing its MFN tariff rates, toconverge towards the EU Common External Tariff.
4. Most legal restrictions to foreign direct investment were dismantled after independence,
resulting in a first wave of FDI in the mid 1990s.  However, the particular characteristics of the
privatization process (Chapter III(3)(iii)), pervasive capital account restrictions, and limitations to
investment in the financial sector may have limited the potential for foreign participation in theSlovenian economy in the second half of the decade.  While most of these restrictions were
abandoned in 1999-00, and a number of incentive programmes have been put in place, the ratio of
FDI to GDP remains below the average in similar transition economies.
(2) I
NSTITUTIONAL FRAMEWORK
(i) Institutional structure
5. The Republic of Slovenia became independent in June 1991, and established a parliamentary
democracy after decades of socialism, by adopting a new Constitution on 23 December 1991.
6. The Parliament is unicameral.  The single chamber (National Assembly), or Drzavni Zbor, is
the supreme organ of state power.  Its 90 Members are elected by universal suffrage to four-year
terms;  50 are elected directly by simple majority, and 40 chosen on a proportional representationWT/TPR/S/98 Trade Policy Review
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system.  Parliament elects the Prime Minister, Cabinet members, and members of the Constitutional
Court.  It exercises most legislative powers, sharing the right of initiative with the Government.  Bills
require a two-thirds majority and three readings to be voted into law.1  Parliament may also hold a
referendum on any matter of interest, at the request of one third of its members, of 40,000 electors or
of the National Council (see below).  The last general election took place in autumn 2000, and the
next is scheduled in 2004.
7. The Constitution also established a National Council, or Drzavni Svet, an advisory body of
40 elected members representing local, professional, and socioeconomic interests.  The National
Council may propose legislation to Parliament or simply give its opinion on draft legislation
examined by the National Assembly, ask to review  a draft law before promulgation, and call for the
constitution of ad hoc Parliamentary commissions on specific issues.
8. The executive branch is composed of the President of the Republic and the Prime Minister.
The President is elected for a five-year term by a direct, general election conducted by secret ballot,
and may serve for a maximum of two consecutive terms.  The next election will take place in 2002.
The President is the Head of State and the Commander-in-Chief of the defence forces of Slovenia.  He
ratifies the main international treaties.  After consultations with the leaders of the main politicalgroups within the National Assembly, he proposes to the National Assembly a candidate for the
Office of Prime Minister;  the Prime Minister is elected by the National Assembly upon this proposal.
The President has to dissolve Parliament if the National Assembly fails to designate a Prime Minister
(after either a new general election or a vote of no confidence).  The Prime Minister heads the
Government and exercises authority over the Administration.  Ministers are also elected by
Parliament, upon a proposal by the Prime Minister.  The Government is accountable to Parliament
collectively, and ministers are accountable individually.
2
9. Judicial power is vested by the Constitution in the courts and tribunal.  Slovenia’s highest
court is the Constitutional Court.  Judges are elected by the National Assembly, on the
recommendation of the Judiciary Council, for a non-renewable term of nine years.3  T h e
Constitutional Court hears appeals against judgements  from lower courts and assesses the conformity
of laws and international treaties with the Constitution.
(ii) Policy formulation and implementation
10. Final responsibility for economic and trade policy formulation, initiation of legislation, and
administrative functions rests with the Government.
11. In 2001, the Ministries of Economic Affairs, of Economic Relations and Development, and of
Small Business and Tourism merged into a single ministerial department, the Ministry of Economy.Broad responsibilities concerning domestic and international trade were transferred from the Ministry
of Economic Affairs to the newly created Ministry of Economy.  The new Ministry covers five sub-
departments, headed by Secretaries of State:  Internal Market (including privatization issues), Foreign
Economic Relations, Regional Development, Development of the Entrepreneurial Sector and
                                                     
1 In its 2000 Regular Report on Slovenia's progress toward accession, the European Commission
considered that the multiple readings requirements and other features of Slovenia's legislative procedures, whileensuring "that all political forces in the Parliament can provide input into the legislative drafting process", could
also lead to "delays in handling the government's proposals".
2 The appointment of ministers is subject to hearings by the National Assembly.
3 The Judiciary Council is composed of eleven members, five of whom are elected by the National
Assembly on a proposal by the President of the Republic, and six are elected amongst judges holding permanentjudicial office (Article 131 of the Constitution).Slovenia WT/TPR/S/98
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Competitiveness, and Industrial Projects.  The Secretary of State in charge of Foreign Economic
Relations has direct authority over bilateral and multilateral trade policies.  In cooperation with other
ministries involved, such as the Ministry of Finance and the Ministry of Foreign Affairs, the Ministry
of Economy negotiates, monitors, and implements international trade agreements as well as
agreements on the protection of investments.  These included, in particular, negotiations for WTO
membership, trade-related aspects of relations with the European Union as well as other partners fromEFTA and CEFTA.  While Slovenia’s open-trade policy implies minimal interference in foreign trade
operations, the Ministry performs a number of monitoring and regulatory functions related to
international trade, such as the harmonization of dom estic laws with international commitments in the
field of product standards, and the issuance of import and export licences for a number of products
(including textiles products).  The Ministry has prime responsibility over tariff policy, and trade andinvestment promotion.  Other important functions performed by the Ministry include general
industrial policy, privatization policies, regional development, price control, and consumer protection.
Implementation of customs policy is under the responsibility of the Ministry of Finance.
12. Specific trade-related activities are performed by national specialized agencies directly linked
to the Ministry of Economy, such as the Intellectual Property Office, the Trade and InvestmentPromotion Agency, and the Market Inspectorate.
4  Accreditation, certification, and standardization
functions performed until 2000 by the Standards and Metrology Institute of Slovenia (SMIS) are
being transferred to the newly established Slovenian Institute for Standardization and the Slovenian
Accreditation Body.  The Competition Protection Office is responsible for supervising adherence to
competition regulation.  While the Office is independent from the Ministry of Economy, it is also the
competent authority for the initiation and conduct of investigations in anti-dumping and
countervailing procedures.  Consumer protection is ensured by the Consumer Protection Office.
Trade Point Slovenia, an agency under the Ministry of Economy, provides the Government, chambers
of commerce, domestic and foreign enterprises, with  business information on international trade and
establishes contacts between interested parties through specialized information centers.
13. Other ministries and agencies also play a role in the definition and implementation of trade
and trade-related policies, principally the Ministry of Finance.  The Ministry of Economy and theMinistry of Finance cooperate, inter alia , in areas such as customs tariffs, export finance, and
government procurement.  The Directorate-General of Customs, under the Ministry of Finance, is
responsible for customs controls and enforcement, investigations, and the collection and development
of trade data.  A new Commission for State Aid Control was established in 2000 to monitor subsidies,
including in agriculture.  The Commission benefits from assistance from the Ministry of Finance.  TheMinistry of Agriculture is responsible for agricultural trade policy formulation.  The Ministry of
Information Society assumes broad responsibility for telecommunications policy, while the Ministry
of Finance plays a central role in many services (banking, insurance).  The Ministry of Health and the
Ministry of Agriculture are responsible for the control of food products.
14. There is no independent official body or mechanism established to regularly review external
trade policies and evaluate their impact on the economy.  Private interests are consulted on an ongoing
basis on economic and trade issues of concern to them.   The Chamber of Commerce and Industry
Associations, other ministries and governmental agencies, as well as non-governmental organizations
and independent experts may be consulted on trade policy matters and particular policy issues.  In
most cases, this is done on an informal basis.
                                                     
4 The role of the Market Inspectorate goes beyond monitoring product safety.  It is responsible for the
surveillance of movements of goods and services; prices  of goods and services; their quality and applicable
standards; and protection of trade marks, and quality marks;  and designation of origin in cooperation withCustoms.WT/TPR/S/98 Trade Policy Review
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(iii) Main laws and regulations
15. One important feature of Slovenia's legal system is that international agreements may apply
directly in Slovenia, provided that the provisions of such agreements are "clear and complete".
Article 8 of the Constitution stipulates that "Statutes and other legislative measures shall comply with
generally accepted principles of international law and shall accord with international agreements
which bind Slovenia […].  Proclaimed international agreements to which Slovenia adheres shall takeeffect immediately".  For example, according to the Slovenian authorities, courts tend to favour direct
applicability in intellectual property cases.  Article 50.3 of the TRIPS Agreement provided the legal
basis for recent rulings of the Court of Appeal of Ljubljana in patent cases.
 5
16. A large number of new trade and trade-related laws and regulations have been enacted in
recent years, in order to implement the requirements of WTO membership and harmonize the legalframework with the EU acquis communautaire .
17. The main legislation related to international trade includes, for border measures, the Customs
Act, the Law on Customs Tariffs and the annual implementing decrees, and the laws and decrees
regulating imports under licensing, export controls, and tariff quotas.  The Law on the Protection of
Competition provides the framework for competition policy and also contains, in its Part V, therelevant provisions on anti-dumping and countervailing measures. A new decree was enacted in 2000
to regulate the use of safeguards.
6  New laws on standards, accreditation, and conformity assessment
provide for  testing and standardization procedures that are, according to the Government, in line with
EU requirements.  The Public Procurement Act of 2000 provides for enhanced transparency and
eliminates price advantages granted to domestic firms. This legislation is being reviewed with a view
to simplifying tender procedures.  A revision of this Act is expected soon.  A legislative framework
aimed at controlling state aid has been developed in the past two years.  Slovenia's intellectualproperty rights (IPRs) legislation reflects both WTO and EU requirements.  The Law on Industrial
Property was revised in 2001 and a new law concerning border measures relating to infringement of
IPRs entered into force at the end of that year.  A series of new laws pertaining to the financial sector
were enacted in 1999 and 2000 to modernize the sector, adapt the legislation to new financial
activities and meet EU standards (Banking Law of 1999, Securities Market Law of 1999 andInsurance Law of 2000).  Table II.1 provides an overview of Slovenia's principal trade and trade-
related laws.
Table II.1
Slovenia's main legislation related to trade, December 2001
Area Main legislation
Main legislation on
exports and imports2000 Law on Customs Tariff (07/2000) and 1999 Customs  Act (04/99);  Decree on the Autonomous
Measures of Reduction or Abolition of Duty Rates for Specific Goods (12/2001);  1993  Foreign Trade
Act;  Decree on the Manner, Time Periods and Conditions for the Allocation of Import Quotas ( 03/93);
Decree Determining the Import and Export Regime for Specified Goods (12/2001);  Decrees on
Determining Tariff Quotas for individuals years (2000, 2001);  Decree on the implementation of the
Customs Act (05/99)
Anti-dumping and
countervailingPart V of the 1995 Law on the Protection of Competition, on "Dumping and Subsidized Imports",
complemented by the 1994 Decree on Dumped and Subsidized Imports.
Safeguard 2000 Decree on Safeguard Measures (09/2000)
Export controls 2000  Exports of Dual-Use Goods  Act (05/2000)
Table II.1 (cont'd)
                                                     
5 WTO document IP/Q4/SVN/1, 1 March 1999.
6 Safeguard measures are regulated by the Decree on Safeguard Measures, notified in WTO document
G/SG/N1/SVN/2, 10 January 2001.Slovenia WT/TPR/S/98
Page 17
Area Main legislation
Privatization 1992 Law on Ownership Transformation;  Law on Completion of Ownership Transformation and
Privatization of Entities Owned by Slovene Development Corporation (1998)
Government procurement 2000 Public Procurement Act (4/2000);  Review of Public Procurement Procedures Act (09/99)
Customs Free Zones 1998  Economic Zones  Act (06/98, amended 12/2001);  Decree on Economic Zones (11/98)
Competition  1999 Prevention of Restrictions of Competition Act (07/1999);  Decree defining the contents and
elements required for the notification form for the concentration of undertakings (01/2000);  Decree on
Block Exemptions (06/2000); Instructions on the Method and Conditions for defining the Relevant Market
(09/2000)
Foreign investment Commercial Company Law (05/93, last amended 05/2001);  Law on Financial Operations of Companies
(06/99, amended 12/99);   Foreign Exchange Act (03/99)
State aid 2000  State Aid Control  Act(01/2000);  Decree on the content and procedure of supplying data for
preliminary and subsequent state aid control;  Decree on the purposes and conditions for the granting of
state aid and on the appointment of the ministries responsible for the management of state aid schemes
Intellectual PropertyRights (IPR)1995 Copyright and Related Right Act (04/95) and amendments (01/2001);  1995 Law on the Protection
of Topographies of Integrated Circuits (04/95);  Law on Industrial Property (05/2001);  1994 Law on
Courts (definition of jurisdiction over IPR disputes);  Law on Customs Measures Relating to Infrigments
of IPR (04/2001)
Tax system 1999 Value Added Tax Act (06/99);  1999 Excise Duties Act (06/99)
Standards 1999 Act on General Safety of Products (03/99);  1999 Standardization Act (07/99);  1999 Act on
Technical Requirements for Products and Conformity Assessment (07/99);  1999 Act on Accreditation
(07/99); Law on Consumer Protection (03/98)
Agriculture 2000 Agriculture Act (06/2000)
Services 1999  Banking  Act (07/99); 1999 Securities Market Act (06/99);  2000 Insurance Act (01/2000);
2001 Telecommunications Act (04/2001);  1999 Energy Act (09/99);  Maritime Code of the Republic of
Slovenia (03/2001);  2001 Aviation Act (02/2001);  2001 Road Transport Act (07/2001)
Source : WTO Secretariat, based on information provided by the Slovenian authorities.
(3) DEVELOPMENTS IN INTERNATIONAL RELATIONS
(i) Trade policy objectives
18. Slovenia’s overriding objective since 1991 has been to complete the transition towards an
open, market-driven economy, well integrated at the regional and multilateral levels.  Slovenia’s
efforts to integrate into the world economy are refl ected in the dismantling of the restrictive trade
regime inherited from the former SFRY, and in its accession, participation in, or adherence to various
multilateral, regional, and bilateral trade initiatives.  Early in its transition process, Slovenia applied
for membership in the GATT and concluded negotiations in time to become an original member of
the WTO.  In parallel, Slovenia signed free-trade agreements with the European Union (1996), and
other European partners (EFTA, CEFTA, Baltic countries, and other countries).
19. Slovenia is strongly committed to the multilateral trading system.  The orientation of  its
economic and trade policies, however, like that of other central and eastern European countries, is
largely driven by the goal of accession to the European Union.  Integration in the EU was given a
strong boost by the implementation of the Europe Agreement, which brought about reciprocal free-
trade on nearly all products, and the accession strategy determined by the European Council.  Thisprocess contributed to the gradual re-orientation of Slovenia’s external trade towards market-based,
European economies.  In addition, Slovenia joined the “network” of bilateral free-trade agreements
that has been concluded between EU candidates and other associated countries.  The agreements,
which are modeled on the content and timetable of the Europe Agreement, in effect create a pan-
European free-trade area, in which Slovenia is fully integrated.
20. Slovenia sees multilateral and regional processes as being complementary,  and aims to
minimize the cost to third parties of bilateral trade liberalization with the EU.  In the period ofWT/TPR/S/98 Trade Policy Review
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implementation of the Europe Agreement, Slovenia -EU trade was liberalized faster than MFN trade,
thereby increasing the gap between MFN and preferential tariffs.  The Government intends to make
stepwise reductions in MFN tariffs a permanent feature of Slovenia's trade policy, in order to
minimize possible negative effects of the adoption of the EU Common External Tariff.  The
harmonization of Slovenia's trade regime with that of the EU covers issues other than tariffs, in
particular customs, standards, competition, subsidies, intellectual property, and other trade-relatedmatters.
(ii) Multilateral agreements
(a) WTO
21. Soon after gaining independence, Slovenia requested observer status in the GATT and filed
an application for full membership in 1992.
7  Accession negotiations took place between 1992 and
1994, during the final stages of Uruguay Round negoti ations.  Slovenia adopted most new obligations
and disciplines of the GATT 1994.  Accession negotiations were concluded in June 1994, and
Slovenia's Parliament ratified the Protocol of Accession in June 1995.  Slovenia became an original
Member of the WTO.
22. As part of its accession commitments, Slovenia bound 100% of its tariff lines.  Bindings for
industrial products vary between 0% and 27%.  Ceiling tariff bindings on agricultural products were
to be lowered by 36% over the period 1995-01.8  Slovenia agreed to replace variable levies on several
agricultural products with bound ad valorem  tariffs.  It  also committed to cut its Aggregate Measure
of Support (AMS) by 20%.  In addition, Slovenia made extensive commitments under the General
Agreement on Trade in Services.  Sector-specific commitments allow for very liberal market access
and national treatment in a wide range of areas, including professional services, communications
services, distribution services, educational services, environmental services, health and socialservices, recreational, cultural and sporting services, and transport services.  Slovenia’s schedules
cover more than two thirds of total GATS activ ities (Chapter IV(3)).  Slovenia maintains MFN
exemptions on audiovisual services, road transp ort, and computer reservation system for air
transport.
9
23. In 2001, Slovenia joined the Information Technology Agreement (ITA).  It is an observer to
the WTO Plurilateral Agreement on Government Procurement, and is in the process of negotiating its
accession.  The status of Slovenia’s WTO notifications is presented in Table II.2.  To date, Slovenia
has never been involved in a dispute settlement case, either as a complainant or a defendant.10
                                                     
7 At its meeting on 14 July 1992, the General Council agreed to establish a Working Party to examine
the application of the Government of Slovenia to accede to the GATT.
8 In accordance with the provisions of the Agreemen t on Agriculture, Slovenia agreed to eliminate
minimum prices and variable import levies.
9 WTO document GATS/EL/99, 30 August 1995.
10 In the WTO, Slovenia has recently raised a bilateral issue with Croatia, regarding Croatian ban on
road transport of crude oil and oil products (WTO document G/C/W/346, 5 February 2002).Slovenia WT/TPR/S/98
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Table II.2
Selected notifications to the WTO, December 2001
WTO Agreement Document Main content
General Agreement on Tariffs and
Trade 1994Schedule XCVI – Republic of Slovenia Schedule of tariff concessions
GATS/SC/99 and GATS/EL/99,
30 August 1995Schedule of specific commitments in
services; list of Article II (MFN)
exemptionsGeneral Agreement on Trade in
Services
GATS/SC/99/Suppl.1,
26 February 1998Schedule of specific commitments
Agreement on Agriculture
(Article 18.2) G/AG/N/SVN/1,
7 June 1995Administration of tariff quotas
(Table MA:1)
G/AG/N/SVN/16,
14 March 2001Imports of tariff quota items (Table MA:2)
G/AG/N/SVN/18,
14 September 2001Domestic support commitments for 2000
(Table DS:1)a
G/AG/N/SVN/19,
14 September 2001Domestic support measures exempt from
reduction (Table DS:2)
G/AG/N/SVN/17,5 April 2001Export subsidies (Table ES:1)
Agreement on Textiles and Clothing
(Articles 2.8(a) and 2.11) G/TMB/N/129/Add.1 and 2 and Corr.1,
G/TMB/N/243/Add.1 and 2 and Corr.1,
4 February 1998Notifications of liberalization measures:
- first and second stages
G/TMB/N/362,3 January 2001-t h i r d  s t a g e
G/TBT/10
6 February 2001Implementation and administration of the
AgreementAgreement on Technical Barriers toTrade(Article 15.2)
G/TBT/2/Add.5/Suppl.2,
1 November  2001Implementation and administration of the
Agreement
(Annex 3c) G/TBT/N/SVN/1-3,
20 June 2001Notification of measures under the WTO
code of good practice
IP/N/1/SVN/N/1/Rev.1/Add.1,
11 September 2000TRIPS-related legislationAgreement on Trade-Related Aspects of
Intellectual Property
(Article 63.2)
IP/N/1/SVN/G/1,
10 March 1999Decree on the geographical indication of
the Lipicanec (Lipizzaner) horse
Agreement on Anti-Dumping Practices
(Article 18.5) G/ADP/N/1/SVN/1,
5 April 1995Law relevant to the Agreement
(Article 16.4) G/ADP/N/78/Add.1,
12 October 2000Semi-Annual Report on Anti-Dumping
Actions
Agreement on Rules of Origin
(Article 5.1 and Annex II) G/RO/N/29/Rev.1,
21 November 2000Preferential and non-preferential rules of
origin
Agreement on Subsidies andCountervailing Measures(Article 32.6) G/SCM/N/1/SVN/1,
5 April 1995Law relevant to the Agreement
(Article 25) G/SCM/N/48 and 60/SVN,
10 August 2000Notification of subsidies
(Article 25.11) G/SCM/N/75/Add.1,
17 October 2001Semi-Annual Report of countervailing duty
actions
Table II.2 (cont'd)WT/TPR/S/98 Trade Policy Review
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WTO Agreement Document Main content
Agreement on Import Licencing
(Articles 1.4(a) and 8.2(b)) G/LIC/N/1/SVN/1,
31 January 1997Laws and regulations concerning import
licensing procedures
(Article 7.3) G/LIC/N/3/SVN/1,
26 June 1997Replies to the questionnaire on import
licensing procedures
Agreement on Customs Valuation
(Article 22.2) G/VAL/N/1/SVN/1 and
G/VAL/N/1/SVN/3,16 December 1997 and
G/VAL/N/1/SVN/2,
24 July 2000Slovenian laws and regulations -
Implementation of the WTO Agreement
Agreement on Preshipment Inspection
(Article 5) G/PSI/N/1/Add.3,
12 July 1996Notification that Slovenia had no laws or
regulations relating to preshipment
inspection
G/SPS/N/SVN/12,17 July 2001Notification of measureAgreement on the Application of
Sanitary and Phytosanitary Measures
(Article 7, Annex B)
G/SPS/N/SVN/8,
23 May 2001 andG/SPS/N/SVN/8/Corr.1,
22 October 2001Notification of emergency measures
Agreement on Safeguard Measures
(Article 12.6) G/SG/N/1/SVN/1,
9 January 1996complemented by G/SG/N/1/SVN/2,
10 January 2001Laws and regulations relative to safeguard
measures
(Article 11.2) G/SG/N/3/SVN,
27 March 1995
G/SG/N/5/SVN/Suppl.1,
14 November 1997 and
G/SG/N/5/SVN/Suppl.2,
1 April 1998Notification of pre-existing grey-area
measures and of timetable for phase out
State Trading Enterprises
(Article XVII:4 (a))and Understanding on the Interpretation of
Article XVII:1G/STR/N/7/SVN,
8 August 2001New and full notification that Slovenia
does not maintain any state trading
enterprises
a Slovenia also presented domestic support commitments for 1995, 1996, 1997, and 1998.
Source : WTO Secretariat.
24. In the run-up to the fourth WTO Ministerial Conference, Slovenia signed the joint
Declaration issued by Trade Ministers of the European Union and the 13 countries that are candidates
for EU membership at their conference in Ljubljana on 12 May  2001.  In this Declaration, Sloveniaand its partners  stated their support for the launch of a new round of multilateral trade negotiations at
the Ministerial Meeting in Doha.  The Declaration stated in particular that: "this round must be
directed at strengthening access to markets, at developing and strengthening the rules and disciplines
of the WTO and at promoting a better integration of developing countries into the Multilateral
Trading System […], as well as the establishment of rules in new areas such as investment,competition, trade facilitation and transparency in government procurement".
11
                                                     
11 In the 2000 Regular Report on Slovenia's Progress Towards Accession, the European Commission
indicates (p.74):  "The EU and Slovenia have established a framework for co-operation regarding WTO issuesboth at Ministerial and at Departmental level. Slov enia has been supportive of the EU policies and positions
within the WTO framework. As regards the new round, Slovenia concurs with the EU on the need to launch acomprehensive round as soon as possible and shares the view that the results of work under the built-in-agendaSlovenia WT/TPR/S/98
Page 21
25. In her statement at the Ministerial Conference in Doha, the Minister of Economy of Slovenia
supported the launch of a new comprehensive and substantive work programme, leading to
negotiations of key issues of world trade.  In particular, Slovenia's priorities are:  strengthening and
clarifying existing rules, including the so called Singapore issues;  continuing the process of
clarification of the relationship between WTO and multilateral environment agreements (MEAs);
addressing non-trade concerns in agriculture;  and flexibility on social and public health objectives,without undermining the TRIPS Agreement.
12
(iii) Regional agreements and arrangements
(a) Relations with the European Union
26. Over the past decade, accession to the EU has been a constant objective of Slovenia’s
policies.  Slovenia presented its formal application for membership on 10 June 1996 and was acceptedas a candidate for full membership of the Union in July 1997.  The process of economic integration
with the EU has been an integral part of the domestic transition towards a market economy.
Slovenia’s preparations for membership have acce lerated recently, with the implementation of the
Europe Agreement, completion of the screening of the acquis communautaire , and rapid progress on
accession negotiations.  Free trade was achieved for most products at the beginning of theimplementation period of the Europe Agreement.
27. The necessary institutional mechanisms to coordinate and implement Slovenia’s policy vis-à-
vis the European Union are in place. The main orientation is defined at the highest level by the Prime
Minister and the Government.  In December 1997, the Government put in place the Government
Office for European Affairs (GOEA) to carry out inter-ministerial coordination on European issues.
13
It heads in particular the Inter-Ministerial Committee on relations with the EU at the level of State
Secretaries, and coordinates working groups at lower levels.  The GOEA generally monitorspreparations for EU Membership, in particular the harmonization of domestic administrative acts with
the acquis communautaire  and relevant EU standards.  It also supervises the implementation of the
Phare programme and performs liaison functions with EU institutions and bodies.
Trade-related provisions of the Europe Agreement
28. On 10 June 1996, Slovenia and the European Union signed an Association Agreement (the
Europe Agreement) providing for, among other economic and political aspects, the establishment of a
free-trade area within a period of four years.  Pending ratification of the agreement, its provisions
concerning trade in goods entered into force of 1 January 1997, under an Interim Agreement.  On that
date, duties and quantitative restrictions on exports of most industrial goods were abolished.Although textiles and clothing were subject to a separate protocol, duties and quantitative restrictions
applying to Slovenia's textiles and clothing exports to the EU were eliminated one year after the entry
into force of the Interim Agreement.
                                                                                                                                                                    
would be less substantial in its absence".  It also indicates that: "as regards the WTO Agreement on Trade in
Textiles and Clothing (ATC), Slovenia needs to use the third stage of integration under the ATC to align itsintegration programmes on those of the EC, while notably avoiding integrating products not yet integrated by
the EC".
12 Statement by H.E. Mrs. Tea Petrin, Minister of Economy.  WTO document WT/MIN(01)/ST/64,
11 November 2001.
13 The GOEA took over from the Office for European Affairs, which had operated under the Ministry
of Foreign Affairs.  The Head of the GOEA now has Ministerial rank in the Government.WT/TPR/S/98 Trade Policy Review
Page 22
29. The Europe Agreement also provided for the gradual liberalization of bilateral trade in
agricultural and processed agricultural products, albeit with transition periods.  Upon entry into force
of the Interim Agreement, Slovenia obtained improved access to the EU markets on selected products
in the form of expanded tariff quotas.  Further concessions were negotiated with Slovenia (as well as
with other EU candidates) in the first half of 2000, effective from 1 July 2000.14
30. The Europe Agreement also includes provisions concerning the progressive liberalization of
services, the movement of workers, the right of establishment, customs, public procurement, the
standardization of norms, competition, intellectual and industrial property, financial services, and
other trade-related matters that complement the liberalization of trade in goods.  Cooperation was
strengthened through increased technical assistance in various sectors and domains of economic
activity.
31. The Government estimated that, as a result of the implementation of the Europe Agreement
and further protocols, 99.4% of Slovenia’s exports in 2001 entered the EU free of duties and other
restrictions.  Some 96.9% of EU exports entered Slovenia under the same conditions.  Between 1995
and 2000, two-way trade between Slovenia and th e EU grew by an average of 7.6% per year,
outperforming trade growth with other regions of the world (5.6%).  The phasing-in of preferences islikely to have played a role in that expansion,  since the margin of preference (relative to MFN
treatment) has increased in the recent years.  In addition, the reduction of economic links with the
former SFRY as well as other countries in eastern Europe has played a role.  Slovenia’s exports to the
EU consists mainly of machinery, chemicals, metal products, automotive products (cars, tyres,
equipment), textiles, and wood products.  On the import side, the main products are also machinery
and electronic equipment, consumer goods, and foodstuffs.
32. The integration of Slovenia’s economy with th e EU, as well as links with EFTA and CEFTA
countries, were further enhanced by its participation in the new European-wide system of diagonal
cumulation of origin that was put in place in the beginning of 1997.  The establishment of the new
system required the harmonization of the rules of origin among 32 participating countries (including
members of the EU, EEA, EFTA, the ten Associated countries in central and eastern Europe, Turkey,
Andorra, and San Marino).  The new system encour aged further inflows of FDI and the development
of outward-processing and assembly operations within the enlarged region, in particular in the textiles
and clothing and automotive industries, two crucial export-oriented activities in Slovenia.  In textiles
and clothing, the harmonization of the rules of origin has coincided with the abolition of duties and
quantitative restrictions on Slovenia’s bilateral trade with the EU.
Process of accession
33. The Europe Agreement provides the basis for the approximation of Slovenia’s legislation
with that of the EU in a wide range of areas, with far-reaching consequences on trade-related areas
such as the external trade regime, competition, state subsidies, customs, product standards, and
protection of intellectual property rights.  The ultimate objective is to help Slovenia, like all otherapplicants for EU membership, to adopt the acquis communautaire , i.e. the corpus of laws and
                                                     
14 The new protocol provides for the liberalization of List 1 (non-sensitive products) and List 3
(specific requests) of the Europe Agreement;  List 3 covers pork meat, poultry meat, cheeses, eggs, apples,
tomatoes, and tomato puree.  According to the European Commission, approximately 73% of EU imports fromSlovenia and 17% of EU exports to Slovenia of agricultural goods have been liberalized as a result of the newprotocol (European Commission, 2001).Slovenia WT/TPR/S/98
Page 23
regulations on which the Community is based.  Adoption of the acquis  is one of the three main
eligibility conditions (the so-called Copenhagen criteria) for EU membership.15
34. Numerous laws were amended or replaced in this context.  In the past few years, changes in
the area of goods included new or revised laws on standardization, conformity of industrial products,
food safety, dangerous substances, and environmental protection.  Great importance was attached to
the introduction of "horizontal" laws on customs, government procurement and  anti-competitivepractices, which are aimed at meeting EU and international standards.  In pursuing the approximation
of legislation, Slovenia receives technical and financial assistance from the Community, mainly
through the Phare programme.
35. Slovenia’s efforts towards membership have been stepped up since the European
Commission's favourable Opinion on Slovenia’s request for EU membership in 1997.
16  The Opinion
concluded that Slovenia fulfilled the necessary conditions, and recommended the initiation of
negotiations for accession.  The Commission considered that Slovenia should be regarded as "a
functioning market economy", which should "be able to cope with the competitive pressure and
market forces within the Union in the medium term ".  However, it noted that "Slovenia has to make
considerable efforts to take on the acquis  in the area of the internal market.  In addition, important
progress will be necessary in the sector of environment, employment and social affairs, and energy.
More generally, further administrative reforms will be indispensable if Slovenia is to have the
structures to apply and enforce the acquis  effectively".
36. As an acknowledgement of Slovenia’s efforts to speed up its European integration the EU
Luxembourg Summit in December 1997 decided to start accession negotiations with Slovenia in
March 1998.  In its first Annual Progress Report, issued in November 1998, the European
Commission confirmed its positive assessment of Slovenia’s progress towards accession, butcontinued to raise concerns regarding Slovenia’s administrative capacity.  To meet such concerns,
Slovenia devoted increasing financial and human resources to meeting EU requirements.  Slovenia’s
domestic plan for meeting the requirements of EU accession is defined in the National Programme for
the Adoption of the Acquis (NPAA).  It is updated on a yearly basis.
17
37. In parallel to the accession negotiations, the EU and Slovenia engaged in a screening of
national legislation and regulations, aimed at identifying remaining differences relative to the
acquis . Such screening is undertaken chapter by chapter, i.e. area by area of negotiation.  The main
part of the screening process was completed in autumn 1999.  After the screening of each chapter,
Slovenia formed and presented its negotiating position: by the end of 1999, Slovenia’s position on 29
out of 31 chapters subject to accession negotiations had been presented to EU Member States.  As of21 December, 2001, the EU and Slovenia had preliminarily closed negotiations on 26 of the
                                                     
15 The eligibility criteria defined by the European Council in Copenhagen (1993) include: the stability
of institutions guaranteeing democracy, the rule of law, human rights and respect for protection of minorities;the existence of a functioning market economy, as well as the ability to cope with competitive pressures andmarket forces within the Union; and the ability to take on the obligations of membership, including adherence to
the aims of political, economic and monetary union ( acquis communautaire ).
16 European Commission (1997).
17 The Accession Partnership and the NPAA require Slovenia to adopt 200 laws and 800 implementing
regulations to meet all the conditions for full membership; the Government expects this to be completed by2002.WT/TPR/S/98 Trade Policy Review
Page 24
29 chapters.18  The authorities aim to complete preparations and negotiations for accession by the end
of 2002.
38. As regards external trade, accession would imply the application of the EU trade regime,
including the Common External Tariff and other trade measures.  In many products in manufacturing
and agriculture, EU membership should reduce overall protection in Slovenia compared to current
levels.
39. The overall impact of EU membership on both the domestic economic structure and trade
patterns is difficult to assess at this stage.  For external trade, it is unclear whether diversion of
imports away from non-preferential sources may increase.  Agriculture, textiles and clothing, and a
few other sectors benefit from higher-than-average pr otection.  At the same time, as a member of the
European Union, Slovenia's goods would have free access to the single market, enabling all firms(whether domestically or foreign-owned) to benefit from access, specialization effects, and economies
of scale.  The impact of EU membership for Slovenia will also depend on whether it is able to
maintain or increase its share of the EU market, especially in areas that are not subject to free trade
under the Europe Agreement (agriculture).
40. Equally important is the ability of Slovenia’s private sector to comply with the complex set of
single-market rules, standards (for example sanitary and safety standards) for products sold in the
EU’s common market.  Slovenia’s liberal trade regime already makes it fairly easy for foreign firms
to operate in the country, but there could be scope for increased competition (Chapters III and IV).
Slovenia’s liberal policy regime has created a favourable investment climate and made it possible for
the country to attract foreign investors, particularly in the industrial sector.  With increased access to
the EU market, Russia, and other countries in the CIS, Slovenia is in a position to attract even more
foreign capital, technology and know-how, includin g in energy, telecommunications, transport and
banking, where major privatization projects are under way. Slovenia’s adoption of the comprehensive
package of EU legislation will make it easier for multinational enterprises to include Slovenia in their
Europe-wide business strategies.
(b) Relations with EFTA countries
41. On 13 June 1995, Slovenia signed a free-trade agreement with countries of the European Free
Trade Association (EFTA).
19  The Agreement was ratified in June 1997, but had been provisionally
applied since July 1995.  It follows a set of rules th at are relatively similar to free-trade agreements
concluded with other countries associated to the EU.  Typically,  trade liberalization  in the industrial
sector  follows common patterns and timetables.  Some differences exist in services and agriculture.
Most duties and quantitative restrictions applying to industrial goods were eliminated upon entry intoforce of the agreement.  Regarding agricultural products, tariffs are either duty free, have the same
rate as for EU Member States, or are at the MNF rates.  Other concessions are being implemented
gradually.  EFTA countries accounted for 2.1% of Slovenia's imports in 2000 and 1.4% of its exports.
                                                     
18 The 26 chapters are: science and technology; telecommunications and information technologies;
education and training; industrial policy;  small and medium-size undertakings;  consumers and healthprotection;  statistics;  free movement of capital;  economic and monetary union; fisheries;  external relations
and development aid;  common foreign and security policy;  company law; employment and social policy;
culture and audiovisual policy;  free movement of goods;  free movement of services;  financial control;freedom of movement of persons;  competition and state aid; transport policy;  taxation;  customs union;  justiceand home affairs;  environment;  and energy.
19 EFTA members are Iceland, Liechtenstein, Norway, and Switzerland.Slovenia WT/TPR/S/98
Page 25
(c) Relations with CEFTA countries
42. Slovenia joined the Central European Free-Trade Agreement (CEFTA) on 1 January 1996.20
Its structure, content and timetable are broadly modelled on the Europe Agreement.  Although
original CEFTA schedules do not provide for free trade in agriculture, tariff concessions have been
negotiated for a large group of agricultural products.  The system of concessions for agricultural
products comprises Lists A, B, C and D.  Lists A and B are valid for all CEFTA members, while ListsC and D are agreed bilaterally between individual CEFTA parties.  Lists A and C refer to duty-free
products. List B and D contain products on which customs duties have been reduced.  Slovenia
liberalized trade in most agricultural products with the original CEFTA members in April 2000.
21
Regarding industrial products, customs duties were abolished among all CEFTA parties on1 January 2001, with the exception of used motor cars, for which duties are free at the bilateral level(for example, duties on used motor cars were abolished between Slovenia and the Czech and Slovak
Republics in 1997).
43. According to the authorities, as a result of the above, almost 100% of Slovenia's tariff lines
are now covered by preferences or duty-free access under the CEFTA.  In 1997, rules of origin among
CEFTA members were harmonized with those applied within the European Union, allowingmultilateral cumulation among the CEFTA countries and the pan-European diagonal cumulation of
origin.  In 2000, CEFTA countries accounted for 9.1% of Slovenia's imports and 7.9% of its exports.
During the first nine months of 2001, Slovenian exports to CEFTA members increased by 6.8%
(US$555 million) compared with the same period in 2000 and imports increased by 5.3%
(US$731 million).  Slovenia has a traditional trade deficit within CEFTA, especially on agricultural
products.
(d) Other agreements and arrangements
44. Slovenia has concluded free-trade agreements wi th other European or neighboring countries
such as the three countries forming the Baltic Free-Trade Area (Estonia, Latvia, Lithuania), Croatia,
Israel, the Former Yugoslav Republic of Macedonia (FYRM), and Turkey. These free-trade
agreements provide for the elimination of duties on industrial goods and the gradual liberalization of
trade in agricultural products.  Free trade in industrial products has largely been achieved with thesecountries.
22  In addition, the agreements contain provisions on trade-related areas, including
competition rules, intellectual property protection and government procurement.  In 2001 a free-trade
agreement was signed with Bosnia and Herzegovina, which applied from 1 January 2002.23  A free-
trade agreement with the Federal Republic of Yugoslavia is in the process of negotiation.
45. Slovenia has non-preferential agreements on economic cooperation, or economic and trade
cooperation agreements with Albania, Argentina, Belarus, Bosnia and Herzegovina, Brazil, China,
Egypt, Federal Republic of Yugoslavia, India, Indonesia, Malaysia, the Philippines, the Russian
Federation, the Republic of Korea, Thailand, and Ukraine.  It is in the process of negotiating such
agreements with Chile, Cuba, Iran, Kazakhstan, Kuwait, Mexico, Moldova, Morocco, Qatar, and
Uzbekistan.
                                                     
20 When CEFTA was signed on 21 December 1992, the original members were Czechoslovakia,
Hungary, and Poland.  The agreement on the accession of  Slovenia was signed on 25 November 1995.  CEFTAhas been enlarged by Romania on 1 July 1997, and Bulgaria on 1 January 1999.
21 As a result of the entry into force of Additional Protocol No. 6 to the Agreement.
22 The free-trade agreements with Latvia and the Former Yugoslav Republic of Macedonia have been
implemented (provisionally, until ratification) since 1996, with Estonia and Lithuania since 1997, with Croatiaand Israel since 1998, and with Turkey since 2000.
23 WTO document WT/REG/131/N/1, 21 January 2002.WT/TPR/S/98 Trade Policy Review
Page 26
(4) DEVELOPMENTS IN THE FOREIGN INVESTMENT REGIME
(i) Domestic regime and incentives
46. Since 1991, Slovenia has attracted foreign direct  investment (FDI) from western Europe.  As
of 31 December 2000, Slovenia's total stock of FDI amounted to US$2.8 billion, i.e. about 14% of
GDP.24  Austria alone accounts for over 45% of total FDI in Slovenia;  Germany, France, Italy, and
the United States are also major investors.25  Between 1994 and 2000, the share of the EU in FDI
stock increased from about 60% to 84%.  The main sectors receiving FDI are banking (25% of total
investment), distribution services (10%), and the wood and paper industry (7%).  Foreign presence is
also significant in other manufacturing industries su ch as chemicals, motor vehicles (assembly of cars,
car equipment, tyres), rubber and plastics products.
47. Greenfield investment has been the dominant form  of FDI.  Access through privatization was
limited during the first phase of the process, i.e ., the phase during which the ownership of socially
owned companies was transferred to the private sector.  A number of factors contributed to this
situation.  The existence of capital controls, the prevalence of privatization operations through
management-employee buyouts, the complex formula requiring ownership of companies to be spread
among various investors (investment funds, Slovene Development Corporation), and the two-yearfreeze on the sale of shares acquired through the national voucher programme left limited room for
acquisition by international investors, in particular through the stock market.
26  By contrast, greenfield
investment has developed across a wide range of sectors, allowing for some diversification of
Slovenia's production base.
48. Since 1998-99, in a context of growing competition for investment between transition
countries, FDI inflows have slowed, sending signals a bout the need to review Slovenia's attractiveness
as an investment location.  Despite indisputable  advantages, including open trade and investment
policies, easy access to EU markets through common borders with Austria and Italy, a skilled labour
force, and strong industrial base, awareness increased in Slovenia that FDI penetration was one of the
lowest in central Europe.  At the request of the Slovenian Government, the Foreign Investment
Advisory Service (FIAS) of the World Bank conducted a survey of administrative barriers to
investment (Box II.1).  In addition, other impedime nts to investment, such as capital controls and
compulsory requirements regarding the presence of Slovenian nationals on the management or
executive boards of companies, were eliminated in 1999-00.  Changes to Slovenia's privatization
policy, in the direction of greater reliance on the stock markets, are expected to offer increased
opportunities for foreign investors, in particular in infrastructure and public utilities
(telecommunications, energy, and transport).
49. The Government is still in the process of implementing the recommendations of the FIAS
report.  These, combined with policies that are conducive to fair competition, open public
procurement, and transparency in privatization, are likely to have greater effects on international
investors than financial incentives, which tend to prove costly for public finances and  attract rent-
seekers. In 2001, Slovenia achieved the status of "adherent to the OECD Declaration on International
Investment and Multinational Enterprises".
                                                     
24 FDI statistics are available in Bank of Slovenia online information, at:  [http://www.bsi.si].
25 Germany holds 12.5% of total FDI in Slovenia, France 10.7%, Italy 5.4%, and the United Kingdom
3.6%.  Outside the EU, the largest investors are the United States (3.9%), Switzer land (3.9%), and the Czech
Republic (3.7%).
26 See in particular, International Monetary Fund (1998a).Slovenia WT/TPR/S/98
Page 27
Box II.1:  Administrative barriers to investment in Slovenia
In 2000, a study on administrative obstacles to investment was conducted by the Foreign Investment
Advisory Service, a joint consulting service of the International Finance Corporation and the World Bank,at the request of the Government of Slovenia.  The study revealed that, while tax administration, customs,and the protection of intellectual property rights were generally well organized and administered, otherareas of government were still "burdened by a bureaucratic tradition of intervention in the economy".  The
study identified some areas where administrative pr ocedures could be further simplified, such as the
registration of companies (registration at the court and obtaining the business activity permit) and foreignexchange transaction reporting requirements.  Other areas  were identified as true obstacles to investment,
where procedures needed to be changed significantly: the procedures related to the acquisition of land forindustry, the delivery of permits for foreign workers, some aspects of labour legislation, and procedures for
the approval of industrial sites.
The report makes several recommendations in each of these areas. For example, it recommends that most
businesses be freed from business permits and that only a limited number of companies be subject tolicensing under a negative list.  Regarding the acquisition of land, the report suggests improving thecoordination between local and central governments, re -evaluating the zoning process for industrial sites,
and promoting the development of industrial parks.  Proposals are also made to simplify authorization
procedures for foreign worker permits (in particular, better recognition of foreign worker diplomas and
qualifications), and, in general, a softening of labour legislation in the direction of more flexible hiring andfiring procedures.  The authorities are gradually taking steps to address these recommendations. Regardingaccess to land for industrial sites, the Ministry of Economy has earmarked locations in which the setting-upof industrial zones is envisaged.  Tenders have also been launched for the development of such sites in less-developed areas of the country.  The Trade and Investment Promotion Agency (TIPO) is also stepping up
marketing and promotion efforts to attract FDI.  Ad hoc administrative task forces will be put in place to
facilitate administrative procedures for foreign companies whenever there is a major investment project.The grant scheme for investment, introduced as a pilot project in 2000, will be continued.
Source:   WTO Secretariat, based on Foreign Investment Advisory Service (2000), Slovenia –
Administrative Barriers to Investment; and Slovenian Trade and Investment Promotion Agency (TIPO),
fact sheets.
(a) Basic framework
50. There is no specific legislation governing FDI in Slovenia.  The general conditions governing
the establishment and operations of companies in Slovenia are laid out in the Law on Commercial
Companies, which applies equally to domestically a nd foreign-owned firms.  Financial transactions of
companies are governed by the 1999 laws on Financial Operations of Companies and on ForeignExchange.  The banking and insurance laws contain specific provisions for the establishment and
operations of financial institutions.  Slovenia's foreign investment regime is fairly liberal, with a priori
no general restrictions; as provided by the Law on Commercial Companies, all business activities are
open to domestic and foreign natural and legal persons alike.  Foreign companies are given the same
rights, responsibilities, and obligations as domestic companies, ensuring full national treatment asregards tax treatment, establishment, and operations.
27
51. Foreign investment is permitted in the types of companies listed in the Commercial Code,
which follows EU standards (sole proprietorship, general partnership, limited partnership, private
limited company or public limited company) under the same conditions as  Slovenian companies. All
companies should be listed in the Commercial Register.  Foreign investors may set up entirely new
                                                     
27 Article 5 of the Law on Commercial Companies explicitly guarantees national treatment for foreign
investment.WT/TPR/S/98 Trade Policy Review
Page 28
companies, enter contractual joint ventures, silent partnerships or freely invest in an existing
Slovenian company, including through takeover, merger, and acquisition.  Foreign companies are
allowed to own 100% of equity without prior approval requirement (except that they must register
with the Slovenian courts in the case of a takeover).28  Foreign investors may branch directly from
abroad, but for  some activities they must obtain a licence to do so (banking). The parent (foreign)
company remains liable for the obligations of its branch. Branches are fully established afterregistering in the Commercial Register and with the tax authorities.
52. There are no performance tests or requirements in respect of the establishment, maintenance
or expansion of FDI, such as minimum or maximum periods for equity holdings, minimum
shareholding for nationals or special conditions for technology transfers.  Earlier requirements for
general managers to be Slovenian citizens, or for Boards of Directors to be composed of Sloveniannationals were abolished in 1999.  However, there are  still quotas limiting foreign presence in certain
professions.  A new Law on the Employment of Foreigners, adopted on 1 January 2000, has relaxed
some quotas and has simplified conditions for visas of foreign workers.  Foreign investors are allowed
to bid for concessions for the exploitation of renewable and non-renewable natural resources and
public goods.  Foreign-owned firms registered under Slovenian law are allowed to own property inSlovenia. Under the Association Agreement between the EU Member States and Slovenia, residents
who have lived in Slovenia for a continuous period of at least three years are free to acquire real estate
in Slovenia on the basis of reciprocity.  From 1 February 2003, all residents of the EU will be free to
acquire real estate in Slovenia.  In the framew ork of negotiations on EU membership, the Government
committed itself to abolishing the reciprocity requirement for the purchase of real estate by EU
nationals as of the date of accession to the EU.
53. Slovenian law guarantees the free and full repatriation of invested capital, dividends,
royalties, fees, and any other income and after-tax profit resulting from the sale of an investment.  The
rights of foreign workers employed in a foreign-owne d firm to transfer their after-tax incomes are also
guaranteed.  Protection against nationalization, requisition, and confiscation of FDI  is also provided
by Law.  Article 69 of the Constitution provides that, while "land and property affixed to land may be
compulsorily acquired, or ownership thereof may be limited by the States in the public interest", it issubject to a "right to compensation in kind or monetary compensation from the State".
54. There are, however, some restrictions on foreign investment in certain business operations.
Foreign-owned companies cannot invest in a military supply industry, gaming, and budget financed
pension and health insurance.  In the financial sector, until recently, pervasive capital account
restrictions, combined with branching restrictions, had limited investment outside of existing entities.
Since 1999, most of these controls and restrictions have been eased.
29  Similarly, limitations applying
to investment in the insurance sector were eliminated in 2000 by the Law on the Ownership of
Insurance Enterprises.  A wider concern for  foreig n investors relates to the process of privatization
and their ability to take control of local firms.  As described above, a large share of privatization
operations took place through internal management and employee buyouts at preferential terms.Newly privatized firms were protected from hostile takeover by a two-year freeze on share transfers,
                                                     
28 Takeovers are allowed for  private companies throug h a direct offer to the shareholder and for public
companies whose shares are quoted in the stock exch ange.  A company that succeeded in taking control of
another company through a takeover has the obligation to   inform the Stock Exchange, the Securities Market
Agency, and the issuer of the shares within certain time limits.  Delays are also set for the publication of
information notices on the premises of the Stock Exchange or the press. According to foreign sources, Slovenian
takeover legislation has proved in the past to be "restrictive" (United State Department of State (2000).
29 In the banking sector, restrictions on branching by foreign banks were eliminated in 1999. The 40%
foreign exchange surrender requirement on foreign loans, and controls on portfolio inflows were alsoeliminated.Slovenia WT/TPR/S/98
Page 29
which expired in 1999.30  Difficulties experienced by foreign investors in acquiring land for
construction, ranging from bureaucratic procedures for obtaining permits to difficulties encountered
during the procurement process, as well as a lack of attractive sites have been reported as
impediments to investment by foreigners (Box II.1).
(b) Incentives
55. Slovenia offers a package of financial incentives to investors, regardless of origin (foreign or
domestic investment).  Incentives include direct financial assistance and tax incentives.  Companies
with investments expected to generate at least 100 new jobs in the first three years (or 50 jobs when
the investment is made in a less-developed area and 10 jobs in research and development activities)
may apply to the Ministry of Economy for direct financial grants.  The grant is aimed at financing part
of the investment in fixed assets, whether it takes place through the expansion of existing productionfacilities, the setting up of new production facilities or the launching of a new activity (possibly using
existing facilities) calling for a "fundamental modification of the product or the production process".
To be eligible, the company is required to make a minimum investment of € 2 million.  The
amount of co-financing provided by the Government depends on compliance with the criteria but
cannot exceed 40% of the cost of a single project.
31
56. While the general corporate tax rate both for foreign and domestically owned firms in
Slovenia is, at 25%, relatively low by European standards, investment allowances can further reduce
the tax rate.  First, companies operating within economic zones (located in Koper and Maribor) may
qualify for a 10% corporate tax rate (Chapter III(2)(ii) ).  In these zones, imports of certain machinery
and equipment may enter free of duty and VAT provided they are used in the production of exported
goods.  In addition, the company's taxable base may be reduced by up to 50% for investment in
tangible fixed assets (passenger cars being excluded).  Furthermore, companies may take advantage ofaccelerated depreciation of tangible and intangible assets (ranging from 5% on premises to 50% on
computers).  Losses may be carried forward for five years; however, cumulative allowances may not
exceed the amount of the taxable base.  The Economic Zones Act stipulates that the zone can operate
until 2010.  However, according to the authorities, the present preferential treatment is not compatible
with the  acquis communautaire .
57. The Government also aims to address administrative barriers to investment, as identified in
the FIAS report, and to improve the coordination of efforts to attract FDI between local and central
authorities, and between State Ministries.  To this aim, it endorsed in July 2001 the "Government
Incentive Scheme 2001-2004", a three-year plan containing measures to increase the offer of real
estate for industrial development, step up marketing and promotion activities to attract FDI, and set upad hoc groups involving all administrative authorities whenever major investment projects arise.
58. Municipalities may also offer different forms of incentives to investors, which are negotiated
on a case-by-case basis.  Such incentives may include relief on local taxes, free utility connections,
and easier and cheaper access to industrial sites.  All companies, domestic or foreign, willing to
employ Slovenians may apply for free training and retraining provided by local employment offices.
                                                     
30 International Monetary Fund (2001).
31 In 2001 the maximum funds available under the Investment Cost-Sharing Grant Scheme was
SIT 725 million (about US$2.96 million).  According to the authorities, grants were obtained for investmentcosts in tangible assets (from 15% to 40% of total investment cost) and for job creation (from US$816 toUS$3,264 per new job created).  The majority of funds distributed went to foreign-owned firms (65.1%).WT/TPR/S/98 Trade Policy Review
Page 30
59. It is not clear whether the benefits of the incentive package, in terms of incremental
investment and job creation, outweigh the costs (fiscal cost, and economic cost of attracting rent-
seekers).
(ii) International initiatives and agreements
60. To date, Slovenia has signed 33 bilateral investment protection and promotion agreements
involving most of its trading partners.  These partners are:  Albania, Austria, Belgium, Bosnia andHerzegovina, Bulgaria, China, Croatia, the Cz ech Republic, Denmark, Egypt, Finland, France,
Germany, Greece, Hungary, Israel, Italy, Lithuania, Former Yugoslav Republic of Macedonia, Malta,
Netherlands, Poland, Portugal, Romania, Russia n Federation, Singapore, Slovak Republic, Spain,
Sweden, Switzerland, Thailand, Ukraine, and the United Kingdom.  Agreements are under negotiation
with Argentina, Brazil, Canada, Chile, Cuba, Indonesia, Kuwait, Latvia, Malaysia, Morocco, Turkey,the United States, and Uzbekistan.
61. Slovenia has signed agreements on the avoidance of double taxation with 25 countries,
including 11 EU Member States, all CEFTA members, and other neighbouring countries.