COMMISSION OF THE EUROPEAN COMMUNITIES 
Brussels, 15.07.1997 
COM(97) 2010 final 
Commission Opinion 
on Slovenia's Application 
for Membership of the European Union 

Contents 
A. INTRODUCTION Page 
a) Preface 
The Application for Membership 
The Context of the Opinion 
The Contents of the Opinion 
b) Relations Between the European Union and Slovenia 
Historical and Geopolitical Context 
Slovenia's Position Concerning the European Union 
Contractual Relations 
The Pre-Accession Strategy 
Trade Relations 
General Evaluation 
B. CRITERIA FOR MEMBERSHIP 
1. Political Criteria 
1.1 Democracy and the Rule of Law 
Parliament and Legislative Powers: Structure 
Functioning of Parliament 
The Executive: Structure 
Functioning of the Executive 
The Judiciary: Structure 
Functioning of the Judiciary 
1.2 Human Rights and the Protection of Minorities 
Civil and Political Rights 
Economic, Social and Cultural Rights 
Minority Rights and the Protection of Minorities 
1.3 General Evaluation 
2. Economic Criteria 
2.1 The Economic Situation 
Background 
Liberalisation 
Stabilisation of the Economy 
Structural Change 
Financial Sector 
Economie and Social Development 
2.2 The Economy in the Perspective of Membership 
Introduction 
The Existence of a Functioning Market Economy 
The Capacity to Cope with Competitive Pressure and Market Forces 
Prospects and Priorities 
2.3 General Evaluation 
3. Ability to Assume the Obligations of Membership 
3.1 Internal Market Without Frontiers 
The Four Freedoms 
- General Framework 
- Free Movement of Goods 
- Free Movement of Capital 
- Free Movement of Services 
- Free Movement of Persons 
- General Evaluation 
Competition 
3.2 Innovation 
Information Society 
Education, Training and Youth 
Research and Technological Development 
Telecommunications 
Audio-visual 
3.3 Economic and Fiscal Affairs 
Economic and Monetary Union 
Taxation 
Statistics 
3.4 Sectoral Policies 
Industry 
Agriculture 
Fisheries 
Energy 
Transport 
Small and Mediumenterprises 
3.5 Economic and Social Cohesion 
Employment and Social Affairs 
Regional Policy and Cohesion 
3.6 Quality of Life and the Environment 
Environment 
Consumer Protection 
3.7 Justice and Home Affairs 
3.8 External Policies 
Trade and International Economic Relations 
Development 
Customs 
Common Foreign and Security Policy 
m 
3.9 Financial Questions 
Financial Control 
Budgetary Implications 
4. Administrative Capacity to Apply the Acquis 
4.1 Administrative Structures 
4.2 Administrative and Judicial Capacity 
4.3 General Evaluation 
C. SUMMARY AND CONCLUSION 
Annexes 
Composition of Parliament 
Single Market: White Paper Measures 
Statistical Data 
IV 



A. INTRODUCTION 
a) Preface 
The Application for Membership 
Slovenia presented its application for membership of the European Union on 10 June 
1996, and the Council of Ministers decided on 15 July 1996 to implement the 
procedure laid down in Article 0 of the Treaty, which provides for consultation of the 
Commission. 
That is the framework in which the Commission submits the present Opinion, 
responding to the request of the European Council in Madrid in December 1995 to 
present the Opinion as soon as possible after the conclusion of the Intergovernmental 
Conference, which commenced in March 1996 and concluded in June 1997. 
The Context of the Opinion 
The Slovenian application for membership is being examined at the same time as 
applications from nine other associated countries. Slovenia's accession is to be seen 
as part of an historic process, in which the countries of Central and Eastern Europe 
overcome the division of the continent which has lasted for more than 40 years, and 
join the area of peace, stability and prosperity created by the Union. 
The European Council in Copenhagen in June 1993 concluded that: 
"The associated countries in Central and Eastern Europe that so desire shall become 
members of the Union. Accession will take place as soon as a country is able to 
assume the obligations of membership by satisfying the economic and political 
conditions. Membership requires: 
- that the candidate country has achieved stability of institutions guaranteeing 
democracy, the rule of law, human rights and respect for and protection of 
minorities; 
- the existence of a functioning market economy, as well as the capacity to cope 
with competitive pressure and market forces within the Union; 
- the ability to take on the obligations of membership, including adherence to 
the aims of political, economic and monetary union. 
The Union's capacity to absorb new,members, while maintaining the momentum of 
European integration, is also an important consideration in the general interest of both 
the Union and the candidate countries". 
This declaration spelled out the political and economic criteria for examining the 
accession requests of the associated countries of Central and Eastern Europe. 
The European Council in Madrid in December 1995 referred to the need, in the 
context of the pre-accession strategy, "to create the conditions for the gradual, 
harmonious integration of the application countries, particularly through: 
- the development of the market economy, 
- the adjustment of their administrative structure, 
- the creation of a stable economic and monetary environment". 
In its Opinion, the Commission analyses the Slovenian application on its merits, but 
according to the same criteria as the other applications, on which it is delivering 
Opinions at the same time. This way of proceeding respects the wish, expressed by 
the European Council in Madrid, to ensure that the applicant countries are treated on 
an equal basis. 
In addition to the individual Opinions the Commission is presenting separately to the 
Council, in the framework of its communication "Agenda 2000", a general assessment 
of the accession requests, and its recommendations concerning the strategy for 
successful enlargement of the Union. At the same time, it is presenting an evaluation 
of the impact of enlargement on the Union's policies. 
The Contents of the Opinion 
The structure of the Opinion takes account of the conclusions of the European Council 
in Copenhagen. It: 
- describes the relations up to now between Slovenia and the Union, particularly 
in the framework of the association agreement; 
- analyses the situation in respect of the political conditions mentioned by the 
European Council (democracy, rule of law, human rights, protection of 
minorities); 
- assesses Slovenia's situation and prospects in respect of the economic 
conditions mentioned by the European Council (market economy, capacity to 
cope with competitive pressure); 
- addresses the question of Slovenia's capacity to adopt the obligations of 
membership, that is the acquis of the Union as expressed in the Treaty, the 
secondary legislation, and the policies of the Union; 
- makes finally a general evaluation of Slovenia's situation and prospects in 
respect of the conditions for membership of the Union, and a recommendation 
concerning accession negotiations. 
In assessing Slovenia in respect of the economic criteria and its capacity to assume the 
acquis, the Commission has included a prospective assessment; it has attempted to 
evaluate the progress which can reasonably be expected on the part of Slovenia in the 
coming years, before accession, taking account of the fact that the acquis itself will 
continue to develop. For this purpose, and without prejudging the actual date of 
accession, the Opinion is based on a medium-term time horizon of approximately five 
years. 
During the preparation of the Opimon, the Commission has obtained a wealth of 
information on Slovenia's situation from the Slovenian authorities, and has 
utilised many other sources of information, including the member states and 
numerous international organisations. 
b) Relations Between the European Union and Slovenia 
Historical and Geopolitical Context 
Slovenia lies on the Adriatic Sea in the triangle between Central, Southern and 
Southeast Europe, bordering four countries (Italy, Austria, Hungary and 
Croatia). Its area is 20250 km and its population 2 million. 
The territory of Slovenia has been largely settled by Slav populations since the 
6th century. In the 13th century power passed into the hands of the Habsburg 
dynasty. Following the First World War and the collapse of the Austro-
Hungarian Empire, Slovenia opted to become part of the Kingdom of Serbs, 
Croatians and Slovenes (later Yugoslavs). During the Second World War, 
Slovenia was occupied by both Germany and Italy. 
In 1945 Slovenia became part of the Socialist Federal Republic of Yugoslavia, 
though the coast and hinterland remained under international administration 
until 1954. After a period of orthodox communist policies of expropriation and 
collectivisation, the Constitutional Law of 1953 established the foundations of 
Yugoslav self-management socialism. The 1963 Constitution fostered the 
notion of a self-managed society at all levels of economic, social and cultural 
life, which remained however largely controlled by the Communist Party. 
A weakening of federal authority and the devolution of powers to the republics 
began in the late sixties, but authoritarian centralism returned after political 
disturbances in 1972. Following the death of Tito in May 1980 political and 
economic disintegration gained momentum. Accelerating inflation, growing 
balance of payment deficits and rapid increases in borrowing added impetus to 
requests for regional autonomy and the introduction of parliamentary 
democracy. In 1989, fearing Serbian domination, the Slovene Assembly 
amended the constitution to pave the way for a sovereign Slovenian state. 
The first free elections in Slovenia were carried in April 1990. In a referendum 
on 23 December 1990, 88% of the votes favoured independence. The "Basic 
Constitutional Charter on Independence and Sovereignty of Slovenia" was 
adopted on 25 June 1991 and independence proclaimed the day after. Victory in 
the 10-day war against the Yugoslav National Army following the independence 
proclamation confirmed Slovenia's status as an independent state. Slovenia was 
recognised on 15 January 1992 by the European Community. Presidential and 
legislative elections in December 1992 led to the formation of a broad coalition 
government. New legislative elections in 1996 were followed by several 
months in which no group of parties could establish a working majority. 
Slovenia's Position Concerning the European Union 
Since independence the Slovene government has consistently underlined its 
foreign policy priority of integration with the European Union. As early as 
February 1992 it sought a Europe Agreement and support for the restructuring 
and consolidation of the Slovene economy. 
As soon as the Cooperation Agreement with the EU entered into force in 1993, 
the Slovenian Government sought the opening of negotiations for a Europe 
Agreement. On 10 June 1996, the day the Europe Agreement was signed, the 
government formally requested EU membership. Two months earlier the 
Assembly adopted a declaration restating this as its objective and noting its 
willingness to liberalise the real estate market on the basis of the principles set 
out at the Madrid European Council. In May 1997 Slovenia issued a document 
on its EU accession strategy, reconfirming its ambition to become a full member 
of the EU and that she is "not only able and willing to assume the obligations 
deriving from full membership but also ready to accept certain limitations which 
the realisation of these obligations would bring for the sovereignty of the 
Slovene state." 
Contractual Relations 
The Socialist Federal Republic of Yugoslavia reached a series of trade 
agreements with the EC, the first dating from 1970. In 1980 a Trade and 
Economic Cooperation Agreement, the first of its kind, was signed, 
accompanied by the establishment of a Cooperation Council. Even then, 96% of 
Yugoslav industrial products exported to the EU were tax exempt, while 28% of 
agricultural products benefited from preferential treatment. Following the 
outbreak of civil war in Yugoslavia, the EC suspended this Agreement in 
November 1991. Since then, annually renewed autonomous preferential trade 
regimes have provided for continuity in trade relations, until the entry into force 
of an Interim Agreement in January 1997 (see below). 
Diplomatic relations between the EU and Slovenia were established on 13 April 
1992. On 1 September 1993 a Cooperation Agreement, essentially modelled on 
the one signed in 1980 with Yugoslavia, accompanied by supplementary 
arrangements in particular on transport, textile and financial cooperation, 
entered into force. 
After one meeting in 1993, the political dialogue envisaged under this 
Agreement was never pursued, because of the expectation that it would soon be 
overtaken by a Europe Agreement. Conclusion of this was, however, delayed 
by differences over the need for amendments to Slovene real estate legislation to 
permit EU nationals to own property. An exchange of letters annexed to the 
Europe Agreement finally paved the way for its signature on 10 June 1996. 
According to these the Slovene real estate market would be opened to all EU 
citizens four years after entry into force of the Europe Agreement, but would be 
already liberalised on entry into force for those EU citizens who have lived for 
at least 3 years on the territory of Slovenia. 
Pending ratification of the Europe Agreement, an Interim Agreement entered 
into force on 1 January 1997 which covers all trade and trade-related fields 
under the Europe Agreement and in these fields replaces the Cooperation 
Agreement and the annual autonomous trade measures. Economic cooperation 
under the Cooperation Agreement will continue. 
Once it enters into force, the Europe Agreement will be the legal basis for 
relations between Slovenia and the Union. Its aim is to provide a framework for 
political dialogue, promote the expansion of trade and economic relations 
between the parties, provide a basis for Community technical and financial 
assistance, and an appropriate framework to support Slovenia's gradual 
integration into the Union. The institutional framework of the Europe 
Agreement provides a mechanism for implementation, management and 
monitoring of all areas of relations. Sub-committees examine questions at a 
technical level. The Association Committee, at senior official level, provides 
for discussion of matters and often finds solutions to problems arising under the 
Europe Agreement. The Association Council examines the overall status of and 
perspectives for relations and provides the opportunity to review Slovenia's 
progress on preparation for accession. 
As regards ratification of the Europe Agreement, the Constitutional Court ruled 
on 5 June 1997 that a prior amendment of the Constitution was necessary before 
this could take place. The government of Slovenia has committed itself to 
obtaining the necessary modification of the Constitution in order to ratify the 
agreement as soon as possible.. 
Recognising the need for effective management of the European integration 
process, the Slovene Government decided on 25 October 1996 to delegate the 
task of pre-accession policy coordination and monitoring to the Office for 
European Affairs under the Ministry of Foreign Affairs. Management of the 
Phare Programme has also been transferred to the Office. 
The Pre-Accession Strategy 
Implementation of the Interim and Cooperation Agreement and the White Paper 
The trade provisions of the Interim Agreement have been implemented 
according to schedule. The first formal consultations under the 
Joint/Cooperation Committee were held on 20/21 March 1997. Nine sub­
committees were established and cooperation at this level has advanced well 
since then. 
Currently, the main issues discussed are: further strengthening the Slovene 
accession strategy, approximation of legislation; public administration reform; 
macroeconomic stability and structural reforms; financial services and the 
liberalisation of capital movements; the wine and spirits agreement; plant 
health/veterinary equivalency protocol; a European Conformity Assessment 
Agreement; certification and standardisation issues; a number of specific trade 
issues; opening of and preparation for participating in community programmes; 
third-pillar cooperation. 
Most of the trade issues which have arisen so far are of minor importance. 
Given the delayed entry into affect of the Europe Agreement, there is scope for 
accelerating introduction of policies and mechanisms even ahead of the 
benchmarks set by the agreements, as for instance in the cases of standards, 
competition and state aids. Policies, e.g. on aspects of public procurement and 
movement of capital, have not always been developed in line with the spirit of 
the Europe Agreement, but in these cases the government is reviewing its 
approach in the context of the accession strategy. 
The Commission's White Paper of 1995 set out the legislation which the 
candidate countries would need to transpose and implement in order to apply the 
acquis, and identified elements essential to the implementation of the Single 
Market (known as Stage I measures) which would need priority attention. 
Slovenia has attached considerable importance to this work. The Office for 
European Affairs is supervising the implementation of the White Paper. In 
addition, the Office for Legislation is responsible for the coordination and 
monitoring of the working groups in the ministries concerned working on the 
White Paper implementation. Considering the implementation of the White 
Paper as a medium-term strategic objective, the Government submitted a three 
year plan for the approximation of primary legislation in May 1996. It is 
intended to elaborate this document further, mainly by integrating into it 
technical standards and secondary legislation, to become a White Paper 
Implementation Strategy. The strategy is scheduled to be approved before the 
end of 1997. 
Particular progress in legislative alignment has been achieved in the area of 
banking, intellectual and industrial property, money laundering, consumer 
protection, personal data, and customs. Areas requiring specific attention are 
free movement of capital, indirect taxation, insurance, standards, competition 
and state aids, energy and telecommunication. 
Overall, the EC/Slovene Interim Agreement is functioning well. There are no 
major problems concerning its current implementation. Initial experience of the 
bilateral consultation mechanism suggests that Slovenia is committed to using it 
effectively. 
Structured Dialogue 
Slovenia has participated since June 1996 in the Structured Dialogue. It attaches 
importance to the dialogue and has made a particular contribution on economic 
and financial affairs, internal market and energy. The Slovene authorities have 
expressed satisfaction about the recently introduced long-term planning of 
meetings and the improved quality of contributions which follows from the 
longer preparation. 
Phare 
Under the Phare Programme, between 1992 and 1996 Slovenia received 
ECU 94 million in support of its transformation and pre-accession efforts. The 
allocation for 1997 was ECU 22 million. There are also cross-border 
cooperation programmes with Italy (ECU 10 million) and Austria (ECU 6 
million) focusing in particular on economic, environment and infrastructure 
cooperation. 
In the first years Phare was used mainly for supporting privatisation and 
enterprise restructuring, reforms in the banking sector and strengthening the 
Slovene research and development capacity. Later, other targets were added: 
approximation of legislation, the public administration reform and other fields 
related to adoption of the acquis and fostering of a competitive enterprise sector. 
Slovenia has made effective use of Phare funds. In particular, the Government 
has targeted a high proportion of technical assistance support at solving specific 
technical problems related to policy reform, transition, the adoption of the 
acquis and the generation of know-how not accessible in the country. 
Disbursement rates have been high. 
Participation in Community programmes 
Pending ratification of the Europe Agreement, Slovenia is not yet in a position 
to participate in those Community programmes that need to await establishment 
of an Association Council. 
Trade Relations 
Between 1992 and 1996, trade between the EU and Slovenia increased 
substantially. EU imports from Slovenia jumped from 1.6 to 4.2 billion ECU, 
while EU exports to Slovenia increased from 1.4 to 5.3 billion. The trade 
balance developed from a slight surplus in 1992 to a deficit for Slovenia. The 
deficit increased in 1995 mainly due to the accession to the EU of Austria, 
Finland and Sweden, and to the need to re-equip the Slovene economy. While 
Slovene exports represent about 60% of GDP, approximately 66% of external 
trade was with the European Union in 1996. The most important goods traded in 
both directions were electrical and transport equipment and textiles. 
Germany is Slovenia's most important trading partner. In 1996, Germany 
secured 25.9% of total Slovene foreign trade, followed by Italy, France, Croatia 
and Austria. Since independence Slovenia has participated in regional 
organisations aiming at political stability and economic cooperation. Slovenia is 
a member of both the Central European Initiative (CEI), and the Central Europe 
Free Trade Agreement (CEFTA). 
General Evaluation 
The bilateral relationship has overall been constructive and smooth. But the 
legislative and constitutional issues which have delayed Slovene ratification of 
the Europe Agreement have constrained the development of the relationship, 
despite Slovene willingness in many fields to pursue the enhanced levels of 
cooperation envisaged in the Europe Agreement even before its entry into force. 
B. CRITERIA FOR MEMBERSHIP 
1. Political Criteria 
The European Council in Copenhagen decided on a number of "political" criteria for 
accession to be met by the candidate countries in Central and Eastern Europe. These 
countries must have achieved "stability of institutions guaranteeing democracy, the 
rule of law, human rights and respect for ancl protection of minorities". 
In carrying out the assessment required in this connection, the European Commission 
has drawn on a number of sources of information: answers given by the Slovenian 
authorities to the questionnaire sent to them by Commission staff in April 1996, 
bilateral follow-up meetings, reports from Member States' embassies and the 
Commission's delegation, assessments by international organisations (including the 
Council of Europe and the OSCE), reports produced by non-governmental 
organisations, etc. 
The following assessment involves a systematic examination of the main ways in 
which the public authorities are organised and operate, and the steps they have taken 
to protect fundamental rights. It does not confine itself to a formal description but 
seeks to assess the extent to which democracy and the rule of law actually operate. 
This assessment relates to the situation in June 1997. It does not examine in detail 
any changes which have taken place since the fall of the Communist regime or which 
may come about in the future, though it generally takes account of any stated intention 
to reform a particular sector. The situation of the government is mentioned here only 
in passing: it will be examined in greater depth in Chapter 4. 
1.1 Democracy and the Rule of Law 
When Slovenia declared independence in June 1991 its Parliament adopted a new 
Constitution which established parliamentary democracy. The Constitution took 
effect in December of that year once it had been approved by the country's 
institutions. Those institutions are working smoothly and normally. The different 
authorities are mindful of the limits to their powers and of the need cooperate with 
each other. 
Parliament and Legislative Power: Structure 
Parliament is made up of a single chamber, the National Assembly, which has 90 
members who are elected for a four-year term under an electoral system which is a 
blend of proportional representation and simple majority. The Italian and Hungarian 
minorities each have one seat reserved for them. Slovenia also has a National 
Council, which represents the interests of socio-economic and professional circles and 
10 
those of the local authorities. It has 40 members elected for a five-year term. They 
may give their opinion on draft legislation examined by the National Assembly, call 
on the latter to have a fresh debate on a draft law before it is promulgated (a majority 
of the Assembly's members must then vote in favour of the law) and ask for a 
parliamentary commission of inquiry to be set up. 
The President of the Republic has to dissolve the National Assembly if it fails to 
designate a Prime Minister. 
MPs enjoy the usual parliamentary immunities. The Opposition's role and 
involvement in the working of the country's institutions is recognised, notably 
through commissions of inquiry which are set up by decision of one-third of the 
National Assembly's members and have the same powers of investigation as the 
courts. There are currently six such committees but their effectiveness is questionable 
in the light of the reports they have produced. The National Assembly also has 39 
standing committees but moves are afoot to cut their number to 15. 
Slovenia has a multiparty system. Thirty political parties are registered, all of which 
fielded candidates at the last general elections in 1996. There are no obstacles to the 
creation of parties, which receive state funding in proportion to the number of votes 
they obtained at the last elections. 
Parliament exercises legislative power and shares the right of initiative with the 
Government, at least 5 000 electors and the National Council. The legislative process 
in Slovenia is quite lengthy: once a law has been scrutinised by the relevant standing 
committee and by the National Council, it must undergo three readings in the National 
Assembly before the latter can give it final approval. 
The Government has autonomous regulatory power which enables it to issue 
regulations even if the law does not give it prior authorisation. It cannot however issue 
regulations regarding the rights of individuals or legal persons unless the power to 
legislate has been delegated to it. The Constitutional Court exercises strict control to 
ensure that any delegation of powers accorded by Parliament is an express one and 
that acts issued by the regulatory authority actually correspond to the legislator's 
intention. The President may pass acts with the force of law in the event of war or a 
state of emergency or if Parliament cannot assemble (Article 108 of the Constitution), 
provided such acts are transmitted to Parliament as soon as possible. 
The National Assembly may decide to hold a referendum on any matter which seems 
to merit this, at the request of one-third of its members, or of the National Council or 
of 40 000 electors. Slovenia held a referendum in November 1996 on the reform of 
the electoral system for general elections but none of the three changes proposed 
obtained the required majority. 
Functioning of Parliament 
11 
The 1992 and 1996 elections were free and fair, each resulting in the formation of 
coalition governments (see Annex for 1996 results). 
Parliament functions satisfactorily: its powers are respected and the Opposition fulfils 
its proper role. The rules of legislative procedure need to be speeded up, however, 
and more generally the National Assembly's technical means and staff need to be 
increased to enable it to fulfil its legislative functions, notably in the context of 
European integration. 
The Executive; Structure 
The President of the Republic is elected by direct universal suffrage for a renewable 
five-year term of office. He has the usual powers accorded to a head of state. If he 
acts contrary to the Constitution or to the country's laws the National Assembly may 
call on the Constitutional Court to strip him of his mandate by a two-thirds majority 
decision of its judges. 
The Prime Mimster is elected by the Parliament upon a proposal by the President of 
the Republic. Ministers are also elected by the National Assembly, upon a proposal 
by the Prime Minister. The Government is answerable to the National Assembly, as is 
each minister individually. 
Local government is run by 58 local government authorities whose leaders are 
appointed by the Government upon a proposal by the Minister for the Interior. The 
local government authorities carry out decisions taken by central government and 
oversee the activity of the local authorities. Their heads are answerable to the 
Minister of the Interior. 
There is only one category of local authority in Slovenia, the municipality, the number 
of which was increased in 1994 from 62 to 147 (20 new ones are planned). The 
municipalities administer the bulk of local public services and are run by a mayor, 
who is elected by direct universal suffrage, and by a municipal council also elected for 
a four-year term of office. Government subsidies continue to form a substantial part 
of the municipalities' budget resources and several draft laws are in the pipeline to 
afford them a greater measure of financial autonomy. 
Public administration in Slovenia is governed by two laws: one affecting government 
and parliamentary officials and another governing the employees of government 
agencies which lays down rules akin to those contained in the Labour Code. 
Although the Constitution provides for it, there is no law at present guaranteeing 
openness in measures taken by the administration. 
The army, the secret services and the police are under civilian control. In 1996 a start 
was made on reorganising the police at local level to enhance its effectiveness. The 
army is under the control of Parliament and the executive. The Prime Minister is 
directly responsible for the activities of the secret services. 
12 
Functioning of the Executive 
Central government works normally and smoothly. 
As Slovenia became independent only recently, the development of local government 
is still under way. The government reform programme provides for the transfer of 
new powers to the municipalities. A law on the reform of local authorities is being 
examined by Parliament. 
To make the administration more effective the Government is planning a 
comprehensive programme to modernise the legal, administrative, financial and 
organisational aspects of public administration and to boost the training of officials. 
The fight against corruption is another prime objective. 
The parliamentary committee responsible for controlling the activities of the police 
has run up against a number of obstacles in carrying out its tasks, notably owing to the 
sometimes fraught relations with the Ministry for the Interior. Nonetheless, control of 
the police's activities and the scope for calling it to account are satisfactory. 
The Judiciary: Structure 
The judiciary is independent of the other branches of government. Judges are 
appointed for life by the National Assembly upon a proposal by the "Judicial 
Council", the body responsible for administering the Bench. It is made up of 11 
members, five of whom are elected by Parliament upon a proposal from the President 
of the Republic while the six others are selected from among sitting judges. The 
judges may only be relieved of their functions by the National Assembly upon a 
proposal by the Judicial Council, if they have committed a crime in carrying out their 
functions, or if they have been sentenced to a term of imprisonment lasting more than 
six months. They enjoy immunity and may not be detained unless Parliament has 
given prior authorisation. In common with the prosecutors, the judges enjoy freedom 
of expression and freedom of association. 
The department of public prosecutions is independent of the legislature and the 
executive. The Prosecutor General is appointed for six years by Parliament upon a 
proposal from the Government. The National Assembly may also dismiss the 
Prosecutor General by a simple majority vote. 
Article 25 of the Constitution enshrines the right to contest the actions taken by the 
administration. However, in practice, the only appellate body is the specialised 
chamber of the Supreme Court which is currently very congested owing to the number 
of cases brought before it, notably since the development of local autonomy. 
Moreover, the procedure before the Court is entirely written and cases are not judged 
during public audience. As a result, the Government has decided to. create a genuine 
administrative jurisdiction comprising four courts whose decisions, taken following a 
13 
public audience, can be contested before the Supreme Court. This Bill is still being 
examined by Parliament. 
In September 1994 Slovenia created the office of ombudsman elected by the National 
Assembly. The ombudsman's task is to examine complaints sent to him. So far he has 
mainly been called on to intervene by persons in prison or in detention centres. 
The Constitutional Court is composed of nine judges appointed by Parliament for a 
non-renewable nine-year term of office upon a proposal from the President of the 
Republic. The Court ensures that laws, decrees and regulatory acts issued by local 
authorities are consistent with the Constitution, international treaties and the general 
principles of international law. It also rules on requests from appellants who feel that 
their fundamental rights enshrined in the Constitution have been violated. Pursuant to 
Article 162 of the Constitution any person who can demonstrate that he or she has a 
case to bring may bring it before the court. The President of the Republic, the 
Government or one-third of the members of the National Assembly may ask the court 
to rule on whether an international treaty to be ratified is consistent with the 
Constitution. 
Functioning of the Judiciary 
The main problems facing the Slovenian judiciary are inefficiency and the amount of 
time it takes to hand down judgments: it can take five years before a civil case is 
brought before the courts. Slovenia lacks judges notably as a result of the relatively 
low level of pay and the statutory requirement that they must be at least 30 years of 
age. This situation should be improved as a result of the programme to equip courts 
with computers and the planned procedural reforms. 
The Constitutional Court plays an important role in the functioning of the institutions 
and democracy in Slovenia. Its case law has helped bolster the establishment of the 
rule of law by giving certain guidelines to other courts in applying the many new 
laws. Since it was created the Court has examined some 1 500 cases, 80% of which 
have been brought by private individuals. Around 5% have been upheld. 
1.2 Human Rights and the Protection of Minorities 
Slovenia has put in place a number of regulations to guarantee the respect of human 
rights and the rights of minorities. These rights can also be underpinned by certain 
international conventions, foremost of which is the European Convention for the 
Protection of Human Rights and its main additional protocols. Taken as a whole, this 
constitutes - pursuant to Article F of the Treaty on European Union - part of the acquis 
any state wishing to join the European Union must first have ratified these texts. 
Slovenia, which has been a member of the Council of Europe since May 1993, ratified 
the European Convention for the Protection of Human Rights and the additional 
14 
protocols in June 1994. Individuals may take their case to the European Court if they 
consider that their rights under this Convention* have been violated. 
V 
Among the other international conventions protecting human rights and minorities, 
Slovenia has ratified the European Convention on the Prevention of Torture, but has 
yet to ratify the Framework Convention on Minorities or sign the European Social 
Charter. It has ratified the key UN conventions in the field of human rights. 
Pursuant to Article 8 of the Constitution, Slovenian laws should be consistent with 
international treaties which have a direct effect on domestic law. 
Civil and Political Rights 
Access to justice is largely guaranteed in Slovenia. A legal aid system applies to the 
criminal courts. The legal security of citizens is hampered only by the length of time 
taken to deliver judgments. 
The death penalty has been abolished and Slovenia ratified Protocol No 6 of the 
European Human Rights Convention in June 1994. 
The right not to be arbitrarily arrested is guaranteed: under Article 20 of the 
Constitution any arrest needs a prior decision of a court. Any person arrested must be 
notified of the reason within 24 hours. The maximum period of detention is three 
months. Article 30 of the Constitution affords any person arrested unjustly the right 
to compensation. 
All citizens aged 18 and over have the right to vote. 
Freedom of association and assembly are guaranteed. The dynamism of the voluntary 
sector, which was allowed to operate even before 1991, is reflected in the existence of 
around 2 000 NGOs in Slovenia. 
Freedom of expression is guaranteed. The press has been privatised and journalists no 
longer encounter obstacles in exercising their profession. In the audio-visual field, the 
public channels (three radio and two television) have private-sector competitors (three 
national television channels and myriad national and local radio stations). Most 
N households can receive foreign radio and TV stations. During election campaigns all 
the political parties are entitled to equal air time on radio and television to put across 
their programme. 
The right of ownership is recognised by the Constitution. However, foreigners are 
still subject to certain limitations, notably as regards ownership of land, which is only 
permitted through inheritance and only where there is reciprocity for Slovenian 
citizens in the country of origin of the foreign national in question (Article 68 of the 
Constitution). 
15 
In its opinion of 5 June 1997, the Constitutional Court confirmed that ratification of 
the Europe Agreement required prior amendment of Article 68 of the Constitution and 
the legal arrangements currently in force. The Government undertook to carry out 
these amendments as soon as possible. 
The process of returning property to persons dispossessed by the Communist regime 
is painfully slow, with only 50% of disputes having been settled and 10% of real 
estate restored to the rightful owner. The Constitutional Court cancelled the 
moratorium decided in December 1995 on the return of properties in excess of 200 
hectares. In order to avoid fresh difficulties occurring in the implementation of this 
legislation and to reduce any uncertainty in the situation as regards property rights, 
Parliament must adopt the necessary rules, and the procedures under way will have to 
be speeded up. This operation will be facilitated by the implementation and 
computerisation of the land registry which is to be carried out in 1998. 
The dispute with Italy on the return of certain property confiscated at the end of the 
Second World War will be settled by the provisions of Annex XIII to the Europe 
Agreement, which also covers the issue of acquisition of real estate in Slovenia by EU 
citizens. 
Respect for privacy is safeguarded by the need for a judge's warrant to be issued prior 
to a house search or telephone tapping. Article 36.4 of the Constitution allows the 
authorities to derogate from this rule in cases of absolute necessity. This procedure 
has not thus far given rise to abuse on the part of the police. 
Slovenia has ratified the Geneva Convention on Refugees and is working on an 
amendment to its domestic legislation to bring it into line with EU rules. There are 
currently around 8 700 refugees from the former Yugoslavia taking advantage of 
temporary protection measures. 
No cases of inhuman and degrading treatment have been reported. 
The Slovenian authorities have not yet settled nationality issues arising from the 
break-up of the former Yugoslavia. Persons residing permanently on Slovenian 
territory and wishing to obtain Slovenian nationality had until 25 December 1991 to 
do so. More than 98% of applicants obtained it. Since then, 16 000 new applications 
have been lodged; 6 000 were accepted and 900 rejected. An issue still to be resolved 
concerns a group of around 5 000 stateless people who for various reasons have 
neither asked for Slovenian nationality nor claimed refugee status. The Government 
will be taking appropriate steps to resolve this problem. 
Economic. Social and Cultural rights 
The right to social security is recognised by the Constitution (Article 50 and Article 
52 for those with no income). 
16 
Freedom to belong to a trade union is guaranteed by Article 76. Four federations 
embrace the vast majority of Slovenians belonging to a trade union. Membership 
stands at around 50%. The right to strike is recognised in Article 77. The law can, 
however, curtail this right if this is in the public interest, taking into account the 
activity of the sector concerned. 
The Constitution also guarantees freedom of education and religion. A dispute has 
arisen between the Government and the Roman Catholic church on the issue of the 
return of property confiscated by the Communist regime. The above-mentioned 
decision of the Constitutional Court should resolve the matter. 
Minority Rights and the Protection of Minorities 
Minorities in Slovenia account for around 8% of the population (2.8% Croats, 2.4% 
Serbs, 1.4% Bosnians, 0.43% Hungarians and 0.16% Italians). Only the Hungarians 
and Italians are recognised as minorities because the other groups are not settled 
permanently in Slovenia. 
The Constitution recognises the rights of minorities. Each group is represented by a 
deputy in the National Assembly who has the power to block the adoption of laws 
which concern the exercise of the specific rights of those communities or their status. 
The minorities have the right to form their own autonomous institutions at local level 
for putting into practice the rights which have been accorded to them in the 
educational, cultural and information fields. The Italian and Hungarian communities 
also have the right to promote their ties with Italy and Hungary. Article 62 of the 
Constitution recognises the right of individuals to use their own language in dealings 
with the administration. 
Article 65 of the Constitution also recognises the special nature of the Roma (gypsy) 
community, which numbers around 7 000 - 10 000 people. A special law on the 
protection of gypsies is currently under scrutiny by the National Assembly and in 
1995 the Slovenian government implemented a programme to strengthen the 
application of their social and political rights. They are represented in the municipal 
councils of the towns in which they live. 
1.3 General Evaluation 
The Slovenian institutions work smoothly, the various authorities being mindful of the 
limits of their powers and of the need for cooperation. The 1992 and 1996 elections 
were free and fair. The opposition fulfills a normal role in the operation of the 
institutions. 
There are no major problems regarding observance of fundamental rights in the 
country. The rights of minorities are guaranteed and protected. Certain improvements 
still need to be made in terms of the working of the judicial system and the restoration 
17 
to the original owners of property expropriated by the Communist regime. Efforts to 
combat corruption need to be more effective. 
Slovenia is a democracy with stable institutions which guarantee the rule of law, 
human rights and respect for, and the protection of, minorities. 
18 
2. Economie Criteria 
In examining the economic situation and prospects of Slovenia, the 
Commission's approach is guided in particular by the conclusions of the 
European Council in Copenhagen in June 1993, which stated that membership of 
the Union requires "the existence of a functioning market economy, as well as 
the capacity to cope with competitive pressure and market forces within the 
Union". 
This chapter of the Opinion therefore gives a concise survey of the economic 
situation and background, followed by a review of Slovenia's progress in key 
areas of economic transformation (liberalisation of the price and trade system, 
stabilisation of the economy, structural change, reform of the financial sector) as 
well as its economic and social development. It concludes with a general 
evaluation of Slovenia in relation to the criteria mentioned by the European 
Council and a review of prospects and priorities for further reform. 
2.1 The Economic Situation 
Slovenia, with a population of 2 million, has a gross domestic product (GDP) of 
ECU 20 billion (expressed in purchasing power parity); its population is about 
0.5 percent of that of the Union, while its economy is only about 0.3 percent. 
GDP per head is about 59 percent of the Union average. The average net monthly 
wage is around ECU 475. 
Slovenia was a founding member of the WTO in 1995, and joined CEFTA in 
1996. 
Progress in Economic Transformation 
Slovenia already started to develop as an industrialised economy while it was 
part of the Habsburg empire, until 1918. It then became part of Yugoslavia, 
which turned communist in 1945. The country adopted a socialist system with 
self-management and social ownership complimentary to central planning and 
state ownership. During the 1980s the imbalances produced by the system 
became apparent: income began to fall and inflation to rise. There was a build-up 
of debt which Slovenia could not easily manage due to lack of access to new 
loans from abroad, and significant transfers to other republics. Some attempts at 
reform were made before independence in 1991, but progress was limited. 
Slovenia had always been the wealthiest and most open of the former Yugoslav 
republics, benefiting from an advantageous geographical location and a 
prosperous past. By 1990, while it only accounted for 9 percent of the Yugoslav 
population, it produced about 16 percent of output and accounted for 27 percent 
of foreign trade. In 1991 Slovenia achieved independence and began to transform 
19 
the economy. As Slovenia had never been subject to the typical command 
planning, the degree of centralisation was lower than elsewhere in central 
Europe. It was also less dependent on the Soviet Union. However, as in other 
transition economies there were a number of distortions: there were restrictions 
on property rights ard the use of capital; there was excessive emphasis on heavy 
industry; large companies played a dominant role; and a substantial share of trade 
was directed towards communist countries. 
At the beginning of transition, emphasis was put on stabilisation, rather than 
reform. Although trade and some prices were liberalised early on, fiscal reform, 
privatisation and restructuring came later and still have some way to go. 
Small-scale private activity was permitted under Yugoslav law, and state 
ownership was relatively limited. The main form of ownership was "social" 
ownership where management was relatively independent, rather than being 
controlled from the centre, and worker involvement in the running of enterprises 
was strong. Nevertheless, certain distortions associated with command planning 
were evident: a lack of financial discipline leading to lower quality and less 
efficient production and over-employment. Indeed, jobs were guaranteed and 
labour shedding was banned. 
Privatisation and the birth of new enterprises have led to an increase in the role of 
the private sector. Privatisation has focused on socially-owned enterprises, while 
the privatisation of state-owned enterprises still has to be dealt with. 
Foreign Direct Investment 
Foreign direct investment in Slovenia has remained low compared to the size of 
the economy: annual inflows have never surpassed one percent of GDP (source: 
EBRD). The main reasons for this are the small size of the market, the 
preferential treatment of domestic investors during the privatisation process, and 
an incomplete legal framework. In recent years, few completely new inward 
investments were made, and foreign direct investment flows went mainly to 
enterprises which already had existing foreign partnerships. 
Economic Structure 
The role of agriculture, in terms of contributions to output, is very much like in 
the EU; it accounts for about 4 percent of value added. However, it accounts for a 
larger share of employment: around 7 percent. Apart from competitive estates in 
the north-east of the country, efficiency is low and structures are fragmented. 
Most agricultural land had remained in private hands during communism, so 
transition problems were not so pronounced. Slovenia is a net importer of food 
and agricultural products. Subsidies are important, mainly for mountainous 
regions. 
The structure of the economy changed as a result of the break up of the former 
Yugoslavia and CMEA, and the stabilisation programme: industry's share in 
employment and output dropped to 35 percent and 33 percent respectively by 
1993. Industrial production growth has not been consistently strong since then; in 
20 
1996 it virtually stagnated. Industry accounted for 32 percent of GDP in 1995 -
with manufacturing accounting for 28 percent. The main production area is 
manufacture of metal products. However, the industrial structure is relatively 
flat- there is less specialisation than might be expected of a small, open 
economy. The most dynamic areas in 1995 where the manufacture of transport 
and electrical equipment, while in 1996 the most dynamic were textiles and food 
processing. 
The relative importance of services as a whole has increased, partly because 
industry contracted but also because tourism has expanded. This has been a 
major growth area. 
There is evidence on the existence of a significant shadow economy in Slovenia. 
The most visual indication of this is the extent of undeclared employment: while 
recorded unemployment is over 14 percent, according to the labour market 
survey (using ILO methodology) actual unemployment is only around 7 percent. 
The notable growth of undeclared employment in temporary or contract work or 
as family workers is mainly due to high non-wage labour costs. 
Main indicators of economic structure 
(all data for 1996 unless otherwise indicated) 
Population 
GDP per head 
as % of EU-15 average 
Share of agriculture in: 
gross value added 
employment 
Gross foreign debt/GDP 
Exports of goods & services/GDP 
Stock of foreign direct investment million 
PPS-ECU (1995) 
per cent (1995) 
per cent (1995) 
per cent (1995) 
per cent 
per cent (1995) 
billion ECU 
ECU per head 2.0 
10100 
59 
4.3 
7.1 
22 
55 
0.6 
290 
Source: Commission services, national sources, EBRD 
'' FDI stock converted at end-1996 exchange rate of 1 ECU = $1.25299 
Liberalisation 
Price Regime 
The vast majority of prices have been liberalised, but prices of certain key 
commodities, such as energy, telecommunications and transport, are still 
administered. They form a significant part in household consumption, accounting 
21 
for some 26 percent of the goods and services in the price index basket. Because 
at their current levels administered prices do not necessarily cover the production 
costs, their adjustment over the coming years will contribute to inflation. 
Direct budget subsidies are quite limited, and exist only on certain foodstuffs and 
public services: in total they amount to about 3 percent of the budget. In addition, 
some of the larger enterprises receive support from the Development Fund, 
which was originally set up to provide emergency funding to stabilize enterprises 
that were salvageable or initiate winding-up procedures for those that had no 
realistic prospects of survival. 
Trade Regime 
Trade was liberalised at the outset. Most quantitative restrictions have been 
removed. Some non-tariff barriers remain but the government is committed to 
removing them in sectors such as telecommunications and electrical equipment. 
The weighted average tariff rate applied to most-favoured nations stood at 
10.7 percent in 1996. Most of the international trade is still invoiced in either 
DM or $, rather than in the domestic currency. 
Foreign Exchange Regime 
The currency, the tolar, was introduced in 1991. The government accepted the 
obligations of the IMF Article VIII in 1995, although the currency had been de 
facto convertible for current account purposes from early 1992. At first the 
currency was allowed to float freely, during which time it depreciated heavily. 
As the currency began to stabilize and inflation dropped sharply, the Bank of 
Slovenia adopted a managed float. The aim was to keep the real exchange rate 
stable and bring down inflation in order to protect competitiveness and help 
boost output. The system was also chosen because Slovenia has a small monetary 
base so it is very susceptible to swings in capital inflows. From mid-1992, these 
increased as a result of current account surpluses. These inflows were sterilised, 
at-a considerable cost, to contain money supply growth and hence inflationary 
pressure. The policy seems to have been relatively successful. However, due to 
the costs of sterilisation, the Bank of Slovenia had to gradually restrict capital 
inflows to be able to maintain the chosen policy objectives. 
Liberalisation of capital flows has made slow progress: capital outflows are 
generally subject to authorisation while the capital inflow regime has recently 
become more restrictive. A particular grey area is that of operations in securities. 
Stabilisation of the Economy 
Domestic 
As in other transition economies, there was a fall in output due to the collapse of 
CMEA (Yugoslavia was not a full member, but CMEA still accounted for a 
substantial amount of trade), the break-up of Yugoslavia, and the transformation 
process. In addition, price liberalisation and the release of forced savings 
accumulated under the old system initially led to rapid inflation, and 
22 
unemployment soared as industry shed workers. However, the impact of the 
decline was less dramatic than elsewhere because Slovenia had long-established 
access to western markets, so trade re-orientation was less dramatic, and the 
starting level of output was somewhat higher. 
The recovery began in 1993 and was stimulated largely by favourable economic 
developments in the European export markets. However, rapid GDP growth 
concealed some domestic weaknesses, such as high wage growth and delays in 
structural reforms. Consequently, when economic growth in Europe slowed 
down in 1995, this was immediately reflected in lower economic growth and 
higher unemployment in Slovenia. This process was further reinforced by a 
simultaneous appreciation of the tolar. Since the middle of 1996, the situation 
has begun to improve again. Higher growth in domestic demand, improved 
competitiveness, and the first signs of economic recovery in the EU, resulted in 
an improving growth performance in the second half of the year. Nevertheless, 
GDP growth in 1996 (3.1 percent) remained slightly lower than in 1995. The 
above mentioned positive growth factors should remain present in the near 
future, and an acceleration of growth to 4-5 percent can be expected. 
On the fiscal side, Slovenia benefited from the break-up of Yugoslavia because it 
had been a net contributor to the federal budget. While tax revenues were 
maintained, the transfers to the other republics decreased, so the budget has, until 
now, remained approximately in equilibrium. However, deficits in the pension 
system, higher social security expenditure, reduced customs revenues as a 
consequence of European integration, and a rising public wage bill, could result 
in a deterioration of the fiscal balance in the near future if reforms are not 
implemented. Given the tight monetary policy framework, a significant 
government deficit would crowd out private investment. 
23 
Main economic trends 
Real GDP growth rate per cent 
Inflation rate 
annual average per cent 
December on December percent 
Unemployment rate, end-year per cent 
ILO definition 
General government budget 
balance per cent of GDP 
Current account balance per cent of GDP 
Debt/export ratio per cent 
Foreign direct investment inflow per cent of GDP 1994 
5.3 
19.8 
19.5 
9 
-0.2 
3.7 
26.5 
0.9 1995 
3.9 
12.6 
8.9 
7.4 
0.0 
-0.2 
29.0 
0.9 1996 
3.1 
9.7 
9.1 
7.3 
0.1 
0.3 
38.2 
0.8 
Source: Commission services, national sources, EBRD 
External 
In June 1995, the question of the unresolved allocation of ex-Yugoslavia's 
foreign debt, was settled as Slovenia took on a share of ex-Yugoslav liabilities. 
Even with this additional debt, the overall debt level remains modest: gross debt 
at then end of 1996 was ECU 3.2 billion, which is fully covered by gross 
reserves of ECU 3.3 billion. 
The economic fortunes of Slovenia are very tied in with its external performance, 
which in turn is dependent on its ability to remain competitive. Exports of goods 
and services account for some 55 percent of GDP, and although there is a trade 
deficit, the receipts from tourism kept the current account in surplus, with the 
exception of 1995 when a small deficit was recorded. As a result, the country's 
foreign exchange reserves have increased steadily, having been non-existent at 
the beginning of transition. 
Structural Change 
Foreign Trade 
Trade with the EU has always been relatively significant, but has increased since 
independence: almost 65 percent of all trade went to the EU in 1996. The most 
important trading partners are Germany, Italy and France. After a sharp fall in the 
first years of transition, the share of trade with the other countries of former 
Yugoslavia is now increasing again, as a result of the stabilisation in the region. 
The importance of CEFTA countries in Slovenia's trade has also been increasing 
24 
after Slovenia became a member, while the shares of Russia and the rest of 
former Soviet Union have been falling. Trade re-orientation has therefore largely 
taken place. 
The commodity composition of exports and imports has not changed 
significantly as a result of transition. Consumer goods are the most significant 
export category, while investment and intermediate goods dominate imports. 
Merchandise trade is highly concentrated: 83 percent of exports and 67 percent 
of imports are manufactured goods or machinery. Within this, machinery and 
transport equipment alone account for one third of total exports! 
Slovenia has the competitive advantages of low wages compared to the EU, and 
highly skilled workers. To remain competitive, given the rising wages, quality 
and productivity improvements are increasingly important. More foreign direct 
investment will be needed to provide the necessary capital and know-how. 
Labour Market 
In Slovenia, labour costs are relatively high for a transition economy and the 
labour market is quite inflexible. The main reasons are that (i) the payroll is the 
main source of tax revenue, so labour, as opposed to profits and consumption, 
bears a disproportionate share of the tax burden; (ii) there is a rigid system of 
collective and social agreements; (iii) the levels of redundancy payments are very 
high; (iv) strong links between workers and management exist - both under the 
old regime and since the management/employee buy-outs during privatisation -
which have hampered labour market adjustment by allowing rapid wage growth 
and the persistence of over-staffing in certain areas. 
Under the previous regime lay-offs were actually banned. In 1988-89 legislation 
was passed to make lay-offs possible. However, the cost of the obligatory 
compensation that had to be paid to redundant workers was prohibitive. The 
government has sought to reduce these, but there is some way to go yet. Social 
security contributions have also been reduced but total labour costs remain 50-60 
percent higher than the average gross wage. 
Statistics show that employment in socially-owned enterprises fell dramatically 
in the early 1990s. However, this includes a large number of workers transferred 
to private subsidiaries, suggesting that working practices may not have changed 
that significantly. Despite the decline of industry and the increased importance of 
smaller firms, employment is still dominated by large-scale heavy industry. 
The wage distribution in Slovenia is quite flat. This is partly due to an egalitarian 
tradition reinforced by a long history of worker management. This has led to 
relatively high wages - which are indexed anyway - at the expense of profits, and 
to high employment. Real wages actually increased in 1992 and 1993, despite the 
decline in GDP; this put extreme pressure on competitiveness, and forced some 
wage capping. The first Social Agreement between employers, the government 
and the unions, intended to contain wage growth, was signed in 1994. As the 
pressure on wages remained strong subsequently, follow-up agreements were 
signed in 1995 and 1996. The Social Agreements have had only limited 
25 
restraining effects: real wage growth in 1996 was still at 5 percent, well above 
the intended 1.5 percent under the Agreement. 
The minimum wage is fairly generous, and under current rules it will remain so 
as it is indexed to inflation every quarter: in June 1996 it stood at 53,500 tolar 
(42 percent of the average commercial sector wage). 
Public Finances 
As Slovenia was paying significant transfers to the other republics in Yugoslavia, 
the budgetary position improved with independence in 1991. Nevertheless a 
substantial amount of reform was necessary to support the new role of 
government - in a market economy and following independence. Most of this has 
already taken place. 
On the revenue side, in 1993, personal income and corporate profits taxes were 
introduced. However, value-added tax has not yet been introduced - and is now 
expected to be in place only in 1999. Recently, the tax pressure on labour has 
been lowered by a reduction of social security contributions by employers. 
However, this reduction has not yet been fully compensated by other measures, 
so that the budget is expected to record a significant deficit in 1997. 
On the expenditure side, the share of transfers to enterprises and households has 
fallen. Meanwhile the social security system has been reformed to provide a 
social safety net. However, the pension and unemployment funds are running 
ever higher deficits, which are being covered by the state budget. They will 
therefore need further reform to make them financially sustainable. 
In addition to central and local government spending, there are a number of 
extra-budgetary funds. The most important of these are the health and pension 
funds, but there is a growing number of smaller funds. At present they do not 
operate under a unified legal framework, which reduces fiscal transparency and 
could put the overall budget position at risk. 
EnterpriseSector: Privatisation and Enterprise Restructuring 
The existence of private enterprises has been possible since 1988. Entry into the 
market was not exclusively dictated by the state and market prices prevailed in 
many areas. However, a significant amount of privatisation and measures to 
boost the development of small and medium-sized firms were needed. The 
private sector currently accounts for only 50-55 percent of output and 
employment. 
Under the previous regime, the system of socially-owned enterprises and worker 
management meant that the distinction between owners, managers and workers 
was not clear: in most enterprises managers were appointed by the employees. In 
larger enterprises, the authorities nominated them. The problems of self-interest 
led to wage escalation, over-employment and under-investment. Loss-making 
enterprises survived not so much because of government subsidies but because 
26 
they accumulated arrears to other enterprises, and they had easy access to bank 
loans - which in turn undermined the health of the banking sector. 
Since mid-1993 the authorities have given priority to the financial restructuring 
of socially-owned enterprises. This was mainly done through the Development 
Fund. The task of the development fund is to restructure, sell or close industrial 
enterprises that could not be privatised. More recently, the fund is supporting 
some of the larger enterprises that are still loss-making. The main problem faced 
by the fund is the limited financial resources available for its operations. Another 
primary objective of the government has been to encourage private sector 
development through legal reforms and the introduction of a regulatory 
framework adapted to the market economy. 
Privatisation of the socially-owned enterprises progressed rather slowly until late 
in 1994, but is expected to be completed by the end of 1997. All citizens of 
Slovenia were given free non-transferable certificates in 1994 (equivalent to 
40 percent of the total social capital of all the enterprises), which they can use to 
buy shares in companies or in investment trusts. The government, eager to speed 
up privatisation, granted the Privatisation Agency control over the privatisation 
of every company which has not yet started work on privatisation plans. One 
remaining problem will be the "privatisation gap", which is caused by the fact 
that the value of the issued vouchers exceeds the value* of the assets to be 
privatised by about one third. There is" currently no decision on which of the 
remaining state assets will be privatised against vouchers to bridge the gap. 
State-owned enterprises (utilities and other monopolies) continue to represent an 
important part of the enterprise sector. In 1995, they still represented more than 
30% of the assets of all larger enterprises (having more than ten employees and 
surpassing certain thresholds on assets and revenues). Their statutory regulations 
remain unclear, and there is a lack of effective monitoring and control structures. 
The current enterprise structure has not developed much since independence: the 
system is still dominated by some large firms. In 1995, small enterprises (0-50 
employees) accounted for 8 percent of manufacturing output while the larger 
enterprises (251+ employees) accounted for 69 percent. Large firms also 
understandably dominate in exports: they accounted for 76 percent of 
manufacturing exports in 1995. 
Foreign investment has been slow to develop in Slovenia, compared to the size of 
the economy. This is largely due to two factors. Firstly, privatisation progressed 
slowly. Secondly, management and employee buy-outs were common, which 
made it harder for outsiders to gain access to shares - in fact, by end-1995, in 
78 percent of the companies that had completed privatisation, its employees held 
60 percent or more of the shares. These are the smaller companies. Employees 
could not afford to buy up the larger firms, so there is more foreign participation 
in these. Where there is foreign investment, profitability has generally improved. 
Further restructuring of firms is needed to reduce the drain on public resources, 
including on the Development Fund, and to prevent crowding-out of profitable 
27 
firms. Changes have been slow in coming because of the links between banks 
and the possibility of running up inter-enterprise arrears. In addition, the amount 
of new investment has been limited by high interest rates, which makes that the 
returns on capital are low. 
Financial Sector 
The Bank of Slovenia is responsible for monetary and exchange rate policy. It 
was created in 1991 as an independent authority to maintain national currency 
stability. It targets the money supply, and controls it through the use of indirect 
instruments, such as open market operations, required reserves and refinancing 
credits. It has been relatively successful in achieving price stability. However, its 
task is made difficult by the extent of indexation in the economy, most 
importantly of interest rates and wages. 
The banking sector was quite decentralised under the previous regime and there 
was a substantial bad loans problem. Initially, in the early 1990s, loan portfolios 
deteriorated due to poor enterprise performance leading to a loss of bank assets. 
Although the bank rehabilitation programme is now coming to an end, 
competition is still lacking and banks still have high operational cost levels. Most 
banks in Slovenia are small and maintain high reserves in conformity with the 
central bank's requirements. The two largest banks are state-owned. In addition, 
there is an interest rate arrangement between the banks which sets the maximum 
rates on deposits. This cartel has been approved by the Bank of Slovenia and the 
anti-monopoly office. It is not compatible with a market-oriented financial 
system. Abolishing the interest rate cartel, combined with the privatisation of the 
remaining state banks and a higher foreign involvement in the sector, would 
force the banks to restructure and increase their competitiveness. 
All banks meet the international capital adequacy requirement and the 
performance of the banking sector has been improving in the recent period. 
Overall, the profitability of the sector has improved as a result of increased bank 
earnings and control of costs. Nevertheless, because of the too small scale of the 
banks, costs remain high by international comparison. 
The development of the financial sector, e.g., the money and capital markets, also 
suffers from the anachronistic payments system inherited from the former 
Yugoslavia. Although the appropriate legislation has been adopted, the markets 
are dominated by the main banks and only a limited number of financial 
instruments are available, so the sector has not deepened. The stock exchange is 
technologically advanced, but it is small and does not contribute much to the 
financial markets. The slow start to privatisation has had a part to play in this. 
The recent introduction of restrictions on portfolio capital inflows has 
significantly reduced the trading volumes on the stock exchange. 
The interbank market is the only organised part of the money market. 
Commercial banks, enterprises, some state-owned funds, insurance companies 
and the government all participate. 
28 
Economic and Social Development 
Social Indicators 
Slovenia is a small country with a population of two million. The population has 
remained very stable over the past decade. 
The workforce is skilled and fairly well educated - in particular the younger 
generations. The share of employed who have received secondary education is 
relatively high at 60 percent (1995). In addition, there is a significant amoimt of 
training, both on-the-job and otherwise: the authorities estimate that some 
30 percent of those employed receive training. 
Life expectancy, which was reduced as a result of transition, is currently only 
slightly below the EU average and rising again: women's life expectancy was 
77.4 years and men's was 69.6 in 1994. 
Regional and Sectoral Differences 
In recent years the level of urbanisation has increased with industrialisation, 
however, it remains relatively low: in 1995, 50 percent of the population lived in 
cities. 
2.2 The Economy in the Perspective of Membership 
Introduction 
The European Council in Copenhagen in 1993 defined the conditions that the 
associated countries in central and eastern Europe need to satisfy for accession. 
The economic criteria are: 
• the existence of a functioning market economy; 
• the capacity to cope with competitive pressure and market forces within the 
Union. 
These criteria are linked. Firstly, a functioning market economy will be better 
able to cope with competitive pressure. Secondly, in the context of membership 
of the Union, the functioning market is the internal market. Without integration 
into the internal market, EU membership would lose its economic meaning, both 
for Slovenia and for its partners. 
The adoption of the acquis, and in particular the internal market acquis, is 
therefore essential for a candidate country, which must commit itself 
permanently to the economic obligations of membership. This irreversible 
commitment is needed to provide the certainty that every part of the enlarged EU 
market will continue to operate by common rules. 
29 
The capacity to take on the acquis has several dimensions. On the one hand, 
Slovenia needs to be capable of taking on the economic obligations of 
membership, in such a way that the single market functions smoothly and fairly. 
On the other hand, Slovenia's capacity to benefit fully from the competitive 
pressures of the internal market requires that the underlying economic 
environment be favourable, and that the Slovenian economy have flexibility and 
a sufficient level of human and physical capital, especially infrastructure. In their 
absence, competitive pressures are likely to be considered too intense by some 
sections of society, and there will be a call for protective measures, which, if 
implemented, would undermine the single market. 
The capacity and determination of a candidate country to adopt and implement 
the acquis will be crucial, since the costs and benefits of doing so may be 
unevenly spread across time, industries and social groups. The existence of a 
broad based consensus about the nature of the changes to economic policy which 
membership of the Union requires, and a sustained record of implementation of 
economic reforms in the face of interest group pressure reduce the risk that a 
country will be unable to maintain its commitment to the economic obligations 
of membership. 
At the level of the public authorities, Membership of the Union requires the 
administrative and legal capacity to transpose and implement the wide range of 
technical legislation needed to remove obstacles to freedom of movement within 
the Union and so ensure the working of the single market. These aspects are 
examined in later chapters. At the level of individual firms, the impact on their 
competitiveness of adopting the acquis depends on their capacity to adapt to the 
new economic environment. 
The Existence of a Functioning Market Economy 
The existence of a market economy requires that equilibrium between supply and 
demand is established by the free interplay of market forces. A market economy 
is functioning when the legal system, including the regulation of property rights, 
is in place and can be enforced. The performance of a market economy is 
facilitated and improved by macroeconomic stability and a degree of consensus 
about the essentials of economic policy. A well-developed financial sector and an 
absence of significant barriers to market entry and exit help to improve the 
efficiency with which an economy works. 
Slovenia began the transition process from a favourable starting point: it was a 
relatively wealthy country with some good infrastructure, a history of 
decentralised decision-making and established links with the West. It had 
industrialised before becoming communist and it never adopted command 
planning; private ownership began to develop before independence. 
The framework for a market economy is largely in place. Macroeconomic 
stabilisation has been largely achieved: inflation is in single digits, the budget 
and the current account are approximately in equilibrium, the currency is stable, 
and economic growth resumed in 1993. Trade, most prices and the foreign 
30 
exchange regime have been liberalised, private ownership has been extended, 
legislation appropriate to a market economy is being passed and property rights 
are enforced. Good progress in the implementation of the Europe Agreement 
should help to consolidate the functioning of the market economy. 
However, the extent of competition and the degree to which the market 
mechanisms work still need some improvement: for example, licensing 
procedures are still very formal, bankruptcy procedures are slow, and a cartel 
operates in the banking sector. The high degree of indexation in the economy 
also introduces a significant amount of inertia into the system. ' 
Reform of public finances is also still necessary. In particular, VAT has to be 
introduced and the tax burden on labour reduced. Social transfers and public 
wages represent an increasing burden on government expenditure which should 
be reduced. The most important and the most difficult issue is pensions. Public 
expenditure on pensions is taking an increasing share of GDP and an increasing 
amount comes from the central budget. Measures to assure the short-term 
sustainability of the system will have to be accompanied by more structural 
reforms. 
A strong and stable financial sector is an essential element of a functioning 
market economy. Although the banking system has a long tradition of 
decentralisation, and regulation appears effective, the system is still 
underdeveloped and needs to mature. Interest rate spreads, i.e. the difference 
between rates on loans and on deposits, are high because many of the banks are 
too small, and because operating costs are high. In general, the sector lacks 
competitive pressures to enforce higher competitiveness. As a result, the banking 
sector is not able to perform its role as a financial intermediary: savings are not 
being efficiently channelled to productive investment. Nevertheless, the financial 
sector is certainly sufficiently developed not to hinder the normal functioning of 
the economy. 
The Capacity to Cope with Competitive Pressure and Market Forces 
It is difficult, some years ahead of prospective membership, and before Slovenia 
has adopted and implemented the larger part of Community law, to form a 
definitive judgement of the country's ability to fulfil this criterion. Nevertheless, 
it is possible to identify a number of features of Slovenia's development which 
provide some indication of its probable capacity to cope with competitive 
pressure and market forces within the Union. 
This requires a stable macroeconomic framework within which individual 
economic agents can make decisions in a climate of a reasonable degree of 
predictability. There must be a sufficient amount of human and physical capital 
including infrastructure to provide the background so that individual firms have 
the ability to adapt to face increased competitive pressures in the single market. 
Firms need to invest to improve their efficiency, so that they can both compete at 
home and take advantage of economies of scale which flow from access to the 
single market. This capacity to adapt will be greater, the more firms have access 
31 
to investment finance, the better the quality of their workforce, and the more 
successful they are at innovation. 
Moreover, an economy will be better able to take on the obligations of 
membership the higher the degree of economic integration it achieves with the 
Union ahead of accession. The more integrated a country already is with the 
Union, the less the further restructuring implied by membership. The level of 
economic integration is related to both the range and volume of goods traded 
with member states. Direct benefits from access to the single market may also be 
greater in sectors where there is a sizeable proportion of small firms, since these 
are relatively more affected by impediments to trade. 
Slovenia is potentially quite capable of coping with the competitive pressure and 
market forces within the Union. The stabilisation of the macroeconomic 
environment is well advanced, infrastructure is well developed, and significant 
progress has been made in reorienting the education and training system in order 
to support competitiveness. Although it has traditionally had relatively high 
labour costs, the economy was able to export successfully because production 
was of relatively good quality, and unit labour costs were still low relative to the 
EU. However, the level of competitiveness has been reduced by rapid wage 
growth and the real appreciation of the currency. Competition from other 
transition economies', where labour costs are even lower, has been increasing. 
Although productivity gains have taken place, the slow pace of improvement in 
competitiveness is hampering the expansion of economic activity. 
The high degree of integration with the Union - about two thirds of total export 
and import flows are with the EU - suggests that competitiveness remains quite 
high. In addition, a more detailed breakdown of exports of goods shows that 
although transport and electrical equipment account for 25 percent of exports, 
Slovenia successfully exports a relatively wide range of products, which 
indicates the general ability of the Slovenian economy to compete in the single 
market. Moreover, the current widespread involvement in trade with the EU 
reduces the vulnerability of the economy to the full integration in the single 
market and the adoption of the acquis even if some sector would prove to be 
unable to withstand the competition within the single market after accession, the 
diversification of exports would leave the economy relatively unharmed. 
Other evidence on the ability of the economy to adjust to greater competition 
relates to the structure of ownership and production: the evidence is mixed. At 
present the industrial structure is not very concentrated and Slovenia produces 
some high tech goods, which together suggest that adjustment could be quite 
smooth. In addition, the number of private and smaller firms has increased. 
However, production and employment are still dominated by enterprises where 
management practices have not changed. A large proportion of medium-sized 
firms are owned by the management and workers, whose incentives to 
restructure, in particular through changes in working practices, are weak. In 
addition, in such enterprises, access to new capital and technology, which could 
facilitate restructuring, is relatively limited compared to foreign-owned firms. 
State-owned enterprises still represent an important part of production. The lack 
32 
of effective monitoring and control structures on these enterprises is not 
beneficial for their restructuring. 
Investment is relatively low as a percentage of GDP and to date has largely been 
in infrastructure (telecommunications and transport links) and the energy sector. 
A significant proportion has gone to "non-productive" assets (e.g., land, 
buildings). This has understandably not produced immediate improvements in 
productivity performance, however it lays the basis for future gains. Although 
basic scientific research is at a high level, there is not enough investment in 
enterprise-based and applied research. At present the private sector accounts for 
only around 25 per cent of investment. The amount of foreign direct investment 
in Slovenia is also generally low, compared to the size of the economy. This is 
likely to be acting as a brake on restructuring, especially given that the firms with 
foreign investment are the most successful in terms of exports, returns on equity, 
and labour costs. The links between enterprises and their banks are often strong 
so that the latter find it hard to exert sufficient financial discipline on the former. 
Agriculture is dominated by small dispersed individual farms. Technology, 
productivity and efficiency are all low, so there is still a significant need for 
adjustment, which could lead to lower employment in the sector. 
The authorities are aware that the legal system still needs to be adapted further, 
and EU standards need to be adopted if Slovenia is to cope with competition 
within the Union. This will require a substantial input from the public 
administration, which needs to be strengthened in terms of coordination and 
implementation. In addition, the authorities have identified the need to clearly 
separate the legislative and executive branches of power to give government a 
clearer role and facilitate policy implementation. 
Although the banking sector is relatively well-developed, it is not competitive: 
operating costs are high, and there is a lack of competition in setting interest rates 
because of a cartel agreement. Because the number of banks is too high for the 
size and the economic needs of the country, the sector will need to consolidate. 
The Slovenian authorities are devoting considerable resources to developing a 
consistent medium-term macro- and microeconomic framework, within which 
the necessary economic reforms to prepare for EU membership can be identified 
more easily and executed more smoothly. 
Prospects and Priorities 
The Slovenian authorities have adopted two medium term strategies: one for 
economic policy as a whole, and one for international policy specifically. The 
problems facing the economy have been clearly identified in the government's 
medium-term strategy, but this has yet to be implemented. The focus for policy 
has shifted from macroeconomic stabilisation to micro-economic and structural 
adjustment. The aim is to boost competitiveness and revitalize the economy. The 
details of policy - e.g., financing, timing are being worked out. 
33 
Slovenia's strengths and weaknesses stem largely from the fact it is a small open 
economy which is relatively wealthy, and which has a strong consensual culture. 
Slovenia has made substantial progress in achieving macroeconomic stability: 
inflation is in single digits, the budget deficit is low, the currency is stable and 
growth resumed in 1993. Progress on structural reform, on the other hand, has 
been much less rapid. The system lacks some dynamism, and has a weak record 
on restructuring and investment. As a result of this, growth remains relatively 
low, while inflationary pressures persist. Expansion is likely to be hampered to 
some extent in the short term by the need to reform public finances further. For 
growth to begin accelerating again, competitiveness and export performance 
need to improve. 
Progress in structural change has been relatively slow because the call for reform 
was less strong than elsewhere. Firstly, the economy was relatively wealthy, and 
still is. Secondly, the industrial decline after independence was less severe than 
elsewhere. Restructuring has been limited in part because of the method and 
speed of privatisation, which did not bring in new capital or new management. 
This helps explain why investment in technology and research and development 
at the enterprise level have been limited. Another factor is the high interest rates 
which discourage investment. 
Inflationary pressure is strong. The necessary further liberalisation of prices for 
some key commodities will continue to put upward pressure on the price level. 
Additionally, inflation is fuelled by the indexation of wages and interest rates. To 
control inflation the degree of indexation needs to be reduced. 
Competitiveness has been affected by the lack of investment in modern 
technology, the lack of restructuring and rising unit labour costs. The chosen 
method of privatisation, which favours incumbent managers and workers, does 
not encourage foreign investor participation or bring in much new capital. In 
many cases, it has not even resulted in substantially new work practices or 
restructuring. Domestic investment has been stronger in the social sector than in 
private sector, where it has been relatively limited because of high real interest 
rates and poor access to loans. As regards wages, the Social Agreements of 
1994-96 did go some way to steadying rises but only had limited success - real 
wage growth continued above productivity growth and above the targets set by 
the agreements. The need to contain wage growth is increasing but there has been 
no concerted attempt to deal with the main problem of indexation in the system. 
The government has reduced non-wage labour costs, but they remain very high 
and budgetary constraints may make further reductions more difficult. 
Slovenia still has to reform part of its public finances. At present the burden of 
social security contributions on labour is disproportionate and there is no VAT. 
Both of these issues will need to be addressed. VAT is now due to be introduced 
in 1999, which is considerably later than originally scheduled. The other 
challenge is to reform the pension and unemployment funds. Until recently these 
were self-financing. However, because of lower social contribution rates and 
demographic changes, which are going to worsen rather than improve, they have 
34 
gone into deficit. To date the state budget has financed the deficit but there is a 
limit to how long this can go on. 
Public administration has been reformed to a significant extent; however, the 
authorities still rightly feel the need to improve policy-making and 
implementation. At present there is a lack of co-ordination in those areas of 
policy where more than one ministry is involved. 
2.3 General Evaluation 
Slovenia can be regarded as a functioning market economy. It has advanced 
considerably in liberalisation and privatisation, and achieved a successful stabilisation 
of the economy. However, there is a lack of competition in some sectors, in particular 
the financial sector, the working of the market mechanisms still needs some 
improvement, and the necessary reforms of the fiscal and social security systems are 
not yet completed. 
Slovenia should be able to cope with competitive pressure and market forces within 
the Union in the medium term, provided that rigidities in the economy are reduced. It 
has a diverse export base, the workforce is skilled and highly trained, and 
infrastructure is relatively good. However, enterprise restructuring has been slow due 
to the consensual character of economic decision-making, and the incentives of 
workers and managers to preserve the status quo. Improvements in competitiveness 
have been hampered by rapid wage growth combined with low productivity growth. 
The low level of foreign direct investment reflects these structural problems, which 
need to be tackled. 
35 
3. Ability to Assume the Obligation of Membership 
The European Council in Copenhagen included among the criteria for accession "the 
ability to take on the obligations of membership, including adherence to the aims of 
political, economic and monetary union". 
In applying for membership on the basis of the Treaty, Slovenia has accepted without 
reserve the basic aims of the Umon, including its policies and instruments. This 
chapter examines Slovenia's capacity to assume the obligations of membership - that 
is, the legal and institutional framework, known as the acquis, by means of which the 
Union puts into effect its objectives. 
With the development of the Union, the acquis has become progressively more 
onerous, and presents a greater challenge for future accessions than was the case in the 
past. The ability of Slovenia to implement the acquis will be central to its capacity to 
function successfully within the Union. 
The following sections examine, for each main field of the Union's activity, the 
current and prospective situation of Slovenia. The starting-point of the description and 
analysis is a brief summary of the acquis, with a mention of the provisions of the 
Europe Agreement and the White Paper, where they are relevant. Finally, for each 
field of activity there is a brief assessment of Slovenia's ability to assume the 
obligations of membership on a medium-term horizon. 
3.1 Internal Market Without Frontiers 
Article 7a of the Treaty defines the Union's internal market as an area without internal 
frontiers in which the free movement of goods, persons, services and capital is 
ensured. This internal market, central to the integration process, is based on an open-
market economy in which competition and economic and social cohesion must play a 
full part. 
Effective implementation of the liberties enshrined in the Treaty requires not only 
compliance with such important principles as, for example, non-discrimination or 
mutual recognition of national regulations - as clarified by Court of Justice rulings -
but also concomitant, effective application of a series of common specific provisions. 
These are designed, in particular, to provide safety, public health, environmental and 
consumer protection, public confidence in the services sector, appropriately qualified 
persons to practise certain specialist occupations and, where necessary, introduction or 
coordination of regulatory and monitoring mechanisms; all systematic checks and 
inspections necessary to ensure correct application of the rules are carried out on the 
market, not at frontier crossings. 
It is important io incorporate Community legislation into national legislation 
effectively, but even more important to implement it properly in the field, via the 
appropriate administrative and judicial structures set up in the Member States and 
36 
respected by companies. This is an essential precondition for creating the mutual trust 
indispensable for smooth operation of the internal market. 
This chapter must be read in conjunction with, inter alia, the chapters on social policy, 
the environment, consumer protection and sectoral policies. 
The Four Freedoms 
A step-by-step approach is being taken to absorption of the acquis by the candidate 
countries: 
- The Association Agreement between the Community, its Member States and 
Slovenia was signed in 1996 and is being ratified. With regard to the four freedoms 
and approximation of legislation, the Agreement provides, in particular, for immediate 
or gradual application of a number of obligations, some of them reciprocal, covering, 
in particular, freedom of establishment, national treatment, free trade, intellectual 
property and public procurement. 
- preceding the entry into effect of the Europe Agreement, the Interim Agreement 
provides for the implementation of the trade and trade-related aspects as stipulated 
under the Europe Agreement with effect from 1 January 1997. 
- The Commission's 1995 White Paper (COM (95) 163 final), guidelines, intended 
to help the candidate countries prepare for integration into the internal market, gives a 
closer definition of the legislation concerned. It identifies the "key measures" with a 
direct effect on the free movement of goods, services, capital and persons and outlines 
the conditions necessary in order to operate the legislation, including the legal and 
organisational structures. Twenty-three areas of Community activity are examined, 
dividing the measures into two stages, in order of priority, to provide a work 
programme for the pre-accession phase. The Technical Assistance and Information 
Exchange Office (TAIEX) was set up with the objective of providing complementary 
and focused technical assistance in the areas of legislation covered in the White Paper. 
A legislative database has recently been established by the Office. 
- The candidate countries will have to transpose and implement all the acquis The 
"Action plan for the single market" submitted to the Amsterdam European Council 
gives details of the priority measures necessary to make the single market work better 
between the Fifteen in preparation for introduction of the single currency. This will 
inevitably entail changes to the acquis. 
General Framework 
Whatever their field of activity, undertakings must be able to operate on the basis of 
common rules. These are important since they shape the general framework within 
which economies operate and, hence, the general conditions of competition. They 
include the rules on competition (on undertakings and State aid) and tax measures 
discussed elsewhere in this Opinion, the opening-up of public works, supply and 
37 
service contracts, harmonisation of the rules on intellectual property (including the 
European patent), harmonisation of the rules on company law and accountancy, 
protection of personal data, transfer of proceedings and recognition of judgments 
(Article 220 Conventions). 
Descriptive Summary 
Public procurement is regulated by a 1997 framework law, which is intended to 
implement part of the EC requirements as a first step. Implementing decrees are in the 
process of being adopted by the Government. A Public Procurement Unit under the 
Ministry of Finance is in charge of monitoring the public procurement system, 
preparing new legislation and issuing instructions. According to this law an 
independent Audit Committee will be appointed by Parliament to rule on all requests 
for audit of decisions. 
Based on the Law on Industrial Property (1992-93) and on the Law on Intellectual 
Property (1992-93), intellectual and industrial property legislation in Slovenia is well 
developed. The Intellectual Property Office is in charge of monitoring legislation in 
the intellectual and industrial property field and coordinating enforcement in 
cooperation with customs, police and the Trade Inspectorate. The TRIPS Agreement is 
applicable to Slovenia. 
Company law is governed by the 1993 Law on Commercial Companies. Currently, 
48,000 companies of various types are registered. Companies can issue shares to raise 
finance, and shareholders are protected in this event. Minimum capital requirements 
are laid down by law. There are safeguard clauses' for the protection of authorised 
capital. Different obligations exist for the protection of creditors depending on the type 
of company. Companies are required to publicise information about major decisions 
affecting them. There is a register of companies in which all the essential information 
regarding each company is kept. Articles 246(5) and 449(6) of the Law on 
Commercial Companies stipulate that the majority of directors of joint stock and 
limited liability companies have to be citizens of Slovenia. There are also provisions 
restricting the operation of foreign firms in Slovenia through branches, thereby 
limiting the freedom of establishment (Arts. 561 to 568). 
The accounting field is regulated by Chapter 7 of the Law on Commercial Companies 
(1993). There is a Law on Audit (1993). The Slovenian Institute of Auditors is 
authorised to adopt accounting standards and to issue certificates to auditors. 
Article 38 of the Slovenian Constitution provides for the protection of personal data. 
Based on that article, the law of 7 March 1990 establishes the institutional framework 
for the protection of data, including a supervisory authority. Slovenia acceded in May 
1994 to the Council of Europe Convention No 108 on data protection. 
Current and Prospective Assessment 
The new Slovene legislation on public procurement only incorporates part of the scope 
of the EC directives. Rules on selection and award criteria will need to be clarified. 
38 
The system of legal remedies is not fully compatible with the EC requirements. 
Furthermore, utilities sectors do not seem to be covered. 
At present, Slovene firms including Slovene subsidiaries of EU firms), obtain 
preferential treatment as regards the award of public procurement contracts. This 
system of preferences could be maintained only up to the end of the transition period 
allowed by the Europe Agreement (i.e. 6 years after entry into force). Complete 
harmonisation in the field of public procurement is expected to be achieved by the end 
of 1999. Slovenia's authorities recognise that changes to the draft law will most 
certainly be needed to meej: EC requirements. 
Intellectual and industrial property legislation is with minor exceptions compatible 
with the acquis communautaire. Aspects remaining to be harmonised include the 
duration of the protection of audiovisual productions and the introduction of 
Supplementary Protection Certificates. As regards the implementation of legislation, 
in particular in the pharmaceutical sector, the exhaustion of trade marks still needs to 
be addressed. 
It is further intended to address provisional measures and the preservation of evidence 
in infringement procedures and border measures by amending existing legislation in 
1999. In practice, the administrative structures are not fully equipped, especially as 
regards their staffing levels and training, to enforce legislation adequately. 
According to the information on company law provided by Slovenia, its legislation is 
already in line with the First, Third, Eleventh and Twelfth Directives, and it is 
understood that the one remaining derogation from the Second Directive and also the 
restrictions against foreign directors and foreign firms are likely to be abolished in 
1997. 
With regard to accounting, nearly all requirements in the 4th, 7th and 8th Directives 
appear to have been implemented. One change in the Law on Audit is planned, to 
allow an audit to be conducted by a self-employed auditor, not only by an auditing 
firm. Certain transitional problems are in evidence relating to the implementation in 
practice of the new rules, including a shortage of qualified accountants and auditors, 
but these can be solved in the medium term. 
The accession of Slovenia to Council of Europe Convention No 108 indicates that 
Slovenian legislation on data protection is in line with European standards as laid 
down in that Convention. Moreover, an authority competent to supervise the 
implementation of the legislation has already been established, the powers of which 
are clearly laid down in the Law. Nevertheless, Slovene legislation is not yet fully in 
line with the EC framework Directive. A new law is expected. Implementation and 
enforcement also need to be strengthened. 
In the field of civil law it should be noted that the Convention of Lugano on 
jurisdiction and the enforcement of decisions in civil and commercial matters is not, 
for the time being, open to Slovenia, which needs to make progress in the area of 
39 
protection of civil interests, subject to the assessment of the states already party to the 
Convention. 
Conclusion 
Slovenia has already largely taken on the most important directives in the sectors 
indicated above. Implementation of the provisions of the Europe Agreement and the 
White Paper's recommendations covering the sectors reviewed has generally been 
good. 
However, further work is required in the area of public procurement, where Slovenia 
will need to make comprehensive amendments to its recently introduced legislation in 
order to reach full alignment with the corresponding EC directives. Regarding 
intellectual property, there is scope for further strengthening implementation 
procedures and enforcement of legislation. In the fields of company law and 
accounting, no problems are foreseen, assuming the legislative timetable proceeds as 
planned, including the repeal of the discriminatory provisions in company law referred 
to above. In the field of data protection, further efforts are required to bring legislation 
fully into line with the EC framework Directive. Implementation and enforcement 
capacities need to be strengthened. This should be possible in the medium term. 
Free Movement of Goods 
Free movement of goods can be achieved only by removing measures which restrict 
trade - not only customs duties and quantitative restrictions but all measures with 
equivalent, i.e. protectionist, effect, irrespective of whether or not they are specifically 
aimed at domestic or imported products. Where technical standards are not 
harmonised, the free movement of goods must be ensured by applying the principle of 
mutual recognition of national rules and accepting the rule that national specifications 
should be no more stringent than is required to achieve their legitimate objectives. 
This rule was established in the Cassis de Dijon judgment. 
For the purpose of harmonisation, the European Community has developed the "New 
Approach" which introduces an approach carefully balanced between government and 
private autonomous bodies and in which European Community legislation and 
European standards play a distinct complementary role. Thus, instead of imposing 
technical solutions, European Community legislation is limited to establishing the 
essential requirements which products must meet. Products manufactured in 
accordance with European standards are presumed to meet such essential 
requirements, but European standards are not the only way to prove such conformity. 
The "New Approach" works in conjunction with the "Global Approach" on product 
certification which governs the apposition of the "CE Mark" on the product. For other 
products such as pharmaceuticals, chemicals, motor vehicles, and food products, 
European Community directives follow the traditional regulatory pattern of providing 
fully detailed rules. 
40 
The free movement of goods also dictates that a number of Community harmonisation 
measures be transposed into national law. Implementation of health and safety 
harmonisation rules is particularly important and requires the establishment of 
appropriate mechanisms and organisations, both for businesses and the authorities. 
Two of the "horizontal" directives essential to smooth running of the single market are 
the Directive on general product safety and the Directive on liability for defective 
products. The regulations concerning general product safety are covered in the section 
on consumer protection. 
The rules on agricultural products (compliance with veterinary and plant-health 
standards) are explained in detail in the section on agriculture. 
Descriptive Summary 
Slovenia started on its path towards establishing the conditions for the free movement 
of goods with the entry into force of the Interim Agreement on 1 January 1997. 
All prices have been liberalised, with the exceptions of those for public utilities, 
foodstuffs and agricultural prices. 
With regard to technical barriers to trade, the process of alignment is proceeding rather 
slowly. In some areas federal regulations of the former SFRY are still being used as 
national regulations in Slovenia. 
Concerning legislative alignment, Slovenia has made some progress, following a 
period of standstill in the second half of 1996. However, the legislative approximation 
programme presented in May 1997 is rather weak both in scope and substance of 
legislative alignment. 
The Slovene Standards and Metrology Institute (SMIS), a government-linked body, is 
entrusted with both the standardisation and accreditation functions, this latter 
traditionally belonging to the public sphere. 
Overall, the standardisation activity is progressing well. By June 1997, SMIS, which is 
an affiliate member of Comité Européen de Normalisation (CEN) and Comité 
Européen de Normalisation Electro Technique (CENELEC), had issued more than 
1200 standards, the great majority of which transpose either European or nternational 
Organisation for Standards /International Electrotechnical Commission (ISO/CEI) 
standards. However, there is still a considerable stock of former Yugoslav regulations 
in force of mandatory application, many of which require different forms of 
mandatory third-party certification. 
Current and Prospective Assessment 
Slovenia has been liberalising progressively its trade regime. Nonetheless, further 
efforts are required for the full adoption and implementation of the acquis. 
41 
There remain a number of restrictive measures relating to foreign trade, including the 
regime of import licensing. About three per cent of imports require special 
government licenses or are subject to quantitative restrictions. The new set of pan-
European rules of origin, applied by Slovenia from 1 January 1997, will further favour 
trade and free circulation. 
In some cases Slovene mandatory standards and certification requirements create 
technical barriers to trade. Additional removal of technical barriers to trade will be 
achieved once Slovenia has adopted EU technical legislation and taken over EU 
concepts. 
Legislative alignment has just started in early 1997, after some period of standstill. 
The legislative approximation programme presented in May 1997 covers considerable 
ground but is rather weak both in scope and substance of legislative alignment. New 
Approach directives are not mentioned and approximation is unclear in the chemicals 
and foodstuffs sector. In some areas, however, legislative alignment seems to be 
progressing satisfactorily, such as on pharmaceuticals and the automotive sector. The 
late adoption of the Law on Standards, being envisaged for 1999, will affect progress 
in negotiations on the European Conformity Assessment Agreement. 
According to the Slovene.authorities major legislative measures should be transposed by 
the year 2000. It needs to be borne in mind, in any case, that secondary legislation is 
often necessary to implement the general legislative framework. However, the limited 
endowment of human resources and technical expertise of Slovenia may hinder a 
smooth approximation process and the setting up of relevant implementation structures, 
thereby making the reform process difficult. 
In addition, adequate structures and staffing for market surveillance should be 
established and developed in the competent public authorities for the ex-post control of 
product safety. With regard to the necessary structures to apply the acquis, Slovenia has 
yet to achieve the required separation between the regulatory, standardisation and 
product certification functions, for the latter two of which more emphasis should be put 
on the involvement of the private sector. 
The current Slovene legislation concerning civil liability for defective products does 
not yet conform fully to the EC requirements in that area. However, amendments are 
already planned in this respect. 
In the areas subject to national rules and not covered by Community harmonisation, 
there is not enough information available to assess whether Community legal 
principles on the free movement of goods are properly applied in Slovenia. The 
reporting procedures which form part of the internal-market machinery are not yet 
operational and so cannot be used in the pre-accession period. The most important 
instruments in this connection are: Directive 83/189, requiring governments to report 
draft national technical standards and regulations; Decision 3052/95 on measures 
derogating from the principle of the free movement of goods; procedures by which 
complaints can be submitted to the Commission; and Article 177 of the Treaty, 
enabling Member States to ask for preliminary rulings from the Court of Justice. It is 
42 
also hard to assess whether Slovenia complies with the principle of mutual 
recognition; more information is required on its national rules, and on administrative 
practices, which can have an effect on product sales. 
Conclusion 
While limited progress has been made towards adopting the acquis related to the free 
movement of goods, considerable further work is needed. In this respect, the 
implementation of the provisions of the Interim and Europe Agreement will contribute 
to progress over the next years. 
Efforts will have to be strengthened to align technical legislation, including New 
Approach Directives. The standardisation and conformity assessment system also 
needs to be strengthened. A speedy adoption of the new Law on Standards would help 
in this respect. Human resources, skill and institution building should be equally 
upgraded. Provided current efforts are increased, free circulation of goods could be 
completed in the medium term. The Slovenian authorities should also see to it - in the 
fields not covered by Community harmonisation - that their national law is not likely 
to hinder trade, notably by ensuring that the measures in force are proportional to the 
objectives pursued. 
Free Movement of Capital 
The Europe Agreement establishes the principle of the free movement of capital 
between Slovenia and the EU. This applies from the entry into force of the Europe 
Agreement as regards direct investments made by companies already established in 
Slovenia and as regards branches and agencies of Community companies (as well as 
the self-employed), gradually during the transitional period. 
It also prohibits the introduction of any new foreign exchange restriction from its entry 
into force. 
The White Paper highlights the link between the free movement of capital and the free 
movement of financial services. It suggests a sequence of capital liberalisation starting 
from long-term capital movements and those linked to commercial transactions to 
short-term capital. 
43 
Descriptive Summary 
Between 1990-96 foreign direct investment (FDI) reached ECU 600 millions By the 
end of 1996, the share of FDI in GDP was 10.8%. Taking into consideration the level 
of GDP in Slovenia, FDI is moderate. The small size of the market explains part of it. 
However, there are also restrictions to FDI. These refer mainly to the way the 
privatisation of socially-owned enterprises has been implemented (mainly through 
management buy outs accompanied by restrictive stipulations for portfolio 
investments by foreigners), to overall tightened controls on foreign capital inflows and 
to various sector specific restrictions. 
Both the government and the private sector have access to the international financial 
markets. However, interest-free deposits in Tolar for non-Government borrowers have 
been increased to 40% for loans with a maturity up to seven years (and 10% for 
longer-term loans). Other measures taken by the Bank of Slovenia comprise the 
introduction of custody accounts for foreign investors, increases in obligatory bank 
reserves for foreign loans and ceilings for remittances from residents' accounts. 
In September 1995 Slovenia officially accepted the obligations of Article VIII of the 
IMF and thus formally established full current account convertibility of the Tolar. 
Current account transactions had been, in practice, freed a few years before. 
Capital outflow is, in general, subject to authorisation while the regime applicable to 
capital has been recently restricted as well. Among the liberalised capital movements 
are foreign direct investment in the country (with exceptions) and abroad (under 
certain conditions), commercial credits, personal capital movements (except loan 
operations) and financial credits and loans (with exceptions/limitations). 
Current and Prospective Assessment 
A notable characteristic of the legal framework concerning capital movements is that 
no provisions exist for the implementation of operations in securities. This implies 
that, concerning the purchase, sale or other operations in securities, the provisions 
governing direct investment, or borrowing and lending, apply by analogy. 
In order to establish the legal basis for the further liberalisation of capital transactions 
and to cover grey areas of existing legislation, notably for operations in securities, a 
new Law on Foreign Exchange is scheduled to be adopted early 1998. 
The prohibition against establishment of branches and cross border provision of 
services by EU investment is intended to be removed with the introduction of the 
Foreign Exchange Act early 1998. Effective legislation needs to be put in place for the 
management of pension funds. 
The approximation of legislation as regards the capital market corresponds, in general, 
to the obligations undertaken in the Europe Agreement. However, some decrees 
adopted by the Bank of Slovenia are not in line with the Agreement. The following 
specific issues deserve further attention: 
44 
a) the issue of the acquisition of real estate by non-residents in Slovenia. 
b) according to provisions in Slovema's company legislation, the majority of members 
of companies' boards of directors must be Slovenian nationals. This provision is 
restrictive and provides a disincentive for the acquisition by non-residents of 
controlling stakes in Slovene companies. The government is aware of the problem 
and intends to remove the provisions as far as banks and insurance companies are 
concerned through the new banking and insurance laws. At present, however, no 
change in these provisions is foreseen for the other sectors. 
c) high interest-free deposits in Tolar for non-Government borrowers constitute an 
important restriction on the free movement of capital; 
d) tight registration procedures, based on the compulsory establishment of custody 
accounts, and high transaction costs, due to high foreign currency reserves to be built 
up by the banks have a negative effect on foreign investment and loans. 
The scope and the justification of the measures adopted by the Bank of Slovenia will 
have to be examined in further detail. Overall, the restrictions introduced early 1997 
tighten further the control over foreign exchange transactions, have a negative effect 
on foreign investments and loans, and should be phased out. 
Conclusion 
Overall, liberalisation of capital movements is slow. Despite substantial progress in 
the approximation of legislation, reflecting the stipulations of both the White Paper 
and the Europe Agreement, recent measures adopted by the Bank of Slovenia caused a 
set back to the liberalisation efforts. 
The government is aware of these problems and has the intention to introduce some 
capital liberalisation measures, including the possibility of foreign banks to open 
branches in Slovenia, through a new Foreign Exchange Act. However, under the 
current framework of monetary and exchange policies, there is little prospect of an 
important move towards further capital liberalisation. Therefore macroeconomic 
foreign direct investment policies should be reviewed in order to be compatible with 
more liberal movements and to promote higher foreign direct investment. 
Free Movement of Services 
The basis of the free movement of services is the prohibition of discrimination, in 
particular on grounds of nationality, and rules on the alignment of divergent national 
legislation. These rules often concern both the right of establishment, which comes 
under the heading of the free movement of persons, and the freedom to provide 
services. Their implementation implies the establishment of administrative structures 
(banking control boards, audio-visual control authorities, regulatory bodies) and 
greater cooperation between Member States in the area of enforcement (mutual 
recognition arrangements). 
A substantial amount of the legislation applicable to the free movement of services 
relates to financial services. It also concerns the problems relating to the opening-up 
45 
of national markets in the sectors traditionally dominated by monopolies, e.g. 
telecommunications and, to a certain extent, energy and transport. These subjects will 
be dealt with in the sections of the Opinion specifically referring to them. 
Descriptive Summary 
With three important exceptions all banks are currently privately owned. There are no 
branches of foreign banks allowed. The balance sheet total has been growing steadily, 
both in absolute terms and as a percentage of GDP. The three biggest banks cover 
more than half of the market. 
The 1991 Law on Banks and Saving Institutions regulates the establishment, operation 
and supervision of banks and savings institutions. Because of the underdeveloped 
financial system the law also includes some provisions which enabled the domestic 
banking system to adjust to the international financial environment. 
Supervision of banks and savings banks is performed by the Bank Supervision 
Department of the Central Bank. A comprehensive system of banking laws and 
regulations is in place and the Central Bank monitors closely its implementation. 
The problem of poor asset quality has been addressed after the promulgation by the 
Bank of decrees setting out rules and regulations on calculating provisions as security 
against potential losses. Foreign banks may establish subsidiaries in Slovenia, which 
benefit from national treatment, or a representative office. They cannot open a 
branches, but the abolition of these restrictions is foreseen under the new banking 
legislation discussed in Parliament. 
All banks meet the 8% international capital adequacy requirement and in fact exceed it 
considerably. To operate with a full-license a bank must have at a minimum SIT 4.080 
million or about ECU 25 million at the end-1996 exchange rate and must also be 
active in retail banking in Slovenia. 
A new Banking Law is scheduled to be adopted by end 1997. Besides the Basel 
Standards, all relevant EU Directives are taken into account. This law targets 
particularly at adjusting the Slovene banking sector to international criteria and 
standards. 
There is only one regulated market, namely the Ljubljana stock exchange, access to 
which is also allowed to credit institutions. The Exchange is a self-regulatory 
organisation whose responsibilities include the adoption of provisions concerning 
access to the market, listing requirements, real-time disclosure of market information 
via radio broadcasting and data reporting to the authority. The Ljubljana Stock 
Exchange is member of the International Organisation of Securities Commissions 
(IOSCO) and the emerging markets committee. Foreign ownership of brokerage is 
limited to 24% of their capital. 
The securities market is regulated by the 1994 Law on the Securities Market and, for 
the establishment and the operation of investment companies and mutual funds, the 
46 
1994 Law on Investment Funds and Managing Companies. The regulation of the 
market was modelled after the US Securities and Exchange Commission. The 
regulation and supervision of the securities market is performed by the independent 
Securities and Exchange Agency. There is a centralised securities register, the "central 
register of dematerialised securities". 
Five insurance companies have a social ownership (public but not State), in two of 
them the social ownership exceeds 50%. The biggest insurance company covers 56% 
of the market and has 80% of total own funds. There is one state-controlled export 
credit insurer. 
The legal framework for insurance companies is the Insurance Companies Act, 
published in 1994 and 1995. The regulation and supervision of the market is currently 
being implemented while further measures are envisaged. The 1994 Insurance 
Companies Act authorises, upon approval of the Insurance Supervisory Authority, 
foreign establishments only through participations of up to 15% of the capital. 
Foreign investors can buy additional shares in Slovene insurance companies subject to 
approval by the Supervisory Authority. The legal basis for the establishment of the 
Insurance supervision authority is set by the above Insurance Companies Act. 
Since 1995, the activities of the supervisory authority have been carried out by the 
Insurance Supervisory Authority, a body part of the Ministry of Finance. 
Recapitalisation of the insurance sector is expected to take until 1999. Investment 
abroad is not allowed. In the case of re-insurance, there is limited access to the local 
market. 
Current and Prospective Assessment 
In the banking sector, laws and regulations adopted after Slovenia's independence are 
similar to those of the EU, namely to the Stage I measures, and are being further 
harmonised with European directives under the new legislation to be adopted by the 
end of 1997. This wiU contribute further to the increase in efficiency of the banking 
system as it becomes part of the European and global banking sector. 
The recent introduction of custody accounts for foreign investors in Slovenia, linked 
with a restrictive licensing and foreign currency reserve policy, limits the number of 
banks entitled to carry out foreign capital transactions, excluding also the foreign 
banks which do not provide retail services in Slovenia, because these are not eligible 
to a full license. Only a full licence grants a bank the right to open custody accounts 
and thus perform the above transactions. 
Approximation to White Paper Stage I measures was achieved by the adoption of the 
Securities Market Law, 1994. The Agency for the Securities Market lacks the power to 
perform its supervision duties efficiently. The transposition of the principles laid down 
by the Investment Services and Capital Adequacy Directives is currently under 
scrutiny by the Government. 
47 
Credit institutions, which may be authorised by the Bank of Slovenia (with prior 
opinion of the securities supervisor) to provide investment services, cannot have more 
than one stockbroking firm as a subsidiary. Establishment of branches and cross-
border provision of services from third countries is not allowed. A 24% ceiling is 
imposed on non-residents' stake in stockbroking firms. However, EU investment firms 
may hold majority interests in local credit institutions authorised by the Bank of 
Slovenia to provide investment services. 
The prohibition against establishment of branches and cross-border provision of 
services by EU investment firms is intended to be removed with the introduction of 
the Foreign Exchange Act early 1998. 
In the field of insurance Slovene legislation still has to undergo some adjustments to 
EU legislation as regards the supervisory system, provisions for foreign investments 
and the lack of transparency in the application of regulations. Problems remain to be 
solved concerning privatisation. Restrictions on setting up branches in Slovenia need 
to be removed. 
Supervision of the sector is still in the early stages of its development. The Insurance 
Supervisory Authority was installed in March 1996 within the Ministry of Finance but 
needs further strengthening. 
48 
Conclusion 
Substantial progress has been achieved. The acquis in this sector has already been to a 
considerable extent transposed, but important provisions still remain to be adopted. 
Full free establishment in the areas of banking, securities and insurance, in particular 
with regard to branches of foreign institutions, still has to be adequately introduced in 
the sectors' legislative frameworks and duly implemented. 
Foreign banks are currently excluded in practice from foreign capital transactions, as 
these are reserved to banks benefiting from a full licence, whose grant is subject to a 
very high capital flow and to the provision of a full range of services in Slovenia 
(including retail services). 
As regards insurance, privatisation should be speeded up and the insurance and 
reinsurance sector opened up to EU operators and to foreign investment. The 
supervisory functions in the sector are expected to be strengthened by the new 
legislation under preparation. 
However, provided harmonisation proceeds as planned, no major difficulties are 
foreseen in achieving full approximation in relation to free movement of financial 
services in the medium term. 
Freedom of Movement of Persons 
The free movement of persons encompasses two concepts with different logical 
implications in the Treaty. On the one hand, Article 7a in Part One of the Treaty on 
'Principles' mentions the concept in connection with the establishment of the internal 
market and implies that persons are not to be subject to controls when crossing the 
internal frontiers between the Member States. On the other hand, Article 8a in Part 
Two of the Treaty on 'Citizenship of the Union' gives every citizen of the Union the 
individual right to move and reside freely within the territory of the Member States, 
subject to certain conditions. The abolition of frontier checks must apply to all 
persons, whatever their nationality, if Article 7a is not to be meaningless. While the 
rights deriving from Article 8a apply in all Member States, those stemming from 
Article 7a have not yet been fully applied throughout the Union. 
a) Free Movement of Union Citizens. Freedom of Establishment and Mutual 
Recognition of Diplomas and Qualifications 
The Europe Agreement provides for the non-discriminatory treatment of workers that 
are legally employed (as well as their families). It covers the possibility of cumulating 
or transferring social security rights, and encourages member states to conclude 
bilateral agreements with Slovenia on access to labour markets. During the second 
phase of the transitional period, the Association Council will examine further ways of 
improving the movement of workers. 
49 
The White Paper considers the legislative requirements in order to achieve a 
harmonious development of the labour market, whilst simultaneously preventing 
distortions of competition. 
The free movement of workers is one of the fundamental freedoms enshrined in the 
Treaty; freedom to practise certain professions (e.g. in the legal and health fields) 
may, however, be subject to certain conditions, such as qualifications. Depending on 
the case, these may be dealt with through coordination or by applying the principle of 
mutual recognition. Freedom of establishment is also guaranteed under the Treaty and 
covers the economic activity of self-employed natural persons and companies. 
The free choice of place of residence may thus be subject to minimum conditions as to 
resources and health insurance where the person does not exercise a profession in the 
country concerned. 
Descriptive Summary 
According to current legislation, foreigners are basically entitled with equal rights as 
regards working conditions as well as in the field of social security with certain 
exceptions linked to the status of permanent residence. 
The issue of a work permit is conditioned upon the non-availability in the area of 
prospective employment of a suitable local worker. Work permits are normally issued 
for only one year and only for work with a single employer. In case, the worker loses 
the employment he must leave the country. Family members of foreign workers do not 
acquire the right to work. There is scope for the state to develop further initiatives 
aimed at economic and social integration of foreigners. However, Slovenia is currently 
preparing new immigration legislation following European standards and principles 
which will address these issues. 
Concerning training, major efforts have been undertaken by the Slovene Government 
to conform with EU Directives. Slovenia has largely taken up the acquis. Structures 
(ministries and-public bodies) are in place for many professions, but these need to be 
reinforced. 
Current and Prospective Assessment 
Slovenia has made significant efforts to adapt its social legislation to EU standards. 
With minor exceptions, Slovene legislation already recognises the principle of 
non-discrimination between nationals and foreigners legally residing in the country. 
Therefore, the application of the principle of equal treatment to those EU workers 
already legally residing in Slovenia should not be a problem. 
Current restrictions on the employment of non-national employees in top managerial 
positions are to be abolished with the new Company legislation scheduled to be 
adopted by the end of 1997. 
50 
Most of the acquis concerning the mutual recognition of diplomas and qualifications 
have already been taken on board. However, there are still important areas where 
continued efforts are required. Full approximation is to be achieved in the medium 
term. 
Training, where coordinated by directives for seven professions, is broadly in line with 
the acquis although some adaptation is still necessary. Professional structures (such as 
professional chambers or associations) are in place for many professions but these will 
probably need to be reinforced in the future. Integration with EU professional 
associations is developing well (for example, engineering diplomas already meet the 
minimum European standards). 
Conclusion 
Policies on immigration and work permits are handled restrictively, but legal 
amendments are under preparation. On mutual recognition of diplomas, some areas 
remain to be adjusted. 
Slovenia is aware of the outstanding issues that need to be resolved with regard to the 
free movement of persons. From a technical point of view, adaptations of regulations 
will be necessary in the medium term. 
(b) Abolition ofChecks on Persons at Internal Frontiers 
The free movement of persons within the meaning of Article 7a of the EC Treaty, i.e. 
the abolition of checks on all persons, whatever their nationality, at the internal 
frontiers has not yet been fully implemented in the Union. Doing away with checks on 
persons is conditional on the introduction of a large number of accompanying 
measures, some of which have yet to be approved and implemented by the Member 
States (see separate section on Justice and Home Affairs). However, that objective has 
been achieved by a limited number of Member States in accordance with the 
Schengen Convention (seven Member States already apply it and another six are 
working towards implementation). 
The draft Treaty aims to make that objective easier to achieve within the Union by 
including a new chapter on Freedom, Security and Justice and incorporating the 
Schengen Agreement into the EU. 
Slovenia has stated its desire and readiness to fulfil the provisions of the Schengen 
acquis. It has begun preparations to this end and has sought assistance in this 
connection from Member States, notably in regard to the strengthening of borders 
controls. Amendments necessary to the Border Control Act and the Law on 
Foreigners are already part of the three-year legislative programme of the 
Government. 
General Evaluation 
51 
Slovenia's progress in the implementation of legislation relating to the White Paper is 
summarised in the annex. According to the table, Slovenia considers that by 30 June 
1997 it will have adopted national implementing legislation for 415 of the 899 
directives and regulations in the White Paper. That figure covers provisions for which 
Slovenia considers it will have adopted implementing legislation or which it will have 
checked for compatibility with Community rules and does not prejudge actual 
compatibility as such, on which the Commission is not able at this stage to state an 
opinion. 
As regards all the fields relating to the internal market, and in particular the fields of 
accountancy, mutual recognition of professional qualifications and intellectual 
property, the Community legislative basisls practically in place. Legislation has been 
adopted in full or in part to implement most of the measures, according to the 
Slovenian authorities' assessment, though the Commission cannot at this stage express 
a position on its total compatibility with Community law. Slovenia still has to make a 
considerable legislative effort to achieve full conformity with the acquis. It is also 
necessary to strengthen the coordination and implementation of the national strategy 
for approximation of legislation. 
Despite the progress already achieved, the genuine progress already achieved in the 
transposition of the texts adopted in the very recent past must go hand in hand with 
concrete implementing measures and the creation of an effective administrative 
infrastructure. Substantial work is still however required in the areas of public 
procurement, insurance, freedom of capital movements, product conformity and 
standardisation, indirect taxation. Implementation and enforcement should be 
considered an integral part of the Slovene pre-accession strategy, which should go 
beyond primary legislation and also include technical standards. 
As things currently stand, the Commission cannot yet express an opinion on the 
capacity of companies, particularly small and medium-sized businesses, to implement 
the acquis. 
Leaving aside certain specific aspects relating to agriculture, checks at the internal 
frontiers of the Union can only be abolished once sufficient legislative harmonisation 
has been achieved. This calls for mutual confidence, based in particular on sound 
administration (e.g. the importance of safety checks on some products at the place of 
departure). As far as goods are concerned, the completion of the internal market on 
1 January 1993 was only achieved by doing away with all the formalities and checks 
performed by the Member States at the internal borders of the Union. 
In particular these checks covered particularly technical points (product safety), 
veterinary, animal-health and plant-health matters, economic and commercial matters 
(e.g. prevention of counterfeiting of goods), security (weapons, etc.) and 
environmental aspects (waste, etc.). 
In most cases, the abolition of checks was only made possible by the adoption anc 
application of Community measures harmonising the rules on movement and 
placement on the market (particularly as regards product safety) and, where applicable, 
52 
by shifting the place where controls and formalities within the Member States or on 
their markets are conducted (in particular as regards VAT and excise duties, veterinary 
and plant-health checks, and the collection of statistics). 
A section of Slovenia's present borders will become the Union's external frontier and 
this means border checks will need to be stepped up (see separate section on customs). 
In view of the overall assessment that can be made of progress achieved to date and 
the rate at which work is advancing in the various areas concerned, it is difficult at 
present to put a time-scale on Slovenia's ability to take over and implement all the 
instruments required to abolish internal border checks and to transfer those checks to 
the Union's external frontier. 
Slovenia has already adopted significant elements of the acquis relating to the Single 
Market. However, the Commission is not yet able to take a position on every measure 
whose transposition has been reported by Slovenia. In any case, progress has been 
limited in some important sectors, notably the liberalisation of capital movements, 
indirect taxation and technical regulations and standards. In most areas, enforcement 
needs to be strengthened. Provided current efforts continue, or are stepped up in areas 
where progress is lagging, it can be expected that in the medium term Slovenia will 
have adopted and implemented the Single Market legislation and made the necessary 
progress on the mechanisms of enforcement in the medium term, in order to be able to 
participate fully in the internal market. 
Competition 
European Community competition policy derives from Art. 3 (g) of the Treaty 
providing that the Community shall have a system ensuring that competition in the 
internal market is not distorted. The main areas of application are anti-trust and state 
aid. 
The Europe Agreement provides for the application of the measures set out in Art. 85 
and 86 of the Treaty (agreements between undertakings/abuses of dominant position). 
The Europe Agreement provides for a competition regime to be applied in trade 
relations between the Community and Slovenia based on the criteria of Articles 85 
and 86 of the EC Treaty (agreements between undertakings/abuses of dominant 
position) and in Article 92 (State aid) and for implementing rules in these fields to be 
adopted within three years of the entry into force of the Agreement. 
Furthermore, it provides that Slovenia will make its legislation compatible with that of 
the Community in the field of competition. 
The White Paper refers to the progressive application of the above provisions and 
those of the Merger Regulation (4064/89) and of Art. 37 and 90 (Monopolies and 
Special Rights). 
53 
Descriptive Summary 
Competition is currently regulated by the "Law on the Protection of Competition " 
(Official Gazette RS No.18/1993 dated April 9, 1993). The Bureau for the Protection 
of Competition is the single authority responsible for the implementation of the Act. It 
was officially established in October 1994 and is responsible to the Ministry of 
Economic Relations and Development. 
In order to be in line with the current and foreseeable situation in the EU as regards 
sectors subject to monopolies or dominant positions such as telecommunications, 
transport, postal services and energy, necessary measures have either already been 
taken or are under preparation. On the "basis of information available, no state 
monopoly of commercial character exists in Slovenia. 
As regards state aid there is as yet no authority responsible for the monitoring of state 
aid, but the necessary legislation for the appointment of this authority and the 
monitoring of state aid in Slovenia is under preparation. No reliable aid inventory 
exists at present. 
Current and Prospective Assessment 
In order to be compatible with EC competition rules, a series of amendments to the 
Law on the Protection of Competition is required. This applies mainly to its scope of 
application (sectors like transport, storage, servicing are excluded from the 
application), the introduction of prohibition on restrictive agreements and the 
definition of dominant position and the abuse of dominance. Further clarification is 
required on joint venture and merger control procedures. Provisions dealing with 
investigation, business secrets and rights of defence are still to be developed. If 
adopted the new draft competition law will go a long way towards satisfying these 
concerns. 
Apparently, Slovenia has started its policy of liberalising and opening up to 
competition certain traditional sectors subject to monopolies such as 
telecommunications and postal services. More information should be provided to give 
a viable evaluation of the situation in the other sectors. 
State aid are not monitored and hence reliable information is not available yet. 
Establishing an inventory and setting up a monitoring authority should be a matter of 
priority. The aid inventory should cover all measures granted by the State, regional or 
local authorities or through State resources. The provision of sufficient staff and 
technical facilities to carry out a credible State aid control is equally crucial. While the 
abolition of the export aid measures is welcomed, certain measures constitute 
operating aids which are only allowed under very strict conditions. Due to the lack of 
transparency, it is unclear whether these conditions are complied with. 
Considerable effort has been made within a rather short period of time to prepare an 
inventory on the existing aid. The Government has also started the drafting and 
54 
adoption of the rules necessary to introduce state aid control and is in the process of 
appointing the monitoring authority. 
In addition to the adoption of legislation sufficiently approximate to that of the EU, 
credible enforcement of competition law requires the establishment of well 
functioning anti-trust and state aid monitoring authorities. It requires moreover that 
the judicial system, the public administration and the relevant economic operators 
have a sufficient understanding of competition law and policy. 
Conclusion 
In respect of anti-trust the current level of approximation of legislation is not 
satisfactory. However, if the new draft law on competition is adopted the process of 
approximation will be close to completed. The Bureau for the Protection of 
Competition needs to be strengthened in order to ensure a credible enforcement of the 
law. 
In the field of state aid the requirements as regards transparency and monitoring of 
state aid have not yet been fulfilled. It will require a substantial effort from Slovenia 
in order to meet these requirements in the medium term. Due to the present lack of 
experience in the field close cooperation with the Commission will be necessary in a 
foreseeable future. 
It seems, moreover, that in certain sectors exclusive or special rights exist which may 
not be compatible with the Community acquis. These problems should be addressed 
in the near future. 
3.2 Innovation 
Information Society 
Present Situation 
The economic and social effects made possible by the combination of information 
technology and telecommunications are great. In Slovenia these possibilities were 
neglected before 1989 although education generally was not. The result seems to be 
that demand for computers has spurted beyond normal expectation deduced from 
GDP per capita. The existence of host computers on the Internet (7.4 per 1000 
inhabitants) as a relative measure of development towards the information society IS 
suggests that Slovenia has reached today the EC average. If Internet connections 
follow the same pattern of growth, the telecommunications infrastructure (at present 
about nine years behind the EC average) may. remain a brake on IS developments. 
The state-owned academic Internet provider ARNES has expanded to become a 
business-oriented service provider, connecting universities, schools, research 
institutions and libraries. Since 1996 several other Internet providers have 
emerged, including services by Telekom Slovenije. 
55 
Conclusion 
In view of the highly advanced infrastructure combined with the excellence of the 
national education system, we can expect Slovenia to realise potentialities of the 
Information society earlier than the average CEEC. 
56 
Education. Training anH ynqth 
Articles 126 and 127 of the EC Treaty provide that the Community shajl contribute to 
the development of quality education and implement a vocational training policy 
aimed at promoting the European dimension in education and at enhancing industrial 
adaptation and the responsiveness of the labour market through vocational training 
policies. 
The Europe Agreement provides for cooperation in raising the level of education and 
professional qualifications. The White Paper includes no measures in'this field. 
Descriptive Summary 
Slovenia's spending on education amounts to 5.8% of GDP. It takes 12.6% of the 
state budget. 
There are 820 schools, 305 000 pupils, 40 000 students and 23 000 teachers in 
Slovenia. 
Since 1990 policy priorities have been gradually refocused to cope with the needs of a 
free market economy aiming mainly at strengthening links between education and 
training on the one hand, and the labour market on the other. 
The 1996 White Paper on Education in the Republic of Slovenia sets the framework 
for comprehensive legal reform of the national education and training system. On this 
basis, six acts have been adopted which regulate (1) the organisation and funding of 
education, (2) pre-school education, (3) primary schools, (4) gymnasia, (5) vocational 
education and training and (6) adult education. A Higher Education Act was adopted 
in 1993 which focused on the restructuring of universities and the development of 
non-university institutions for higher professional and vocational education. 
The Tempus programme has contributed to the achievement of the goals of higher 
education reform and created the basis for cooperation with the EU higher education 
institutions. 
About 15% of the total population of Slovenia is between 15 and 25 (age group 
eligible for the Youth for Europe programme). Several measures in the field of youth 
have been taken in the past years to strengthen the role of youth associations in society 
and to provide premises for youth activities. A national youth information and 
counselling centre, and its network at local level, have been established and youth 
mobility and volunteer services are supported. Slovenia should start participating in 
the youth for Europe programme in 1998. 
Current and Prospective Assessment 
The Slovene Government made significant progress in re-orienting the education and 
training system towards a human resources development policy which is suitable for a 
57 
small open market economy aiming at intemational competitiveness. Further efforts 
remain to be undertaken in the field of policy implementation. 
As regards education, budgetary resources should now be re-oriented in line with the 
new priorities identified. In addition, there is scope for intensifying links with research 
and development and strengthening orientations towards market developments. 
Slovenia should start participation in the Youth for Europe programme in 1998, 
subject to the ratification of the Europe Agreement. The Youth for Europe National 
Agency has not yet been designated. 
Conclusion 
In the perspective of accession, no major problems should be expected in these fields. 
Research and Technological Development 
Research and Technological Development activities at Community level, as provided 
for by the Treaty and in the Framework Programme, aim at improving the 
competitiveness of European industry, the quality of life, as well as supporting 
sustainable development, environmental protection, and other common policies. 
The Europe Agreement will provide for cooperation in these areas, notably through 
participation in the Framework Programme. The White Paper includes no direct 
measures in this field. 
Descriptive Summary 
The national policy for research and technological development is defined in the 
National Research programme adopted in January 1995. Basic legislation in this 
sector is the Law on Research Activities established in 1991 which is to be replaced 
by a new Law on Financing and Organisations in the Field of Science and technology 
currently under preparation by the Ministry of Science and Technology. 
The current science expenditure amounted to 1.77% of GDP in 1995 (up from 1.46% 
in 1993), of which 0.75% by private enterprises. The Slovenian Government's aim to 
increase this rate to 2.5% by 2000 will require substantial investments by both the 
public and the private sector. 
Two universities and more than 40 research institutes compete for limited funds. At 
the same time, there is an overall tendency to decrease public financial support. In 
addition, there are about 20 private foundations providing general support and 
fellowships for the development of the sector. The Academy of Science and Art and 
the National Council for Research and Development have advisory functions on 
policy. 
58 
A programme with priority setting in science and technology policy and 
encouragement measures to link with industry has been set up. Core priorities are 
improved targeting of financial support, increased private funding, enhanced 
participation in international research programmes, refocusing of budgetary 
allocations towards enterprise targeted applied research and improved know how-
transfer. 
Regular cooperation with the European Community started in 1992 with the 3rd 
Research and Technology Development Framework Programme. So far, cooperation 
was mainly concentrated on COPERNICUS (Specific Programme for Cooperation 
with CECs and NIS) and remains rather low for participation in the 4th Framework 
Programme. Slovenia is a member of COST (European cooperation in the field of 
scientific and technical research) and EUREKA (European Research Coordination 
Agency). 
Since 1993, the statistics in this field are compatible with OECD standards. 
Current and Prospective assessment 
The overall re-organisation of the complex research and technological development 
structures has advanced and aims at intensifying links with economic and industrial 
development. However, considerable efforts remain to be undertaken to revitalize 
technological development in the industrial sector and to exploit the potential of 
national research for economic development. Privatisation of research institutes is 
supported. Additional financial resources are provided for research and networking 
infrastructure, guarantees and capital investments as seed or venture capital. So far, 
this had not led to the results expected, but there are reasonable prospects for an 
upturn. 
Slovenia has declared its interest in full association with the 5th Framework 
Programme. 
Conclusion 
In the perspective of accession, no major problems are expected in this field. 
Accession would be of mutual benefit. 
Telecommunications 
The objectives of EC telecommunications policy are the elimination of obstacles to 
the effective operation of the Single Market in telecommunications equipment, 
services and networks, the opening of foreign markets to EU companies and the 
achievement of universally available modern services for EU residents and 
businesses. Tiiese are achieved through harmonisation of the standards and 
conditions for service offerings the liberalisation of the markets for terminals, 
services and networks and the adoption of necessary regulatory instruments. The 
Directives and policies needed to achieve this have now been established, but the 
59 
liberalisation of public voice telephony and operation of related infrastructure will 
be deferred for a year or two after 1998 in certain member states. 
The Europe Agreement provides for cooperation aimed at enhancing standards and 
practices towards EC levels in telecommunication and postal policies, 
standardisation, regulatory approaches and the modernisation of infrastructure. The 
White Paper focuses on the approximation of regulation, networks and services, 
followed by further steps ensuring gradual sector liberalisation. 
Descriptive Summary 
Slovenia emerged from independence with its telecommunications system intact. The 
telephone line penetration rate increased from 24.1% in 1991 to 33.3% at present. 
The digitalisation rate of the network is well advanced and reached 66% of the 
transmission and 46% of the switching capacity by mid 1995. 
The current legislation and regulatory instruments are the previous Yugoslav law on 
Telecommunications Systems of 1988; a new law on telecommunications of May 1997 
and the decree of 1995 on Type Approval, Certification and Testing of Terminal 
Equipment. The public operator Telekom Slovenije has a monopoly of voice 
telephony until the year 2000. It also has a subsidiary which runs the two mobile 
telephony networks with analogue and digital standards. Other services are liberalised. 
The state ownership of Telekom Slovenije amounts to 76% and will be further reduced 
by about one third to make the organisation more flexible and commercial. 
Current and Prospective Assessment 
Degree of Liberalisation 
While there has been little progression in liberalisation, recent Government 
declarations indicate that market opening is accelerating which will create a major 
challenge for Telekom Slovenije. The public operator has exclusive rights for the fixed 
network and voice telephony until 1 January 2001. A subsidiary of the operator is 
running the two mobile telephony networks with analogue and digital standards. The 
markets for value added services are liberalised. The Government intends to publish a 
tender for a second GSM mobile telephony network at the end of 1997. 
60 
Approximation to EC law 
A new telecommunications law was adopted by Parliament on 28 May 1997. The 
conformity of the final legislation as voted by Parliament with EU-law is being 
checked. A Decree on Type Approval, Certification and Testing of Terminal 
Equipment was issued in 1995. After the adoption of the Decrees for the application 
of the Telecommunications Law and the adoption of the draft frequency allocation 
Decree, it can be expected that the country will harmonise the remaining part of its 
regulation with the acquis by 2000. The administrative capacity to handle these 
approximation requirements needs further strengthening. 
In June 1997 the Government started to adjust the distorted tariffs structure by 
increasing the tariffs for local communications (plus 9%) and by reducing the tariffs 
for other phone calls (minus 18%). The local call price is among the lowest of the 
region but there is a very high connection charge for new customers. Universal 
service remains to be achieved and, as competition develops and the network 
expands into less advanced areas, the existence of obligations on operators to 
provide universal service will undoubtedly become a focus of regulatory activity. 
Infrastructure 
The penetration rate in the telephone service increased from £4.1 in 1991 to 33.3 per 
100 inhabitants in 1997 (the average in Ireland, Portugal and Greece is about 43.9 per 
100) and the digitisation rate in 1997 is 66% (the average in Ireland, Portugal and 
Greece is about 62.4). ISDN services have been introduced in two major cities since 
1995. By the end of the year 2000, the penetration rate for telephony is planned to reach 
40 per cent. The full digitisation of the transit network is not expected to be completed 
until the year 2010. There are about 220,000 CATV subscribers corresponding to 90% 
of the households connected (100 network operators). 
There is little direct foreign investment so far in the telecommunications sector. The 
only operator of mobile telephony, Mobitel, is a 100% subsidiary of Telekom 
Slovenije and the paging operator, Teleray, is a private Slovenian company. In 1996 
Telekom Slovenije received an ECU 35 million loan from a consortium of foreign 
banks. 
Competitiveness of the Sector 
In 1995 there were 5 employees per 1000 lines (the average in Ireland, Portugal and 
Greece is about 6.2) and the average waiting time for a telephone line was 1.8 
years. The price of a standard telephone line for business communications (283 ecu) 
is at a medium level compared to the prices in the region. The revenue per line 
(about 344 ecu in 1995) is the highest in the region. This should be sufficient to 
ensure that Telekom Slovenije can be run as a business profitable enough to allow 
for further investment. However, the sector will only be able to face full 
competition if substantial efforts are made towards more cost-oriented tariffs. 
61 
Conclusion 
Telecommunications in Slovenia, with a modern infrastructure and advanced service, in 
the mid term will reach a level comparable to some of the EU Member States. 
Implementing the acquis will be possible in the medium term but will require early 
introduction of competition in all fields. The public network operator should be able to 
face full competition if tariff rebalancing is implemented before 2000. 
Audio-visual 
The audio-visual acquis aims, in the context of the Internal Market, for the provision 
and free movement of audio-visual services within the EU as well as the promotion of 
the European programme industry. The Television Without Frontiers Directive, 
which is applicable to all broadcasters regardless of the modes of transmission 
(terrestrial, satellite, cable) or their private or public nature, contains this acquis, 
setting down basic rules concerning transfrontier broadcasting. The main points are: 
to ensure the free movement of television broadcasts throughout member states; to 
promote the production and distribution of European audio-visual works (by laying 
down a minimum proportion of broadcasting time for European works and those by 
independent producers); to set basic standards in the field of television advertising; to 
provide for the protection of minors and to allow for the right of reply. 
The Europe Agreement provides for cooperation in the promotion and modernisation 
of the audio-visual industry, and the harmonisation of regulatory aspects of audio­
visual policy. 
The Television Without Frontiers Directives is a Stage I measure in the White Paper. 
Descriptive Summary 
The legal framework for the audio-visual sector is determined by the Law on Public 
Media, and the 1994 Law on Radio and Television Slovenia. 
The main television broadcaster is the public service RTV Slovenia, although a 
number of other television organisations also operate in the market. 
Financial assistance is provided to productions made under a special system of 
cofinancing. Budgetary finance is provided to encourage investment in independent 
productions, European works and national productions in the area of film and video. 
Detailed information on film distribution is not available. 
Current and Prospective Assessment 
The audio-visual sector in Slovenia is attempting to re-establish itself after major 
upheavals in recent years, and is characterised by rapid growth and constant change. 
Its ability properly to adhere to the acquis presupposes an upgrading of the capacity of 
62 
the programme-making industry to meet the important challenges of an adapted 
regulatory framework. 
Slovenian audio-visual legislation is partially compatible with EU requirements; 
deficiencies remain in a number of areas, including freedom of reception, the 
promotion of European works, independent producers and recent works, isolated 
advertising spots, the protection of minors, and advertising rules. The Slovenian 
Government has stated its intention that laws bringing Slovenia into line with EU 
requirements should be passed in 1998. 
Conclusion 
Provided that the necessary legislative measures are pursued in the timescale foreseen 
and are accompanied by necessary structural adaptation of the industry, Slovenia 
should be able to meet EC requirements in the audio-visual sector in the medium 
term. 
63 
3.3 Economie and Fiscal Affairs 
Economic and Monetary Union 
By the time of Slovema's accession, the third stage of EMU will have commenced. 
This will mark important changes for all Member states, including those that do not 
participate in the euro area. All Member states, including the new ones, will 
participate fully in the economic and monetary union. Their economic policies will be 
a matter of common concern and they will be involved in the coordination of 
economic policies (national convergence programmes, broad economic guidelines, 
multilateral surveillance, excessive deficit procedure). They will be required to 
respect the stability and growth pact, to renounce any direct central bank financing of 
the public sector deficit and privileged access of public authorities to financial 
institutions, and to have completed the liberalisation of capital movements. 
Accession means closer monetary and exchange rate cooperation with the European 
Union. This will require strengthening structural reforms in the area of monetary and 
exchange rate policies. Member states not participating in the euro area will be able 
to conduct an autonomous monetary policy and participate in the European System of 
Central Banks (ESCB) on a restricted basis. Their central banks have to be 
independent and have price stability as their primary objective. Monetary policy has 
to be conducted with market-based instruments and has to be "efficient" in 
transmitting its impulses to the real economy. Therefore, reforms need to be pursued 
to tackle factors that hinder the efficiency of monetary policy, such as the lack of 
competition in the banking sector, the lack of development of financial markets and 
the problem of "bad loans" in the banking sector. Finally all Member states shall treat 
their exchange rate policy as a matter of common interest and be in a position to 
stabilise their exchange rates in a mechanism yet to be decided. 
As membership of the European Union implies acceptance of the goal of EMU, the 
convergence criteria will have to be fulfilled by Slovenia, although not necessarily on 
accession. While the fulfilment of the convergence criteria is not a precondition for 
EU membership, they remain key points of reference for stability oriented 
macroeconomic policies, and must in time be fulfilled by new member states on a 
permanent basis. Hence the successful conclusion of systematic transformation and 
market oriented structural reforms is essential. Slovenia's economic situation and 
progress has already been analysed in preceding chapters of this Opinion. 
Current and Prospective Assessment 
The Slovenian Central Bank enjoys a relatively high degree of independence from the 
government. The Governor is appointed by the Parliament and the Bank is the only 
institution responsible for monetary policy actions. The formal objective of the 
Central Bank is the stability of the domestic currency and implicitly price stability. 
The Law on the Central Bank is not fully compatible with the Treaty prohibition of 
budget deficit financing, but the sound fiscal record to date has eliminated the need for 
central bank deficit financing. 
64 
Monetary policy in Slovenia has been quite effective in reducing inflation. The 1996 
inflation rate was at the single digit level. However, the efficiency of monetary policy 
is hindered by several different factors. The privatisation of state-owned banks and the 
restructuring of the whole banking sector has proceeded well after a relatively slow 
start. The bad loans, although reduced, remain a problem. The lack of government 
bonds papers, due to the sound fiscal record, makes it difficult for the central bank to 
use indirect instruments for. the purpose of money supply control. In addition, the 
policy of preserving the high degree of indexation of the economy keeps lending 
interest rates high, thus discouraging financial intermediation and the ability of 
monetary policy to affect fthe real economy. The high degree of indexation is also 
responsible for the occurrence of massive speculative capital inflows. These capital 
inflows endanger the ability of the central bank to control monetary aggregates. They 
also slow down the disinflationary process. Moreover, if they are sterilised they are 
the source of additional budgetary expenditures. Finally, they are always subject to 
possible reversal and put the country's currency under severe strains. In early 1996, 
the Slovenian authorities have introduced capital controls to limit this phenomenon. 
These measures which are in contradiction to the Europe agreement are still 
operational. 
The Slovenian exchange rate regime has been a managed float since mid-1992. In 
practice the Slovenian Tolar has shadowed the Deutsche Mark. The exchange rate 
policy combined with a positive inflation differential and a highly indexed economy, 
led to a massive speculative capital inflow in the period 1992-1994. In 1995, the 
Slovenian authorities relaxed their exchange rate stance and after an initial 
appreciation, the exchange rate has been depreciating slowly. The current account is 
virtually balanced. 
Conclusion 
It is premature to judge whether Slovenia will be in a position, by the time of its 
accession, to participate in the euro area; that will depend on the success of its 
structural transformation permitting to attain and to adhere permanently to the 
convergence criteria, which are not however a condition of accession. 
Slovenia's participation in the third stage of EMU as a non-participant in the euro area 
should pose no problems in the medium term. However, it is important that central 
bank legislation is made fully compatible with EC rules and that the banking sector 
is restructured. Finally, monetary policies able to curb speculative capital inflows 
without resorting systematically to capital controls should be adopted. 
Taxation 
The acquis in the area of direct taxation mainly concerns some aspects of corporation 
taxes and capital duty. The four freedoms of the EC Treaty have a wider impact on 
national tax systems. 
The indirect taxation acquis consists primarily of harmonised legislation in the field of 
Value Added Tax and excise duties. This includes the application of a non-
65 
cumulative general tax on consumption (VAT) which is levied on all stages of 
production and distribution of goods and services. This implies an equal tax 
treatment of domestic and non-domestic (import) transactions. The VAT acquis also 
contains transitional arrangements for the taxation of transactions within the European 
Union between taxable persons. In the field of excise duties the acquis contains 
harmonised tax structures and minimum rates of duty together with common rules on 
the holding and movement of harmonised excisable goods (including the use of fiscal 
warehouses). As a result of the introduction of the Single Market, all fiscal controls at 
the Community's internal frontiers were abolished in January 1993. 
The mutual assistance between Member State tax authorities is an important feature of 
administrative cooperation in the Internal Market; the respective Directive covers both 
direct and indirect taxation. 
The Europe Agreement contains provisions on approximation of legislation in the area 
of indirect taxation. 
The White Paper contains as Stage I measures those which make up the main 
requirements of the indirect taxation acquis (essentially, those measures applied in the 
Community up to 1993), and as Stage II measures those which are in addition 
necessary to implement the full indirect taxation acquis. 
Descriptive Summary 
Direct Taxation 
The two company taxation Directives and the Arbitration Convention provide for a 
mechanism which applies on the basis of reciprocity. Respective provisions can 
therefore by definition not be expected to exist before accession. 
Indirect Taxation 
Nearly 70%» of the fiscal revenue over the past four years has been generated through 
indirect taxes, (i.e. the sales tax and customs duties), and this has continued on an 
upward trend. 
Value Added Tax 
At present Slovenia does not operate a Value Added Tax system. Instead it operates a 
system of single-stage sales tax on final consumption which bears little resemblance 
to the value added system applied within the Community. 
Excise 
Slovenia does not yet have a system of excise duty. Instead, ad valorem rates of duty 
apply on mineral oils, alcoholic beverages and tobacco products except cigarettes. 
66 
Mutual Assistance 
The tax administration has not yet had to develop its capacity for mutual assistance 
with the tax authorities of Member States, since mutual assistance is a feature which 
would only become applicable on accession. 
Current and Prospective Assessment 
Value Added Tax 
Slovenia's membership of the European Union would require the introduction of a 
Community based VAT system. The current Slovenian draft VAT law has been based 
upon the main principles of the Community VAT system but will require some 
additional adjustments to bring the VAT legislation into line with the requirements of 
the Community acquis. 
The Slovenian national strategy plan for implementing the recommendations of the 
White Paper regarding VAT envisages the introduction of a VAT system. A proposal 
for the introduction of a VAT system has been submitted to the Slovenian National 
Assembly for adoption. The VAT Act is planned to enter into force on 1 January 
1999. 
Excise 
The current excise duty system does not comply with Community requirements, and it 
discriminates against certain imported commodities in favour of domestically 
produced products. 
A draft law on excise duty has been prepared and is going through the Slovenian 
National Assembly with an anticipated implementation date of 1 January 1999. The 
section dealing with scope, coverage and exemptions is comprehensive and in accord 
with the terms of the EC Directives relating to harmomsation of the structures of 
excise duties. The section dealing with procedures is less well developed. It provides 
for the introduction of intra-warehouse movement under suspension of duty, and an 
accompanying document system on the lines of the document required by the 
Community excise legislation. 
It will be important to ensure that the excise tax reform will be fully implemented and 
effectively operated in a way which is consistent with the EC provisions on the 
holding and movement of goods. 
Mutual Assistance 
There would also be a need, on accession, to implement the appropriate arrangements 
for administrative cooperation and mutual assistance between Member States. These 
requirements are essential for the functioning of the Internal Market. 
67 
Conclusion 
The acquis in respect of direct taxation should present no significant difficulties. 
Although legislation is in preparation, in the absence at present of a VAT or excise 
system it must remain open to doubt whether Slovenia could comply with the acquis 
in the medium term. 
It should be possible to start participating in mutual assistance as the tax 
administration develops its expertise in this respect. 
Statistics 
The main principles of the Community acquis relate to the impartiality, reliability, 
transparency, confidentiality (of individual information) and dissemination of official 
statistics. In addition there exists an important body of principles and practices 
concerning the use of European and international classifications, systems of national 
accounts, business registers, and various categories of statistics. 
The Europe Agreement provides for cooperation to develop effective and reliable 
statistics, in harmony with international standards and classifications. 
The White Paper includes no provisions in this field. 
Descriptive Summary 
The Statistical Office of Slovenia (SO) is the central body charged with producing and 
disseminating official statistics in Slovenia. 
The legal basis for Slovene official statistics consists of the 1995 Law on National 
Statistics. 
Current and Prospective Assessment 
Slovene legislation is, with very few exceptions, compatible with the current 
standards applied within the European Union. 
Some issues of confidentiality need clarification, and there are deficiencies in sectors 
such as financial accounts, agricultural statistics, and foreign trade statistics. 
Conclusion 
Slovenia should be able to comply with EU requirements for official statistics within 
the next few years. 
68 
3.4 Sectoral Policies 
Industry 
EC industrial policy seeks to enhance competitiveness, thus achieving rising living 
standards and high rates of employment. It aims at speeding up adjustment to 
structural change, encouraging an environment favourable to initiative, to the 
development of undertakings throughout the Community, and to industrial 
cooperation, and fostering better exploitation of the industrial potential of policies of 
innovation, research and technological development. EU industrial policy is 
horizontal by nature. Sectoral communications aim at transposing horizontal concepts 
into specific sectors. EC industrial policy results from an articulation of instruments 
from a number of Community policies; it includes both instruments related to the 
operation of markets (product specification and market access, trade policy, state aids 
and competitions policy) and measures related to industry's capacity to adapt to 
change (stable macro-economic environment, technology, training etc.). 
In order to cope with competitive pressure and market forces within the Union, the 
industry of applicant countries needs to have achieved a certain level of 
competitiveness by the time of accession. The applicant countries need to be seen as 
pursuing policies aimed at open and competitive markets along the lines set out in 
Article 130 ("Industry") of the Treaty. Cooperation between the EC and the 
candidate countries in the fields of industrial cooperation, investment, industrial 
standardisation and conformity assessment as provided for in the Europe Agreement is 
an important indicator of development in the right direction. 
Descriptive Summary 
Slovenia has a small industrial sector, commensurate with the size of the country. The 
total production of Slovene industry is at present in the order of 5.3 billion Ecu or less 
than twice the industrial production of Luxembourg, and its share in GDP has 
decreased from 37% in 1990 to 32% in 1995. The manufacturing sector consists of 
slightly more than 8,000 enterprises of which more than 90% are private owned; 
several hundreds of enterprises are still "socially-owned". As yet there is no statutory 
legislation established for state-owned enterprises which cover about 30% of the 
Slovene economy. The degree of concentration is high as 570 companies account for 
80% of industrial employment, turnout and exports. The most important sectors are 
chemicals, electrical and mechanical engineering, automotive products, textiles and 
clothing, and paper and wood products. 
Slovenia has managed to build on its past position as the most sophisticated 
manufacturing centre of former Yugoslavia where its industries specialised in, 
processing raw materials and semi-manufactured goods from the southern republics. 
Its post-independence recovery has so far largely been a success story recovering well 
from the loss of most of its former Yugoslav markets. The industry has become more 
export oriented and the import regime is liberal. The government is committed to 
further liberalisation and elimination of non-tariff barriers. Horizontal support 
policies, in particular as regards small and medium enterprises, regional development 
69 
and enterprise targeted research and development, are still at an early stage of 
development. 
However, industrial production slowed down in 1995 and 1996, due inter alia to weak 
demand in some key export markets, the high level of the Tolar and reduced 
competitiveness in terms of labour costs. Other factors which have contributed are 
high interest rates, foreign capital restrictions, and slow legislative adaptation. As a 
result, investment levels and modernisation of industry have suffered. Sectors 
particularly affected are paper, textiles and clothing, leather, food products, iron and 
steel, printing; however, other sectors such as electrical engineering, non-ferrous 
metal processing, chemicals and wood products operate relatively well. 
Privatisation of Slovene industry has run into some difficulty, although many 
companies are well managed and relatively well equipped, mainly due to the 
complexity of the mix of a voucher system, management buy-out options, and other 
methods. Public utilities have not been privatised so far. Foreign direct investment is 
relatively low (1% of GDP), despite very little perceived political risk. 
Slovene industry, main production sectors in 1995 
% share 
industrial 
GVA number of 
companies % share 
industrial 
employment 
Raw material processing (steel, 
metallurgy, cement , glass, ceramic, 
paper, wood) 
Mechanical & electronic engineering 
Textiles, clothing, leather/shoes 
Foodstuffs 
Automotive 
Chemicals 
Pharmaceuticals 
Information technologies 11 
15.5 
9 
7 
5 
6 
5.5 
2.5 924 
1027 
624 
280 
1 
468 
12 
332 17.5 
20 
14 
6 
5 
5 
2 
2.5 
Total 100 
Industrial production as % of GDP 32 100 
In comparison with other CEECs the productivity of basic sectors (metallurgy, steel, 
glass, ceramics, wood-paper cement) is relatively high. The industrial structure in 
these sectors is characterised by a predominance of SMEs. There are no important 
capacity surpluses. Privatisation is advanced in most of these sectors. 
The steel industry is very small and privatisation is slow. Slovenia shows a relatively 
high degree of specialisation and strong export capacity in the non-ferrous metals 
sectors (in particular aluminium), but also in tires and paper. 
70 
Slovenia has an advantage in having a more modern forest-based industries sector 
than neighbouring CEECs and a correspondingly higher level of inward investment, 
especially from EU companies. The sector is small but quality is often on EU level (in 
particular for pulps, paper and printing applications). Hence, Slovenia can be 
considered as an emerging competitor to EU producers in some niche markets in the 
paper sector, as witnessed by significant exports. The high level of privatisation has 
been an important factor behind this positive performance. 
Textile and clothing: The majority of the companies in this industry are SMEs but 
production is concentrated, in a few major companies. Net investments in clothing 
correspond to disinvestment in the textile subsector, indicating a specialisation down­
stream of the production chain. Wage costs are among the highest in the CEECs 
(although still lower than in the EU). FDI is focusing on new technologies and 
equipment modernisation. The textile/clothing industry is already integrated into the 
European "filière" especially because of widespread outward processing trade (OPT), 
which underlies three quarters of total exports of clothing. 
Foodstuffs industry: This sector is small in relation to the size of the market, highly 
fragmented, and weak. 
The only automotive producer of importance is a subsidiary of a French car producer. 
Chemicals: this sector is small and Slovenia does not have any major petrochemical 
activities. However, there is a major tire production facility established as a joint 
venture with a German/Austrian producer which is the state of the art and a major 
exporter. The pharmaceutical industry is one of the largest in Central Europe. 
Production is highly concentrated in three companies. About 75% of production is 
exported, mainly to the CEECs. Slovenian firms have also begun to market some 
generic drugs in EU markets. The sector fully harmonised with relevant EC legislation 
and product patent protection has been introduced. Enforcement remains a problem, 
however. 
The information technology (IT) industry is small but in good shape. It has emerged 
from ex-Yugoslavia's long-term technological development programme which placed 
electronics as a priority of national economic development. Slovenia has a remarkable 
tradition in electrical and electronic consumer products (both brown and white 
products), with substantial exports to the EU. Production is mainly based on licences 
from major multinationals 
Demand forecasts for the IT sector in Slovenia are optimistic. The leading company 
for production of telecom equipment can probably participate further in the world­
wide growth as it supplies major global corporations with components and 
assemblies. 
Current and Prospective Assessment 
Slovenian industry started from a productivity level that was much higher than in the 
other applicant countries and which is probably already now comparable to that of 
some Member States. However, progress has been slow over the last few years, due to 
71 
an only moderate investment rate and slow privatisation. FDI has been limited by 
restriction on land ownership, capital controls and slow privatisation and has so far 
financed only about 5 per cent of all investment, one of the lowest rate in all 
applicant countries. 
While transformation of ownership has advanced in the majority of socially-owned 
companies, their restructuring is in most cases still to be undertaken. Obstacles are 
the under-capitalisation of enterprises due to the prevailing pattern of management 
buy-outs and the high real interest rates which are aimed at avoiding large current 
account deficits and keeping inflation under control, but which curb enterprise 
investment. The national authorities will also need to define a proper strategy for the 
future management or privatisation of state-owned enterprises and public utilities. 
Effective regulatory systems are to be set up. There is scope for improving the quality 
and efficiency of the services to the public and private sector. Continued price 
liberalisation would further support the efficient allocation of resources. Foreign 
investments could play an important role to improve competition and efficiency. 
In early 1997 the Slovenian government presented its new strategy for increasing the 
competitiveness of Slovenian industry which sets out a wide range of measures 
compatible with the orientations given by Art. 130 of the Treaty. Implementation has 
started recently, though partly by way of measures incompatible with EC disciplines 
such as on state aid control. Further progress on industrial competitiveness depends 
on implementation of the strategy, by both industry itself and the Slovene 
government. 
Conclusion on Industrial Competitiveness 
The current level and perspective for competitiveness of most of the Slovene industry 
enables a positive expectation on its capacity to cope with the competitive pressure 
and market forces within the Union in the medium term. There may however be 
problems linked to certain labour market rigidities and for those sectors and 
companies which have not yet undergone restructuring. 
An evaluation of the acquis specific to the free circulation of industrial goods is to be 
found in the separate section on the internal market. 
Agriculture 
The Common Agricultural Policy aims to maintain and develop a modern agricultural 
system ensuring a fair standard of living for the agricultural community and the 
supply of goods at a reasonable price for consumers, and ensuring the free movement 
of goods within the EC. Special attention is given to the environment and rural 
development. Common Market Organisations exist to administer the CAP. These are 
complemented by regulations on veterinary health, plant health and animal nutrition 
and by regulations concerning food hygiene. Legislation also exists in the area of 
structural policy, originally developed primarily to modernise and enlarge agriculture, 
but more recently with an increasing emphasis on the environment, and the regional 
72 
differentiation of the policy. Since reforms in 1992, increasing contributions to farm 
support have come from direct aid payments compensating cuts in support prices. 
The Europe Agreement provides the basis for agricultural trade between Slovenia and 
the Community and aims to promote cooperation on the modernisation, restructuring 
of Slovenia's agriculture sector as well as the agro-industrial sector and plant health 
standards. Prior to ratification of this Agreement, the Interim Agreement is regulating 
a preferential trade in the field of agriculture. The White Paper covers the fields of 
veterinary, plant health and animal nutrition controls, as well as marketing 
requirements for individual commodities. The purpose of such' legislation is to 
protect consumers, public health and the health of animals and plants. 
Descriptive Summary 
Agricultural Situation 
The value of the agricultural production 1995 was approximately 0.56% of that of 
the Union. 
Agriculture has a modest place in Slovenia in terms of GDP, employment and 
export earnings. However, it plays an important role as an economic and social 
stabiliser. Agriculture accounts for 4.3% of the GDP and around 7% of 
employment. 
About 92%o of the agricultural land is privately owned while the remaining 8% is 
owned by the state. There are 156,000 holdings in Slovenia, of which 82% have 
less than 10 ha. About 46,000 of these holdings are household plots. The 
Slovenian farm sector therefore faces a substantial challenge of structural 
adjustment, particularly in sectors without price support measures in the EC (pig, 
poultry and egg production). 
Out of a total area of two million ha about 50% is covered by forest and about 
39% is agricultural land. About 70% of the agricultural land is in less-favoured 
hilly and mountainous regions, mainly used for permanent pasture. Only 30% of 
the agricultural area, or 250,000 ha, is arable land. 
The most important arable crops are cereals (45% of arable land), fodder (30%) 
and potatoes (10%). Agricultural production is equally shared between crop 
(52%) and livestock production (48%). 
Slovenia is a net importer of food and agricultural products (self-sufficiency: 
84%). In 1995 it produced 535,000t cereals, 449,000t potatoes, 65,000t sugar 
(included imported raw sugar for processing), 700,000hl wine, 590,000t milk, 
36,000t beef, 58,000t pigmeat and 56.000t poultry meat. The most important 
sectors producing surplus for exports are wine, hops, poultry and dairy. However 
the external trade in agricultural products represents a limited role in the overall 
trade balance (4% of exports, 8.2% of imports). The total agricultural imports 
amount to ECU 612 Mio and the export to ECU 262 Mio. While the EC is an 
73 
increasingly important trading partner in agricultural products (EU-15: 55% of 
imports, 30% of exports) the former Yugoslavia remains Slovenia's most 
important export market (53%» of export in 1996). 
Although the agro-food industry is relatively well structured and benefits for the 
most part from the same technological methods as used in the EC, the industry is 
suffering from low utilisation of capacity and would need to adapt to EU-quality 
standards. 
However the privatisation process has not been completed. About 10% of the 
sector has not yet been privatised, amongst which the most important companies. 
Agricultural Policy 
Slovenia started to implement its own agricultural policy in 1991. This policy 
was consolidated with the adoption of the "Strategy for Agricultural Development 
of Slovenia" in 1993 putting special emphasis on sustainable rural and agricultural 
development with recognition of ecological and social aspects. The support 
policies include the following main elements (i) price control for milk, sugar, 
wheat and flour; (ii) input subsidies, credit and investment support; (iii) external 
border protection an export aid. 
Agricultural prices in Slovenia are generally higher than in other CECs, and in 
most cases higher than the lowest price registered in the EU markets. Wheat prices 
are substantially higher than EC prices due to higher support prices for bread 
making wheat in Slovenia. 
The main policy measures in sectors with market organisations are similar, or 
close to, EC policies. However, a number of sectors have very few market 
intervention mechanisms other than external trade protection. Rural development 
is an essential element of Slovenian agricultural policy, and a number of the 
policy measures are aimed at attenuating unfavourable production conditions for 
farmers in hilly and mountainous regions and promoting extra-agricultural 
economic activity such as production of higher value-added speciality products, 
tourism, etc. 
Slovenia is in the process of reviewing its agricultural policy with the objective of 
bringing it closer to the CAP. Direct payments, such as income aid for farmers, 
together with regional and rural development policies, are envisaged to be 
gradually introduced. Changes in the price support measures for milk were 
adopted in 1996. With envisaged implementation in 1997, direct payments 
replace price policy supporting milk production in mountainous and hilly areas. 
The share of the government's budget spent on agriculture is about 2%. Increased 
spending is envisaged by the new government in conjunction with the planned 
implementation of policy measures similar to the CAP (direct payment, rural 
development policies). 
74 
Foreign trade policy represents an important element in Slovenian food and 
agricultural policy. In 1993 Slovenia introduced a system of threshold prices and 
variable import levies. When Slovenia became a member of the WTO these 
measures were changed in accordance with the conditions of the GATT 
Agreement. Slovenia has undertaken the commitments of the GATT Agreement 
on domestic support, market access and export subsidies. Slovenia has made its 
commitments in ECUs. The limited export subsidies used so far are envisaged to 
be used for export promotion activities. The Europe Agreement with Slovenia 
was signed in 1996. 
Slovenia is also a member of CEFTA (Central Europe Free Trade Agreement). 
Agricultural market liberalisation within CEFTA will be implemented 
progressively with the intention of achieving in 1999 complete market integration 
between the contracting parties. 
Slovenian trade policy is also aimed at maintaining and restoring its markets in the 
former Yugoslavian Republics. In this framework, a free trade agreement has 
been signed with the Former Yugoslavian Republic of Macedonia (FYROM). 
Slovenia is introducing the legislation identified in the White Paper. 
Current and Prospective Assessment 
A major concern of the Slovenian Government is the pressure for structural 
adjustment in the farming sector, in particular in the mountainous regions and less 
favoured areas. To the extent to which Slovenia achieves its objectives of 
bringing its policies closer to the CAP in major sectors, there should not be major 
difficulties for Slovenia adapting to EC policies. However, domestic budget and 
human resources constraints could delay the process of approximation. 
Adjustments of certain market organisations are necessary, (i) State monopolies in 
the cereals, oilseed and sugar sector will have to be dismantled; (ii) the Slovenian 
sugar policy would need to be adapted to EC policies; (iii) the policies in the 
pigmeat, poultry and egg sectors are similar to EC policies and these sectors do 
not represent any major obstacle for accession if a new draft legislation 
introducing intervention prices and public intervention purchases in the pigmeat 
sector is not approved by Parliament; (iv) the policies applied to the dairy and beef 
sectors are different from EC policies on essential points (dairy quotas, market 
price quotation systems, etc.). 
The main market policy instruments applied in the EC are not applied in Slovenia. 
This includes key instruments such as dairy quotas, key features of the arable crop 
scheme (base area, set-aside, compensatory payments and premiums in the 
livestock sector), as well as certain rural and structural development programmes. 
Management and control of these measures would require relatively sophisticated 
administrative systems, including an appropriate land register and cattle 
identification and registration systems. 
75 
It is difficult to foresee at this stage what will be the development of agricultural 
support prices in Slovenia in the period before accession; this will depend on a 
number of factors including the domestic economy, the situation on export 
markets, and the development of price support levels in the Union. However the 
Slovenian Government has announced its intention to decrease support prices and 
move towards more targeted direct income support. 
An important element in Slovenian agricultural policy is support to reducing costs 
of production and income support in disadvantageous areas. Some of these 
policies, in particular direct input subsidies» are in conflict with the acquis while 
other policies (credit and investment policies) are within the scope of EC policies 
for structural development. 
The food processing sector could be the most affected by membership. It is 
essential that appropriate policies on increasing quality standards and productivity 
will be pursued during the pre accession period. The increased trade liberalisation 
resulting from regional trade agreements will likely accelerate the adjustment 
process through increased competition. 
Slovenia has made progress in implementing the key measures identified in the 
White Paper. With a continuation of current progress the most essential parts of 
internal market measures should be in place by the end of the decade. However, it 
is difficult at this stage to assess the degree of approximation to the acquis and to 
what extent the necessary inspection and control infrastructure is, or will be, in 
place to ensure adequate enforcement of the legislation. 
In the veterinary field approximation to, and an implementation of the acquis has 
been partly achieved. The indicated timetables for the approval and 
implementation of secondary legislation in the different sections vary from 1997 
until the year 2000. It is questionable whether the legal structure is sufficiently 
adequate to amend/implement EC legislation effectively. 
In the approximation process, further adoption would be needed with regard to the 
concept of HACCP (Hazard Analysis Critical Control Point) and auto-control, 
monitoring and surveillance programs, disease eradication, internal market control 
measures (safeguard, the license system, veterinary checks, additional guarantees, 
régionalisation), import regime (approved third countries, approved 
establishments) and the identification and registration system of animals 
(particularly back yard holdings). The facilities and professional experience at 
border inspection posts and veterinary laboratories need upgrading. The 
computerised information system, the identification and registration system of 
animals, and the rendering infrastructure need to be improved. Vaccination 
against classical swine fever is still being carried out and a change to a non 
vaccination policy is necessary but will be technically difficult. 
As regards seeds and propagation material, plant health, plant protection products, 
pesticide residues and animal nutrition, the approximation of legislation is 
76 
underway. However it will be necessary for the Commission to verify whether the 
legislation is correctly implemented. 
EC marketing standards for fruit and vegetables would need to be introduced. 
Legislation is currently being prepared to harmonize marketing requirements in 
the wine sector. Slovenia is a member of the OIV (Office International de la 
vigne et du Vin) and its legislation is harmonised with OIV resolutions. 
The adrninistration has limited management experience, and at the present stage 
the administrative structure appears to be inadequate to ensure appropriate 
implementation and enforcement of the acquis. 
Conclusion 
Further alignment to the acquis is still necessary although significant progress has 
been made in adopting the measures mentioned in the White Paper. 
Particular efforts are needed in relation to: 
- strengthening of structural and rural development policy; 
- implementation and enforcement of veterinary and plant health requirements and 
upgrading of establishments to meet EC Standards; this is particularly important 
with regard to the inspection and control arrangements for protecting the EU 
external border; 
- strengthening of the administrative structures to ensure the necessary capacity to 
implement and enforce the policy instruments of the CAP; 
- further restructuring of the agro-food sector to improve its competitive capacity. 
If such progress is accomplished, accession in the medium term should not be 
accompanied by significant problems in applying the common agricultural policy in 
an appropriate manner. 
Fisheries 
The Common Fisheries Policy includes common market organisations, structural 
policy, agreements with third countries, management and conservation of fish 
resources, and scientific research in support of these activities. 
The Europe Agreement includes provisions concerning trade in fisheries products 
with the Community. 
The White Paper includes no measures in this field. 
Descriptive Summary 
77 
The fishing sector does not play an important role in the national economy. Along the 
Adriatic coast it has local significance but the limited fishing opportunities offered by 
the Adriatic mean that it will remain small-scale. In 1995, 105 vessels caught 1,91 It 
(mostly pilchard, anchovy, sprat). Only 183 fishermen were employed. 
As a trading partner of the Community, Slovenia represents 0.05% of EU total imports 
(independently of origin) of fisheries products and 2.0%» of EU imports of fisheries 
products from the candidate countries alone (in terms of value). As regards EU exports, 
Slovenia receives 0.52% of our total exports of fisheries products and 6.2% of our 
exports of these products to the candidate countries (in terms of value). 
In the processing industry (with an employment of 300 people) the output was 2,285t in 
1995. The main product is canned anchovy. 
Current and Prospective Assessment 
Slovenia's production and foreign trade data, when compared to the corresponding EC 
figures, are quite low and therefore they should not have a significant impact upon the 
Community as a whole. 
It will be necessary for Slovenia to establish a fisheries administration which is capable 
of implementing the Common Fisheries Policy - in particular the management of 
resources, the keeping of a fishing fleet register, the application of structural policy for 
the sector, the management of the market scheme and the collection of all statistical data 
- as well as the EC's policies on health, hygiene and environmental matters. 
Conclusion 
The sector will most likely not represent a problem for accession. 
Energy 
Main EU energy policy objectives, as reflected in the Commission White Paper "An 
energy policy for the EU" include enhancement of competitiveness, security of energy 
supplies and protection of the environment. Key elements of the energy acquis 
comprise of Treaty provisions and secondary legislation particularly concerning 
competition and state aids, internal energy market (including directives on electricity, 
price transparency, gas and electricity transit, hydrocarbons licensing, emergency 
response including security stock obligations, etc.), nuclear energy, as well as energy 
efficiency and environmental rules. Development of Trans-European Energy 
Networks and support for energy R&D are other important elements of energy policy. 
Ongoing developments include liberalisation of the gas sector, energy efficiency 
acquis and the Auto-oil programme. 
In the field of nuclear energy, the Community acquis has evolved substantially from 
the original EAEC Treaty to a framework of legal and political instruments, including 
78 
international agreements. At present, it addresses issues of health and safety, 
including radiation protection, safety of nuclear installations, management of 
radioactive waste, investment including EURATOM financial instruments, promotion 
of research, nuclear common market, supplies, safeguards, and international relations. 
The Europe Agreement provides for cooperation to develop the progressive 
integration of the energy markets in Europe and includes provisions on assistance 
within the related policy areas. The White Paper preparing CEECs for the internal 
energy market underlines the need for full application of key internal market 
directives in combination with EC competition law. As to the nuclear sector, the 
White Paper refers to nuclear supply safeguards and shipments of nuclear waste. 
Descriptive Summary 
Slovenia imports more than 70% of its energy requirements, particularly oil and gas 
(30 and 10% of the energy balance respectively), but also solids and nuclear fuels. 
Indigenous resources are essentially lignite (causing serious environmental pollution) 
and low quality sub-bituminous coal represent 20% of the energy balance, but also 
some hydropower, biomass and uranium (mining stopped in 1990 and 
decommissioning is ongoing). 
Mining of solid fuels will continue in future for strategic reasons, but production has 
already decreased sharply over the last years (lignite from 5.1 to 3.9 Mt in the period 
1985-1995 and brown coal from 2.6 Mt to 1 Mt in the period 1989-1995). 
External dependency can be managed well thanks to a diversified geographical origin 
of imports and good network connections. The electricity grid is since 1974 
interconnected with the Western European UCPTE network. Oil and gas are imported 
from Russia but also from other sources. Energy efficiency is only half of the EU 
average due to its heritage of the past: low prices, obsolete and inefficient 
technologies and inadequate energy efficiency policies. 
One US Pressurised Water Reactor at Krsko supplies 20% of the electricity needs in 
Slovenia and exports 50% of its electricity to Croatia. This jointly Slovenia-Croatian 
owned nuclear plant is supervised by the Slovenian Nuclear Safety Administration 
within the Ministry of Environment and Physical Planning. Though not required by 
the acquis, an independent supervisory structure would be desirable. Slovenia should 
implement this principle included in the Nuclear Safety Convention recently ratified. 
Investments have been made to ensure that nuclear safety is maintained at a high 
level. The fact that this power plant is built on a fault line has led to further 
seismological in its surroundings. One research reactor is in operation in Ljubljana. 
Current and Prospective Assessment 
The 1996 "Strategy for efficient energy use and supply in Slovenia" is in line with 
EC-energy policy and includes: market orientation, security of energy supplies, 
protection of the environment and improvement of energy efficiency. 
79 
The competition framework in the energy sector is progressively approximating with 
the directives of the internal energy market in combination with the application of EU 
competition law. Adoption of specific energy laws should be stepped up. 
Energy prices have been considerably increased, but certain prices are, for social or 
other reasons, still (cross)-subsidised and do not recover costs. Government policy is 
to increase prices by 7% per annum (in real terms) and to be on +/- 80% of average 
EU prices in the year 2000. 
Energy companies are generally state dominated monopolies but there are some small 
independent power producers. For the management of public utilities in the sector, 
statutory legislation should be established to ensure efficient management of state 
owned enterprises and to avoid distortive competition. To ensure future 
competitiveness of the companies, real price increases should be in line with 
Government targets. 
Current oil stocks (thirty days of consumption) do not comply with Cornmunityac^w/s 
on emergency preparedness foreseeing among others, ninety days of mandatory 
stocks. In the event of rapid adoption of legislation, the EC target could be reached in 
the medium term. 
Restructuring of the solid fuels sector continues and its social and regional 
consequences will have to be addressed whereas the state interventions should be 
assessed against EC state aid rules. 
Slovenia has started the development of Community conform efficiency legislation 
(e.g. labelling appliances, minimum efficiency norms) as well as environmental norms 
(e.g. fuel quality standards) but more remains to be done. In this context, it should be 
noted that investments in the Lendava refinery are needed in order to have a chance to 
compete on the already saturated European market. 
Nuclear fuel, on the basis of Slovenian uranium, was fabricated in the USA, where 
also the enrichment services were largely purchased. Spent fuel from reactors will be 
shipped back to the USA. 
The common nuclear materials supply policy of security through diversification of 
sources will apply to Slovenia for supply contracts concluded after accession. From a 
long term supply perspective in an enlarged EU it would be desirable for Slovenia to 
procure at least part of its uranium needs on the basis of long term contracts. 
Spent fuel from Krsko is stored in the plant pool and its capacity may be increased. 
Interim storage in dry casks could also be envisaged. Some of them could be stored in 
Croatia which benefits from the electricity produced at Krsko. However, the long 
term final disposal of spent fuel is not yet defined and should therefore be further 
analysed. The Government has started to collect funds for the decommissioning of 
the Krsko plant at the end of its operation. 
80 
Upon accession, Slovenia would need to comply with the provisions of the Euratom 
Treaty, in particular those related to supply of nuclear material, the nuclear common 
market, safeguards, health and safety and international agreements. The country has 
not yet adhered to or fully implemented all the relevant international regimes in these 
fields inter alia Nuclear Suppliers Guidelines, IAEA extended reporting and accession 
to the Nuclear Energy Agency of the OECD) but has a full-scope safeguards 
agreement in force with the IAEA. No major difficulties in applying Community 
legislation in these areas are however expected. Specific attention should be given to 
the operation safety of the Nuclear Power Plant. The independence of the safety 
authority should be supported. 
Conclusion 
Provided that current efforts are maintained energetically, Slovenia should be in a 
position to comply with most of the EC energy legislation in the next few years. 
However, matters such as the adjustment of monopolies including import and export, 
access to networks, energy pricing, state interventions in the solid fuels, emergency 
preparedness including the building up of mandatory oil stocks and the development 
of energy efficiency and fuel quality standards need to closely followed. 
No major difficulties are foreseen for compliance with Euratom provisions but 
Slovenia should adhere to, or implement fully, certain international nuclear 
agreements. Nuclear safety standards should be handled appropriately and longer 
term solutions for nuclear waste will have to be found. 
Transport 
Community transport policy consist of policies and initiatives in three fundamental 
areas: 
• Improving quality by developing integrated and competitive transport systems 
based on advanced technologies which also contribute to environmental and safety 
objectives. 
• Improving the functioning of the single market in order to promote efficiency, 
choice and user-friendly provision of transport services while safeguarding social 
standards; 
• Broadening the external dimension by improving transport links with third 
countries and fostering the access of EU operators to other transport markets (The 
Common Transport Policy Action programme, 1995-2000). 
The Europe Agreement provides for the approximation of the legislation with 
Community law and cooperation aiming to restructure and modernise transport, the 
improvement of access to the transport market, the facilitation of transit and the 
achievement of operating standards comparable to those in the Community. The 
White Paper focuses on measures for the accomplishment of Internal Market 
conditions in the transport sector, including such aspects as competition, legislative 
harmomsation and standards. 
Descriptive Summary 
Slovenia has traditionally been a transit route for traffic with Greece and Asia Minor; the 
infrastructure was developed accordingly. The political changes at the end of the 80s, 
together with the war in ex-Yugoslavia, led to a major reorientation of traffic flows, with 
a sharp fall in Northwest-Southeast traffic and a gradual rise in traffic on the Southwest-
Northeast axis, with much of the latter using road infrastructure not built for such traffic 
volumes. The advent of peace should restore Slovenia's role as a transit route between 
Greece and the rest of the Union, and there may be some new constraints on 
infrastructure. Slovenia is in the middle of a major programme of investment in 
improvements to its road network, mainly at this stage on the Southwest-Northeast axis; 
it will also need to improve border crossing infrastructures to cope with growing 
demand for traffic to and from Croatia. As a transit country, the fact that land and sea 
borders with Croatia are not yet fully demarcated could eventually cause problems. 
Current and Prospective Assessment 
As regards completion of the internal market, Slovenia has made substantial progress 
towards adopting the acquis despite being the last country to conclude an association 
agreement with the EC. Slovenia's international transport sector already largely 
applies, or is well on the way to applying rules similar to the Union's, in particular in 
the air, maritime, combined transport, road passenger transport and road haulage 
fields. The absence of statutory legislation for state-owned companies hinders the 
establishment of a transparent market organisation. In the rail sector, care should be 
taken to ensure, in the coming years, effective application of the acquis in the public 
service aspects and standardisation of accounts. Slovenia should be able swiftly to 
integrate into the internal market for transport subject to alignment of its road tax 
system on the acquis in this field and an opening-up of the road haulage market. 
The development of an integrated and competitive transport system is an objective of 
which the Slovenian authorities are aware; achieving an acceptable level of safety and 
optimal use of the transport system are likely to be the two main difficulties. 
Slovenia's progress on safety is satisfactory on the whole. In contrast, the objective of 
coherence in the transport system appears harder to attain. Slovenia is likely to face a 
steady rise in the share of road transport and will have to focus its efforts on the use of 
railways. 
In order to improve links with the Member States and its neighbours, Slovenia is 
planning to invest about ECU 2.2 billion of its own budget over the period 1995-99 in 
transport infrastructure used by international traffic, primarily on trans-European 
corridors. This sum amounts to about 2.9% of GNP, a respectable figure. 
Conclusion 
Slovenia has made notable and rapid progress in the adoption of the acquis in the 
transport sector. Provided that it makes additional efforts on the operation of its road 
haulage market (in particular on market access and tax) and clarifies the financial 
procedures in the rail sector - measures which are perfectly achievable - the transport 
82 
sector is unlikely to pose major problems as regards adoption of the internal market 
acquis. 
It will be necessary to make sure, however, that the resources are available which are 
needed to lay the foundations for the future trans-European transport network extended 
to the applicant countries. 
Small and Medium Enterprises 
EU enterprise policy aims at encouraging a favourable environment for the 
development of SMEs throughout the EU, at improving their competitiveness and 
encouraging their Europeanisation and internationalisation. It is characterised by a 
high degree of subsidiarity. The complementary role of the Community is defined 
and implemented through a Multiannual Programme for SMEs in the EU. This 
programme provides the legal and budgetary basis for the Community's specific SME 
policy actions. The acquis has so far been limited to recommendations on specific 
areas, although legislation in other sectors also affects SMEs (e.g. competition, 
environment, company law). 
The Europe Agreement provides for cooperation to develop and strengthen SMEs, in 
particular in the private sector, inter alia through provision of information and 
assistance on legal, administrative and tax conditions. The White Paper contains no 
specific measures. 
Descriptive Summary 
Small and medium-sized enterprises constitute the large majority of the Slovene 
enterprise sector. Since 1988, individuals are allowed to set up their own private 
company (Law on Enterprises and Law on Crafts). The privatisation process, which is 
now in its final phase, has led to the break up of a number of larger industrial companies 
into medium-sized enterprises. 
The Ministry of Economic Affairs has presented a strategy which, inter alia, foresees the 
decentralisation of SME development towards the local level. The Chamber of 
Economy and the Chamber of Crafts, with compulsory membership, are also present at 
local level. 
The main policy measures include profit tax discounts for start-ups and small enterprises 
for the first four years and rebates for the import of foreign machines and raw materials 
(especially for export-oriented companies). Credit guarantees are arranged through a 
fund for SMEs and locally by municipal funds. Further, there are training and 
international promotion supports, and links with small business associations of 
neighbouring countries. These measures concern the companies with less than 50 
employees since those are the companies classified as "SMEs" in Slovenia. 
Current and Prospective Assessment 
83 
The government recognises some weaknesses in its SME development policy, 
especially regarding the coherency and the coordination of the various action 
programmes. This situation should be improved in the years to come. Small and 
medium enterprises form an important innovation and export potential in Slovenia. 
With a view to supporting the development of a competitive enterprise sector enabling 
Slovenia to catch up with economic development in the EU these assets merit support. 
The ongoing efforts to strengthen the SMEs during the pre-acçession period will 
therefore need to be continued. 
Conclusion 
There are no specific problems foreseen regarding Slovenia's future participation in this 
sector. 
3.5 Economic and Social Cohesion 
Employment and Social Affairs 
Community social policy has been developed through a variety of instruments such as 
legal provisions, the European Social Fund and actions focused on specific issues, 
including public health, poverty and the disabled. The legal acquis covers health and 
safety at work, labour law and working conditions, equal opportunities for men and 
women, social security co-ordination for migrant workers and tobacco products. 
Social legislation in the Union has been characterised by laying down minimum 
standards. In addition, the social dialogue at European level is enshrined in the Treaty 
(Article 118b), and the Protocol on social policy refers to the consultation of the social 
partners and measures to facilitate the social dialogue. 
The Europe Agreement provides for approximation of legislation with Community law 
and cooperation on improving standards of health and safety at work, labour market 
policies and the modernisation of the social security system. The White Paper 
mentions measures for approximation in all the areas of the acquis. 
Descriptive Summary 
In Slovenia there are a number of trade unions, including four major ones. The 
employers are mainly represented by four organisations. At national level the tripartite 
social dialogue functions well. Further development of the social dialogue will be 
supported by the planned adoption of a new framework law on Labour Relations. 
According to ILO methodology, the unemployment rate was 7.3% in 1996. The 
Slovenian registered unemployment figures are higher but have an in-built tendency to 
overstate unemployment. 
Slovenia has developed a regionalised employment service structure to handle active 
labour market policy. 
84 
Slovenia has the same type of financing problems in the area of social security that are 
encountered in most European countries. In 1994, the part of GDP spent on social 
security was similar, at 25% of GDP, to that of many member states. Unless the social 
insurance system is reformed, a widening deficit will strain the national budget in the 
near future. Some of the changes in the system, however, may increase the risk for 
some groups to fall through the net of social protection. Social assistance schemes as a 
means of last resort are rather poor. Continued efforts are required to ensure that 
measures of social protection are developed. 
The overall situation of public health in Slovenia is comparable to EU levels. 
Current and Prospective Assessment 
In Slovenia, work on the approximation of health and safety legislation is still in an 
initial phase. Although no timetable has been indicated by Slovenia, the 
approximation process to the EU acquis is underway. Appropriate independence of 
the existing labour inspection structures in compliance with ILO Convention No. 81 
has to be guaranteed. 
The main principles of European labour law have already been introduced into 
Slovenia's legal system. Some adaptations are still necessary concerning the 
protection of employees in case of a transfer of the undertaking and the setting-up of a 
guarantee institution to protect employees in the event of insolvency of their employer. 
Smaller amendments are needed conceming collective dismissals, the information of 
employees on the working conditions applicable to their work contract as well as 
concerning the existing working time regime. Even if there is already a system of 
works councils in force, the social dialogue on company level needs to be developed. 
A new labour code is being prepared to secure full compliance with the acquis. 
Generally, the continuation of policies to modernise the labour market should be 
encouraged. 
The main provisions of EC legislation concerning the equal treatment of men and 
women are covered by the Slovene national legislation. Adaptation of the rules for 
parental leave is needed. 
Concerning the right to the free movement of workers, there would appear to be no 
obstacles to prevent Slovenia from being able to implement the provisions of the 
acquis in this area. The introduction of the right to free movement will however 
require changes in the national law, particularly as regards access to employment and 
a treatment free from discrimination on grounds of nationality. 
In the field of social security for migrant workers, accession does not, in principle, 
pose major problems, but certain technical adaptations will be necessary. More 
important is the administrative capacity to apply the detailed co-ordination rules in 
cooperation with other countries. Slovenia appears to have many of the administrative 
structures necessary to carry out these tasks, but further preparation and training will 
be necessary prior to accession. 
85 
The Directives on the warning labelling of cigarette packages and the maximum tar 
content have not yet been transposed into Slovene legislation. 
Conclusion 
In the social policy field, Slovenia has already taken a number of significant steps in 
preparation for its future EU-membership. Social reforms should be continued and the 
social dialogue should be developed. If Slovenia persuades her efforts, she is likely to 
be able to take on the obligations of EU membership in the medium term. 
Regional Policy and Cohesion 
In accordance with Title XIV of the Treaty, the Community supports the 
strengthening of cohesion, mainly through the Structural Funds. Slovenia will have to 
implement these instruments effectively whilst respecting the principles, objectives 
and procedures which will be in place at the time of its accession. 
The Europe Agreement provides for cooperation on regional development and spatial 
planning, notably through the exchange of information between local, regional and 
national authorities and the exchange of civil servants and experts. The White Paper 
mentions no specific measures. 
Descriptive Summary 
Slovenia's aggregate GDP has registered positive growth rates since 1993 and was at 
some 59% of the EU average in 1995. After having grown with an annual average of 
nearly 6% from 1990 to 1995, figures suggest a declining trend of unemployment 
amounting to approximately 7%. 
The present legal basis for Slovenia's regional development initiatives is the law on 
"Stimulation of Development in demographically Endangered Areas" adopted at the 
very end of 1990 which covers 61% of the territory and 24.6% of the population. 
According to this law, the State provides cofinancing of infrastructure development 
projects at local level including public services and soft loans for economic activities 
(SMEs). 
Recently, a law on Regional Development Promotion has been submitted to the 
national Parliament defining three types of problem areas in line with current EU 
practices (1.2 and 5b) and a border zone within the 10 km area distance from the 
border (to participate in Interreg-Phare programmes). This law also suggests the 
establishment of Regional Development Councils and the establishment of a 
comprehensive information system. Spatial planning is defined in the long and mid 
term plans under the responsibility of the local self government. 
The Ministry of Economic Relations and Development is in charge of regional 
development, the Ministry of Environment and Physical Planning deals with spatial 
86 
planning. Twelve functional planning regions were created but without elected 
representations or established administration. Since 1995 local administration is 
organised on the basis of 147 local authorities. The Law on Public Administration 
defines the competencies of these local bodies. 
Slovenia's financial instruments at the disposal of regional development initiatives are 
limited. However, the share of development related expenditures which could 
constitute potential counterpart funds to EC structural policy cannot yet be 
determined. Therefore, Slovenia's cofinancement capacity cannot presently be 
evaluated with sufficient reliability. 
Current and Prospective Assessment 
A new law on regional development is under preparation and the Government decided 
in November 1996 to establish an inter-ministerial Task Force for the development of 
a national policy in this field. 
However, ministerial responsibility for regional development policy and spatial 
planning is in need of strengthening. In addition, the institutional structure seems 
embryonic with low interministerial co-ordination. 
Nevertheless, a clear political awareness seems to prevail in Slovenia as to the need 
for a regional policy and the establishment of administrative and budgetary procedures 
able to channel the EU structural actions. " 
Conclusion 
Slovenia is currently establishing a regional development policy adapted to its 
regional disparities. Given the small size of the country, Slovenia's regional policy 
should be formulated within the framework of its national development strategy. 
Although some provisions are still to be implemented, Slovenia's administrative 
capacity seems sufficient to implement integrated regional development programmes 
efficiently. Subject to these necessary modifications, Slovenia should, in the medium-
term, be ready to apply the Community rules and channel the funds from the EC 
structural policies. 
3.6 Quality of Life and Environment 
Environment 
The Community's environmental policy, derived from the Treaty, aims towards 
sustainability based on the integration of environmental protection into EU sectoral 
policies, preventive action, the polluter pays principle, fighting environmental damage 
at the source, and shared responsibility. The acquis comprises approximately 200 
legal acts covering a wide range of matters, including water and air pollution, 
management of waste and chemicals, biotechnology, radiation protection, and nature 
protection. Member states are required to ensure that an environmental impact 
87 
assessment is carried out before development consent is granted for certain public and 
private projects. 
The Europe Agreement stipulates that Slovenian development policies shall be guided 
by the principle of sustainable development and should fully incorporate 
environmental considerations. It also identifies environment as an area for bilateral 
cooperation, as well as for approximation of legislation to that of the Community. 
The White Paper covers only a small part of the environmental acquis, namely 
product-related legislation, which is directly related to the free circulation of goods. 
Descriptive Summary 
There are no particular environmental hot spots in Slovenia. However, there are 
important, and in some cases growing, problems, mainly in water quality and waste 
management, but also in air and soil pollution. 
Surface and ground water quality has deteriorated in recent years, because of waste 
water originating from agricultural run-off, discharge of untreated municipal and 
industrial waste water, and leakage from industrial and municipal waste disposal sites. 
The quality of drinking water is low and there is little treatment of waste water though 
Slovenia is considering the launching of action to improve the situation. Waste 
management is an area of growing concern; here problems derive from rapidly 
growing untreated industrial and municipal waste and leakage from unregulated waste 
dumps. Power plants and, increasingly, urban traffic are the main sources of air 
pollution, which is especially important in the Ljubljana area. Acid rain has recently 
become a major problem. Extensive use of fertilisers and pesticides in agriculture 
contributes to soil pollution. Slovenia has an extraordinarily rich bio-diversity, but its 
erosion causes concern. 
Slovenia has a framework environmental legislation (Environmental Protection Act of 
1993), whose objectives and principles aim at sustainable development. A legislative 
system is also in place for air and water pollution, but there is no legislation for waste 
management, although the Government has recently adopted an extensive strategy for 
this area. On the whole, secondary legislation on implementation and enforcement is 
lagging behind. 
Financial resources allocated to the environmental sector are very limited, well below 
the EU average, and below the investment requirements as assessed by the Slovenian 
authorities for implementing their National Environmental Action Programme. 
Economic instruments include the ecological development fund and a system for fines 
and permits. 
Current and Prospective Assessment 
Slovenia's environmental legislation has begun moving into line with that of the EU, 
but gaps in sectoral and enforcement legislation remain and there is insufficient 
information on the degree of compliance of recent legislation. In addition, Slovenia 
88 
does not seem to have structures ensuring the compatibility of environmental 
legislation and policies with those of the Union. Critical for progress in achieving 
formal compliance with the acquis will be the adoption in all environrnental sectors of 
subsidiary legislation for implementation, fully compatible with existing framework 
legislation. 
In terms of White Paper measures for environment (both Stage I and Stage II), 
Slovenian legislation is partially compatible in most areas, but gaps exist in waste 
management, chemical substances and noise emission legislation. 
Current levels of substantive compliance are still below EC norms in key areas -
industry and energy sector, municipal waste and hazardous waste. Slovenia's focus 
on water quality has led to a relative neglect of compliance with other parts of the 
Community acquis, including product related directives and waste directives. 
Environmental concerns in the agricultural sector have to be addressed. Particular 
attention should be given to the quick transposition of framework directives dealing 
with air, waste, water and the Integrated Pollution Prevention and Control (IPPC) 
directive, as well as the establishment of financing strategies for legislation in the 
water, air and waste sectors requiring major investments. 
Key measures for significantly raising substantive compliance levels would include a 
major focus on raising enforcement levels, increasing the national budget for 
environmental investment, easing administrative and parliamentary bottle-necks in 
developing new legislation, and further developing economic instruments. The 
country's environmental accession strategy should include implementation timetables 
for meeting the EC environmental acquis, starting among others with implementation 
of the framework and IPPC directives mentioned above. 
Conclusion 
Full transposition of the environmental acquis in Slovenia can be expected in the 
medium-term, if current plans for new framework and secondary implementation 
legislation are realised and if the National Environmental Action Programme and 
environmental accession strategy are quickly adopted. However, effective compliance 
with a number of pieces of legislation (e.g. urban waste water treatment, drinking 
water, aspects of waste management and air pollution legislation) could be achieved 
only in the long term, and will require a significant increase in environmental 
investment, as well as a major effort to reinforce administrative capacity. 
Consumer Protection 
The Community acquis covers protection of economic interests of consumers 
(including control of misleading advertising, indication of prices, consumer credit, 
unfair contract terms, distance selling, package travel, sales away from business 
premises and timeshare property) as well as the general safety of goods and the specific 
sectors of cosmetics, textile names and toys. 
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The Europe Agreement provides for approximation of legislation with Community law 
and cooperation with a view to achieving full compatibility between the systems of 
consumer protection in Slovenia and the Community. Stage I measures of the White 
Paper focus on improving product safety, including cosmetics, textile names and toys, 
and on the protection of the economic interests of consumers, notably measures on 
misleading advertising, consumer credit, unfair contract terms and indication of prices. 
Stage II measures relate to package travel, sales away from business premises and time-
share property. New EC legislation which has been adopted recently (distance selling) 
or will be adopted soon (comparative advertising, price indication) will also need to be 
taken into account. 
Descriptive Summary 
Although Slovenia does not yet have a Consumer Protection Act, a draft law has been 
discussed for several years by Parliament. In September 1996, the government set up on 
an agency for Consumer Protection which up to now, however, seems to lack the 
necessary resources. The Ministry for Economic Relations and Development is overall 
responsible for the coordination of consumer policy. Together with the Slovene 
Consumers Association, the Ministry draws up the annual program of consumer 
protection to be adopted by the Slovene Government. Consumers are represented by 
the Slovene Consumers' Association which was founded in June 1990 as an 
independent non-government, non-profit organisation. Due to its strong role, other 
consumer movements have difficulties developing. 
Current and Prospective Assessment 
The draft Consumer Protection Act appears to be on good track to be agreed. But 
further amendments or new provisions would still be required to make Slovene 
legislation fully compatible with EC standards on consumer policy. 
On the protection of economic interests of consumers, it appears that the indication of 
the price of products and misleading advertising will only partly be regulated by the 
Slovene draft Consumer Protection Act. While the provisions on "special types of sale" 
are more protective for consumers than under the EC directive, regulations on unfair 
contract terms need to be clarified. There are important gaps in the areas of consumer 
credit, package travel and timeshare property where there appears to be few legislative 
initiatives or no legislation at all. 
The Slovene law on product safety appears to have limited coverage compared to EC 
rules, and the draft Consumer Protection Act is unlikely to include any new or wider 
provisions to protect consumers in this area. On cosmetics, the main problem with the 
expected new regulation for cosmetic products concern the definition of the product. 
New regulations in line with EC Directives are expected for textiles names and the 
safety of toys. 
The development of a strong and independent consumer movement, sustained by public 
authorities, will need to accompany the introduction of the acquis. 
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Conclusion 
In spite of the inadequate legal situation, the prospect for legislative developments in 
alignment with the EC acquis appears positive in the medium-term provided work 
continues. But efforts need to be made to realign national law with the EC acquis. 
Slovenia needs to agree urgently the draft Consumer Protection Act as well as a number 
of other amendments intended to strengthen consumer protection, notably on general 
product safety. 
3.7 Justice and Home Affairs 
The Present Provisions 
The Justice and Home Affairs (JHA) acquis principally derives from the framework 
for cooperation set out in Title VI (Article K) of the Treaty on European Union 
(TEU), "the third pillar", although certain "first pillar" (EC Treaty) provisions and 
legislative measures are also closely linked. 
The EU JHA framework primarily covers: asylum; control of external borders and 
immigration; customs cooperation and police cooperation against serious crime, 
including drug trafficking; and judicial cooperation on criminal and civil matters. The 
TEU stipulates key principles upon which such cooperation is based, notably the 
European Convention on Human Rights and the 1951 Geneva Convention on the 
Status of Refugees. It is also based implicitly on a range of international conventions 
concerning its fields of interest, notably those of the Council of Europe, the United 
Nations and the Hague Conference. The legislative content of third pillar acquis is 
different from the first pillar; it consists of conventions, joint actions, joint positions 
and resolutions, (including the agreed elements of draft instruments which are in 
negotiation). A number of EU conventions (including the 1990 Dublin Convention, 
and conventions relating to extradition, fraud and EUROPOL) have been agreed by 
the Council and are now in the process of ratification by national Parliaments; several 
other conventions, including one on external frontiers are in various stages of 
negotiation in the Council. The JHA acquis involves a high degree of practical 
cooperation, as well as legislation and its effective implementation. 
The New Treaty 
For many of the above matters, the entry into force of the Treaty resulting from the 
Amsterdam Inter-Governmental Conference will mark the end of the current 
cooperation framework. 
Reiterating the objective of developing the Union into an "area of freedom, security 
and justice", the new Treaty brings these matters, including the free movement of 
persons, asylum and immigration, into the Community's sphere of competence. 
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On the free movement of persons in particular, the new Treaty provides for the 
incorporation of the Schengen acquis into the framework of the European Union and 
binds any candidate for EU membership to accept that acquis in full. 
With regard to matters remaining within the cooperation framework, i.e. policing and 
criminal justice, the new Treaty provides for the reinforcement of the cooperation 
system. 
The Europe Agreement and the White Paper 
The Europe Agreement includes provision for cooperation in the fight against drug 
abuse and money laundering. 
The White Paper does not deal directly with third pillar subjects, but reference is made 
to first pillar matters such as money laundering and freedom of movement of persons 
which are closely related to Justice and Home Affairs considerations. Reference is 
also made to the Brussels and Rome conventions. 
Descriptive Summary 
General Preconditions for JHA Cooperation 
Slovenia joined the Council of Europe in 1993 and has ratified the most important 
instruments concerning human rights. The Constitution provides for an independent 
judiciary according to the rule of law. 
Institutional reform of JHA institutions is well under way, although there is some 
concern about the efficiency and effectiveness of the judiciary. The Constitution 
guarantees data protection, in line with EU requirements, and Slovenia has ratified the 
1990 data protection convention. A new law is in preparation, designed to modernise 
the data protection system. (See also separate section on single market). 
Asylum 
Slovenia is party to the Geneva Convention and 1967 Protocol. Currently asylum law 
is regulated by the general Law on Foreigners, but a new asylum law, in line with EU 
requirements and covering social support as well as application procedures, is in 
preparation. Very few applications for asylum have been made. However, there are 
some 8,000 temporary refugees from former Yugoslavia, who have been granted 
temporary protection. A law on temporary refuge was adopted by the Slovenian 
parliament in April 1997. 
Immigration/Border Control 
Some 190 million border crossings were made in 1995; of these some 4,200 were 
revealed to be illegal. Migrants are coming from Romania, Sri Lanka, Turkey and 
China. Slovenia follows the EU list of third countries for which visas are required and 
uses the EU standard visa format. Residence and immigration issues relating to aliens 
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are covered by the 1991 law on Foreigners. Readmission agreements are in place with 
Austria, Benelux, France, Greece Hungary, Croatia, Switzerland, Slovakia, Romania 
and Canada. Border management is thorough and effective. 
Police Cooperation 
Organised crime exists in Slovenia in the fields of arms trafficking, trafficking in 
women, prostitution, money laundering, vehicle theft, and smuggling of drugs. 
Legislation has been strengthened to help tackle organised crime more effectively, 
with specialist units being established; their level of experience is limited but their 
effectiveness is growing. Slovenia has signed the 1990 Money Laundering 
Convention. (See also separate section on single market). Slovenia experienced 
isolated incidents of political terrorism at the end of the independence war, but there 
have been no recent incidents. Slovenia is concerned about the use of its soil by 
international terrorists. It is not party to the key international terrorist conventions, 
but domestic criminal law covers terrorist activity. 
Drugs 
Slovenia is a major transit country for drug trafficking. Significant quantities of 
heroin have been seized in recent years. Domestic demand is increasing. Slovenia 
has acceded to the main international drugs conventions. Domestic legal measures to 
tackle drugs investigations are in place and there are special drugs units in the 
enforcement agencies. 
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Judicial Cooperation 
Slovenia has ratified the main criminal conventions and has in place domestic legal 
procedures relating to cooperation on criminal matters. It is party to a number of 
Hague conventions and is developing its implementation capacities on the civil side as 
well. Generally the Slovene judiciary and wider legal system is inexperienced and 
inefficient and needs reform, and human resource development to enable it to operate 
effectively. 
Current and Prospective Assessment 
There are still some gaps to be filled in Slovenia's legislation but for the most part the 
legislation is either in preparation or in place. Priorities for the near future will be 
filling the remaining gaps with regards to intemational conventions, particularly in the 
criminal field and to develop the judicial system and institutions dealing with 
organised crime. In the migration field it will be important to develop and implement 
the new asylum law in a manner which respects the EU acquis in full. 
Conclusion 
For the most part Slovenia has demonstrated its capacity to make progress on key 
JHA issues, notably immigration and border control. Assuming progress is made on 
other issues, especially with regard to the judiciary and the full adoption of the asylum 
acquis, and systems to tackle organised crime are developed further, Slovenia should 
be able to meet the justice and home affairs acquis (present and future) within the next 
few years. 
3.8 External Policies 
Trade and International Economic Relations 
The acquis in this field is made up principally of the Community's multilateral and 
bilateral commercial policy commitments, and its autonomous commercial defence 
instruments. 
The Europe Agreement includes provisions in several areas requiring parties to act in 
accordance with WTO/ GATT principles, or other relevant international obligations. 
The White Paper includes no provisions in this field. 
Descriptive Summary 
Slovenia has developed an open, trading economy and is a member of the World 
Trade Organisation (WTO). Upon accession Slovenia would have to comply with the 
obligations of the multilateral WTO agreements to which the Community is a party. 
At present Slovenia maintains quantitative restrictions on the import of textile and 
clothing products. On accession Slovenia would have to apply Community quotas on 
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quantitative restrictions. The Slovenian authorities are committed to phasing out these 
restrictions, with their elimination planned by 2005. On accession the Community 
textiles policy of the Community would be extended to Slovenia; any Community 
restrictions still maintained at the date of accession would require adjustment by an 
appropriate amount to take account of Slovenian accession. 
Current and Prospective Assessment 
On accession Slovenia would have to apply the Community's Common Customs 
Tariff, and the external trade provisions of the Common Agricultural Policy. The post 
Uruguay Round weighted average levels of most favoured nation duties for Industrial 
products will be 10.9% for Slovenia and 3.6% for the Community. 
In its relations with international organisations Slovenia should ensure that its actions 
and commitments respect the Europe Agreement and ensure a harmonious adoption of 
its future obligations as a member of the Community. 
On accession Slovenia would become party to the Community's various preferential 
agreements. Preferential agreements between Slovenia and third countries would, in 
general, have to be terminated on accession. 
In the area of trade in services and establishment Slovenia has sought to ensure that its 
multilateral commitments under the GATS are as consistent as possible with those of 
the Community; Slovenia has indicated its willingness to resolve any significant 
inconsistencies which may nonetheless come to light. 
On accession Slovenia would have to repeal national legislation in the field of 
commercial defence instruments, and EC legislation would become applicable there. 
Experience from previous accessions has shown that the automatic extension of 
existing anti-dumping measures to new member states prompts third countries to raise 
problems in terms of the compatibility of this approach with relevant WTO 
provisions. It has also shown that accession creates a potential for circumventing 
measures adopted by the Community under the commercial defence instruments. This 
happens when, prior to accession, substantial quantities of the products subject to 
measures are exported to the territory of the future member state and, on accession, 
are automatically released for free circulation in the enlarged customs territory. These 
two problems would have to be addressed during Slovenia's pre-accession phase. 
Slovenia is party to one of the four existing regimes for the non-proliferation of 
weapons of mass destruction, and is ratifying a second. Dual-use items are not 
currently subject to export control under Slovenian legislation. Arms export is 
controlled. It is questionable whether Slovenia would be able to abide by EC 
legislation upon accession since effective controls need time to be implemented. 
Slovenia should address this issue as a matter of urgency. 
Conclusion 
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Slovenia is well placed to be able to meet Community requirements in this field 
within the next few years provided, in particular, that the question of the need for 
export controls on dual-use goods, is dealt with rapidly. 
Development 
The acquis in the development sector is made up principally of the Lomé Convention, 
which runs until early 2000. 
Neither the Europe Agreement or the White Paper include provisions in this field. 
Descriptive Summary 
Slovenia has no preferential trade agreements with ACP countries, and no GSP 
schemes apply. No duty free access is granted by Slovenia. 
Slovenia has no budget for development aid, although it has contributed financially to 
the reconstruction of Bosnia and Herzegovina. 
Current and Prospective Assessment 
On accession, Slovenia should apply its preferential trade regime to the ACP States 
and participate, together with the other member states, in financing the European 
Development Fund (EDF), which provides financial aid under the Lomé Convention. 
Slovenia could confront some difficulties in applying the present Lomé trade regime 
integrally from the date of accession. 
Normally, new member states accede to the Lomé Convention by means of a protocol 
on the date of their accession to the EU. 
Conclusion 
Slovenia will need to make significant progress if it is to meet EU requirements in this 
field within the next few years. 
Customs 
The acquis in this sector is the Community Customs Code and its implementing 
provisions; the EC's Combined Nomenclature; the Common Customs Tariff 
including trade preferences, tariff quotas and tariff suspensions; and other customs-
related legislation outside the scope of the customs code. 
The Europe Agreement covers the establishment of a free trade area with the 
Community and the progressive removal of customs duties on a wide range of 
products, according to clear timetables starting from the date of entry into force of the 
agreement. 
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The White Paper includes in Stage I, measures to consolidate and streamline the free 
trade established under the Europe Agreement, including legislation compatible with 
the Customs Code, Combined Nomenclature, etc. Stage II concerns the adoption of 
the full Community legislation, with a view to joining the customs union upon 
accession. 
Descriptive Summary 
On accession the Slovenian customs authorities would be required to assume all the 
responsibilities necessary for the protection and control of their part of the EU's 
external border. Besides the provisions on indirect taxation, they would be 
responsible for the implementation and enforcement at the external border of the 
Community's common commercial policy, the common agricultural policy, the 
common fisheries policy etc. 
Slovenia's capacity fully to apply the acquis presupposes the possibility to adopt and 
implement the Community legislation; and the existence of an adequate level of 
infrastructure and equipment, in particular in terms of computerisation and 
investigation means and the establishment of an efficient customs organisation with a 
sufficient number of qualified and motivated staff showing a high degree of integrity. 
With the support of the technical assistance provided by customs programmes, 
Slovenia has achieved the adoption and entry into force on 1 January 1996 of a 
Customs code compatible with the Community's customs code and its implementing 
provisions. The legislation on customs reliefs is in great measure compatible with the 
Community legislation, but important delays exist for counterfeit and pirated goods. 
Slovenia is undertaking a continuous process of aligning its national goods 
nomenclature to the Community's Combined Nomenclature. A Slovenian Integrated 
Tariff already exists. This will greatly facilitate the comparison of the Slovenian tariff 
rates with those of the Commission Customs Tariff. 
Slovenia adopted on 1 January 1997 the new system of cumulation of origin between 
European countries. 
Slovenia has applied to become a contracting party to the EC/EFT A Common Transit 
Convention and the Single Administrative Document Convention. Slovenia has also 
applied to participate in one of the customs databases (TARIC). 
Current and Prospective Assessment 
Tax-Free shops at land borders are allowed by Slovenia under national legislation 
although the Slovenian authorities intend to comply with the Customs Cooperation 
Council Recommendation of 16 June 1960 by 1 July 1998 at the latest. These Tax-
free shops are not allowed at land borders by the Recommendation nor are they 
permitted inside the EC territory, therefore the abolition of this kind of facility will be 
a condition for accession. However, the Slovenian authorities should accelerate the 
dismantling of these shops as soon as possible. 
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It will be important that the Slovenian customs authorities can participate 
appropriately in the various computerised systems necessary for the management, in 
the customs union/internal market, of the customs and indirect tax provisions, as well 
as the computerised systems for mutual administrative assistance in customs, 
agricultural and indirect tax matters. Computerisation is at a preliminary stage of 
development in Slovenia and will need to be upgraded. 
Slovenia would need on accession to dismantle customs controls at the borders with 
EU member states and with other acceding countries. The resources needed for the 
reinforcement of the border posts along its frontiers with non-EU member states 
should be taken into account in its strategic planning. 
Conclusion 
If Slovenia continues major efforts to align its organisation and staff to the duties that 
have to be carried out by a modern customs administration, it should be able to meet 
EC requirements in the next few years. 
Common Foreign and Security Policy 
Following the declaration of independence on 25 June 1991, Slovenia has orientated 
its foreign and security policy towards the EU and NATO. Since it began 
participating in the political dialogue between the EU and the associated countries, 
Slovenia has been actively involved in the arrangements provided for under the 
Union's Common Foreign and Security Policy and whenever invited has supported 
EU actions within that framework. Slovenia is a member of the UN, OSCE, Council 
of Europe and many other international organisations. It is an associate partner of 
WEU, participates in the NACC, the PfP and has made clear its desire to become a 
member of the WEU and NATO as soon as possible. It has provided transit facilities 
for international forces en route to peacekeeping operations in former Yugoslavia; 
although it did not send troops to participate in IFOR, it has provided helicopters and 
medical equipment. Slovenia also participates in a number of regional organisations 
including CEFTA and the CEI. 
There are no territorial disputes between Slovenia and any member or associated State 
of the Union. There remain some problems, however, between Slovenia and Croatia, 
the most difficult of which is the dispute over the maritime border in Piran Bay. 
Other disputes concern the less contentious demarcation of land frontiers; property 
law; management of the Krsko Nuclear Plant; and banking claims. There are also a 
number of outstanding economic cooperation issues to be resolved with Croatia. 
Slovenia is concerned to ensure protection for the Slovene minorities in Italy and 
Austria. 
Slovenia has a new and small diplomatic staff with limited experience and resources. 
In due course, it should nevertheless be able to play a full role as a member of the 
Union. It maintains 36 representations abroad and employs 108 diplomatic staff. 
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Slovenia does not formally participate in the control regimes concerning weapons of 
mass destruction but has established contacts with the relevant organisations and has 
stated its intention of participating in all relevant international arms control treaties. 
The small Slovenian armed forces, which are under democratic control, are being 
reorganised to meet NATO requirements. There is little defence industrial capacity. 
Slovenia is currently studying EU regulations with regard to export controls of dual 
use technology with a view to introducing the necessary legislation. 
In its statement accompanying its application for membership of the Union, the 
Slovenian government confirmed that it was ready and able to participate fully and 
actively in the Common Foreign and Security Policy. 
The assessment of Slovenian foreign and security policy to date leads to the 
expectation that as a member it could fulfil its obligations in this field. 
3.9. Financial Questions 
Financial Control 
The implementation of Community policies, especially for agriculture and the 
Structural Funds, requires efficient management and control systems for public 
expenditure, with provisions to fight fraud. Approximation of legislation is moreover 
needed to allow the system of "own resources" to be introduced, with satisfactory 
provision for accounting. 
The Europe Agreement contains no specific provisions on financial control. However 
it provides for cooperation in audit, including technical assistance from the 
Community as appropriate. The White Paper includes no measures in this field. 
Descriptive Summary 
At the time of independence the audit and control of the economic sector was carried out 
by the self-managed institution, the Agency for Payments and Control (SDK), deriving 
from the Yugoslav system. The SDK carried out its function effectively within the 
Yugoslav economic system. Since independence Slovenia has had to progressively 
remove the powers of the SDK, and to transfer them to free market oriented institutions. 
In terms of external control, the National Court of Audit, created in July 1994 and 
operating from January 1995, is the supreme control body of the State exercising control 
over government accounts, the State budget and resources extended for public purposes. 
The Court of Audit is empowered to supervise the collection of public duties and taxes, 
and to control the business operations of public and also private law entities and 
enterprises as far as they receive public funds from the state budget, and of other entities 
in which the state holds an interest. Its independence is guaranteed by the Constitution. 
Reporting generally follows international audit standards. Annual reports comprise 
99 
summary information on findings, infringements and the balance of the use of funds, and 
may include recommendations for penal proceedings or investigations. 
A special parliamentary Committee on control of finances and budget exercises a political 
control on the financial management of the Government. 
In terms of internal control, the Department for Budget Inspection located in the Ministry 
of Finance verifies the various budget users' financial, material and accounting 
management according to an annual audit programme enforced by the Government. It 
covers regularity, legality and purpose of use. A preventive budgetary control is also 
secured by the Department of Public Accounting within the Ministry of Finance, and to 
some extent within each ministry. 
Three bodies are responsible for cooperating with other countries in the fight against 
fraud, depending on the nature of a case: for criminal offences, the Criminal Investigation 
Service of the Ministry of the Interior within Interpol, for violations of customs 
regulations, the Customs Directorate of the Ministry of Finance, and for financial 
operations, the Office for Money Laundering Prevention. State revenues tax control is 
carried out by the Tax Services which perform tax monitoring. 
Current and Prospective Assessment 
Following independence, international standards of financial management and control 
were introduced in line with practice in EU Member States. Several EU Regulations are 
applicable from the date of ratification of the Europe Agreement, targeting at good 
governance and the protection of the Community interests in sound management of 
Community funds. While legislation generally reflecting the acquis in the field of 
financial control has been adopted or is in the process of auoption, implementation and 
enforcement structures need to be developed and strengthened. 
There is no central authority responsible for fighting against fraud, nor is such a body 
envisaged. Internal and external control bodies have not yet reached the level of 
efficiency to be compatible with EU practice and standards. 
The customs internal control is not a specific audit platform for "own resources" and 
further cooperation with the Commission will be required to establish whether accounting 
procedures entirely fulfil the requirements of Regulation 1552/89. 
The actual reporting and follow-up procedures suffer from an unsatisfactory conceptual 
definition of the Courts Role on the one hand and excessive formalisation on the other. 
The actual situation is due to a great extent to the lack of clearly established audit concept 
as well as the lack of well trained staff. 
The National Court of Audit needs to be strengthened in order to carry out performance 
and project audits including a revision of the reporting system. The Ministry of Finance 
also requires additional resources to carry out tasks effectively. 
100 
In the agricultural sphere, a distinction should be made between ex-ante and ex-post 
control. Accounting procedures, control criteria and the framework of administrative 
sanctions in the event of irregularity should be clarified. 
Given the absence of a regional policy comparable to that of EU Member States, it is 
difficult to provide any assessment of the financial control tools in the field of regional 
development and regional development funding. Efficient monitoring, control and audit 
structures would need to be set up in this area as well as in other areas covered by the 
structural funds. 
Conclusion 
Continued efforts are necessary to strengthen financial control and audit functions. 
Budgetary Implications 
The communication entitled "Agenda 2000" sets out the overall financial framework 
which should accommodate the budget impact of any future enlargements in the 
medium term. This is to ensure that any enlargement is compatible with proposed 
Community policy guidelines within reasonable budget limits. 
As things stand, it would be difficult, not to say premature, to attempt precise country-
by-country evaluations of the budgetary implications of each of the applicants joining 
the Union. Exactly what the impact would be may vary considerably depending on a 
whole series of factors: 
the date on which the applicant country joins; 
developments in Community policies between now and then, in particular the 
decisions to be taken on further reform of the common agricultural policy and 
new guidelines for structural measures; 
the progress made by the applicant countries in terms of growth, increasing 
their competitiveness and productivity and their ability to absorb the acquis ; 
the transitional measures that will come out of the negotiations. 
Only a few orders of magnitude for certain budget categories and an overall estimate 
can be given purely as a guide. 
Expenditure 
If the common agricultural policy were to be reformed along the lines suggested by 
the Commission, once the reforms were fully up and running and in terms of just 
market intervention measures, Slovenia's accession would give rise to only marginal 
additional expenditure in relation to likely expenditure on the present fifteen Member 
States. 
Application of the other internal Community policies in the new member countries 
would be likely to involve additional expenditure probably in excess of their relative 
proportion of Union GNP, since for certain policies the additional implementing costs 
101 
also depend on the target population, the geographical area covered or the number of 
Member States involved in the coordination and harmomsation measures. The GNP of 
Slovenia is currently 0.3% of total Union GNP. 
By contrast, Slovenia's accession should not involve significant additional 
expenditure as far as Union external action is concerned. 
It should not be forgotten that when an applicant country joins, the Community 
budget will no longer have to bear the costs of grants the country was eligible for 
under the various pre-accession programmes, such as PHARE. 
In light of the above, the estimated costs in the three areas mentioned arising from 
Slovenia's accession should fall within the range of, annually, ECU 1.0 to 1.3 billion 
in 2005-06 (at constant 1997 prices). 
Revenue 
Assuming full application of the own resources system, the new members' 
contributions to the Community budget should, in terms of total GNP and VAT 
resources (taking account of the capping rules applying to VAT), be close to the 
proportion of the Union's GNP they account for, which in Slovenia's case is 0.3%. 
Slovenia's portion of traditional own resources will depend on the structure of its 
trade flows at the time of accession. 
To ensure that the own resources are established, monitored and made available in 
line with Community regulations, Slovenia will have to overhaul its current customs 
system. In addition, for the purposes of accurately calculating the GNP resource 
considerable improvements will have to be made to the national accounts to ensure 
that they are reliable, homogeneous and complete. Improving the statistics will also be 
essential for drawing up the VAT own resources base, which will mean bringing 
Slovenia's VAT system fully into line with the Community directives. 
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4. Administrative Capacity to Apply the Acquis 
The European Council in Madrid in December 1995 concluded that the harmonious 
integration into the EU of the central and eastern European applicant states would, in 
particular, require the adjustment of their administrative structures. This chapter 
examines the current state of the public administration in Slovenia, including relevant 
aspects of the judicial system, and assesses the current and prospective ability to carry 
out the functions required of it in a modern, democratic state, with a particular focus 
on the need to administer matters related to the acquis. 
4.1 Administrative Structures 
A description of Slovene constitutional structures, their powers and responsibilities, 
including those of local government, is given in Chapter 1. 
At the central level there are 15 ministries, in addition to the Prime Minister's Office 
and a number of additional ministers without portfolio. For the handling of specific 
issues inter-ministerial committees can be established, at the level of ministers or state 
secretaries. 
As yet, there is no full statutory basis for a Civil Service, nor any clearly stated set of 
principles governing the role of the Civil Service. Instead, administrative procedures 
legislation governs the work which the Civil Service undertakes. A Civil Service Act 
is under preparation. 
The civil service is politically independent. Non-career civil servants may be 
appointed into State Secretary posts. Senior members of a political party are not 
permitted to fill civil service posts. 
There are about 25 000 civil servants in the Slovene public administration. Overall, 
apart from specialised professions, pay levels in the public sector, while lower, are 
reasonably competitive with the private sector. 
As a result of the Act on Ministries, the Ministry of the Interior has been made 
responsible in 1995 for public administration and its reform. A reform programme has 
been submitted to the Slovene Government in June 1997, foreseen to be approved by 
the Government as part of the national pre-accession strategy before end 1997. The 
reform is based on an in-depth analysis of the Slovene situation and comprises the 
adoption of a new Civil Service Law in 1998. It is intended to be completed by end 
1999. A state-secretary for administration has been nominated inside the Ministry of 
Interior to strengthen coordination, monitoring and implementation of the reform. 
The Office of European Affairs supervises implementation of the White Paper. (See 
also the section of the Introduction concerning relations between the European Union 
and Slovenia). 
103 
4.2 Administrative and Judicial Capacity 
An important legacy of the past for the public administration of Slovenia has been the 
need, following independence in 1991, to transform the regional administration of 
Slovenia into one responsible for central government functions. While there was a 
continuity in personnel and administrative practice, the administration was largely 
under-equipped to perform all the additional functions. 
The structures of the public administration are reasonably well adapted to the effective 
execution of its necessary responsibilities. In order to ensure that the positive 
development of the civil service over the last years is consolidated and reinforced it 
will be important to address the need for greater communication and cooperation 
within and between ministries; implementation and enforcement structures are at an 
early stage of development and will require significant additional efforts. There is a 
shortage of staff in the Slovene public administration, in particular in the area of the 
implementation and enforcement of legislation. This includes the judiciary. 
In order to ensure a sound basis for the future positive development of the civil service 
in its proper role it will be important that a firm legal basis is established as soon as 
possible. The current arrangements go part of the way to meeting this requirement but 
are insufficient on their own. 
The civil service is understaffed in a number of key departments. Although the civil 
service has expanded and continues to do so the intake of graduates is limited to a 
small base; there are serious shortages at middle and senior management levels. 
These problems will have important negative consequences for the ability of the civil 
service to function effectively, unless they are successfully addressed in the near 
future. 
Public confidence in the civil service is variable. There is no evidence of significant 
corruption. 
While there remains scope for improving efficiency and effectiveness of the 
administration, the administrative practice of coordination and cooperation is, 
nevertheless, developing, in particular against the background of the Slovene strategy 
to adoption EU policies and legislation. Professional levels are often good, but in 
order to provide a sound basis for continued European integration further development 
of administrative skills will be an important objective. There is still scope for 
improvement in skills at the level of general and financial management, and in the 
areas of policy analysis, monitoring and evaluation. Progress has been made in civil 
service training and plans are being developed for a civil service college. The 
Masterplan for the Implementation of Public Administration Reform in Slovenia 
(1997-99) provides a comprehensive reform programme for which the Government is 
committed to make the necessary financial resources available. It will be important 
that decentralisation initiatives are carried through. Given the complexity of the 
reforms envisaged, its success will also depend on the strength of the policy 
implementation and coordination mechanism to be set up. 
104 
There is a need to extend coverage of the reform to the judicial system in Slovenia and 
to focus specifically on the EU internal» market and its implementation and 
enforcement requirements. The success of the reforms, in particular in the EU area, 
will largely determine whether Slovema will be able effectively to administer the 
acquis. 
Key Areas for the Implementation of the Acquis 
The uniform application of EC law: The effective application of the acquis 
presupposes that the judicial authorities of member states are able to apply the 
provisions of the Treaty dealing with ensuring the unity and application of the acquis, 
and are able to ensure the proper functioning of the Single Market and Community 
policies in general. A high quality and well trained and resourced judiciary is 
necessary for the application by the courts of EC law, including cases of direct effect, 
and cases of referral to the European Court of Justice under the terms of Article 177 
EC. 
There is a particular need to train judges in Community commercial law. In addition, 
significant human resource constraints exist. However, if appropriate action is taken 
to develop the capacity of the judicial system, including in these respects, the system 
could be in a position, in the medium term, effectively to apply the acquis. 
Single market: The ability of Slovenia to ensure the correct application of 
Community requirements in the Single Market, particularly concerning the free 
movement of goods and services presupposes the existence of highly developed and 
effective regulatory, standardisation, certification and supervisory authorities, able to 
act fully in accordance with EC rules. An analysis of these points is made in Chapter 
3.1 (under "The Four Freedoms"). 
Concerning the administrative capacity in respect of free movement of goods, the 
situation in Slovenia is largely satisfactory, although public procurement is an area of 
some concern. The Standards and Metrology Institute, a government linked body, is 
entrusted with both the standardisation and accreditation functions; Slovenia has yet 
to achieve the required separation between the regulatory, standardisation and product 
certification functions. Adequate structures and staffing for market surveillance will 
need to be established and developed in the competent public authorities for the ex-
post control of product safety. Concerning the free movement of services the situation 
is much less satisfactory than for goods. The Financial Systems Department of the 
Ministry of Finance is concemed with all legislation and supervision in the field of 
private financial institutions. It is suffering from a shortage of experienced staff to 
deal with new legislation. The Bank Supervision Department, part of the Central 
Bank, has 36 staff The Agency for the Securities Market lacks the legal base for 
enforcement; it has 15 staff. Supervision of the insurance sector is still in the early 
stages of development. The Insurance Supervisory Authority has 7 staff. 
In order to meet EC requirements in this area staff shortages, in particular, must be 
addressed. 
105 
Competition: As explained in Chapter 3.1 (under "Competition") enforcement of 
competition law requires the establishment of anti-trust and state aid monitoring 
authorities, and that the judicial system, the public administration and the relevant 
economic operators have a sufficient understanding of competition law and policy. 
In Slovenia the central authority is the Bureau for the Protection of Competition 
which has 3 staff; this is inadequate. The level of expertise is not high. The ability 
effectively to implement EC requirements in this field will require considerable 
investment in human resources and the definition of the competences of the Bureau 
for the Protection of Competition. There is no state-aid authority, and the 
administrative arrangements in relation to state-owned enterprises (where there is a 
lack of suitable legislation) require attention; effective regulatory systems will need 
to be set up in order to ensure competition standards. 
Telecommunications: In order to formulate and implement the many liberalisation 
regulations contained in the acquis in this field it is necessary to have a regulatory and 
policy making body that is effectively separated from any operating company. 
In the Department for Post and Telecommunications 8 staff work on 
telecommunications. Further staff work elsewhere. The administrative capacity will 
need to be strengthened . ' 
Indirect taxation: The effective administration of the indirect taxation acquis 
presupposes structures capable of implementing the EC legislation concerning the 
harmomsation of Valued Added Tax and excise duties in an environment in which 
fiscal controls at internal EU frontiers have been abolished; and the excise system is 
based on the tax warehouses, duty being payable at the local rate in the member state 
at the time the goods are consumed. This requires a highly developed and well trained 
and resourced service, with a high degree of integrity. 
In Slovenia the relevant authority is the Ministry of Finance (a central Ministry, 14 
regional offices and 50 branch offices) with 3,200 staff. Due to a large turnover of 
staff, resulting partly from trained staff being recruited by the private sector, it is 
difficult to assess the capacities of existing staff. Some useful expertise is available. It 
will be necessary nonetheless to consolidate professional standards, including training 
measures and improvements in pay. 
Agriculture: The administrative requirements in the agricultural area primarily 
concern veterinary and plant health control, to protect public health and ensure the 
free movement of agricultural goods; and the ability to administer the mechanisms 
and requirements of the CAP, including high standards of financial control and 
official statistics. These points are dealt with in Chapter 3.4 (under "Agriculture"); 
general standards in the statistical field are examined in Chapter 3.3 (under 
"Statistics")] 
Concerning the administrative capacity in respect of veterinary and plant health 
controls in Slovenia, various improvements will be required, including to the facilities 
and professional experience at border posts and veterinary laboratories. The overall 
106 
staff of 93 at the Ministry of Agriculture (6 in the food sector) is very modest. The 
inspectorate for Agriculture, Forestry and Hunting has 124 staff and the Veterinary 
Inspectorate 116. Concerning the administration of CAP requirements, strengthening 
of the current administrative structures will be necessary. 
In order to meet EC requirements in this area important improvements remain to be 
made. 
Transport: The application of the EU Internal Market and competition requirements 
to the transport sector, the development of relevant infrastructure products, and other 
aspects of the transport acquis will present administrative challenges to new member 
states. 
The responsible government authority in Slovenia is the Ministry of Transport (96 
staff). There is a shortage of qualified staff. The absence of statutory legislation for 
public enterprises involved in transportation could pose a problem for the acquis. 
Employment and social policy: A central administrative requirement in respect of the 
acquis in this area is adequate inspection capacity, particularly concerning health and 
safety at work. 
In Slovenia the Labour Inspectorate has 74 inspectors. It requires reinforcement of 
staff resources and expertise. 
Regional policy and cohesion: The main administrative requirements in this area are 
the existence of appropriate and effective administrative bodies , and in particular a 
high degree of competence and integrity in the administration of Community funds. 
In Slovenia the Ministry of Economic Relations and Development is in charge of 
regional development (59 staff, of which 2 are resposible for regional development; 5 
work in the Regional Development Fund). The administrative arrangements in this 
area are at an early stage of development. The situation concerning financial control is 
not satisfactory (see the section, below, on "Financial control"). The effective 
administration of the acquis in this area will require significant efforts to create an 
appropriate institutional, administrative and budgetary framework. 
Environment: Because EU environmental policy, involves the integration of 
environmental protection into EU sectoral policies the administrative requirement is 
potentially very wide, affecting many bodies not normally associated with 
environmental protection. However, the main responsibility lies with environment 
ministries and various subsidiary bodies. 
In Slovenia the Environment Ministry employs 1,200 staff. Monitoring is carried out 
by the Ministry and the sectoral authorities, enforcement by the National Inspectorate 
(28 inspectors). These arrangements are not yet adequate since only 40 per cent of 
inspectorate positions are filled. The effective administration of the acquis in this area 
will require training in inspection and enforcement procedures, and the areas of 
competence of the various actors needs to be clarified. 
107 
Consumer protection: In this area, the effective administration of the acquis requires 
the allocation of overall responsibility to a specific State body through which the 
formulation, implementation and enforcement of consumer policy and consumer 
protection legislation can be undertaken. 
In Slovenia the governmental Ministry of Economic Relations and Development 
shares responsibility for consumer affairs with the semi-independent Office for 
Consumer Protection. There are 3 staff-working on consumer protection. As regards 
non-governmental consumer bodies an already strong and independent consumer 
movement has developed. There remains confusion about the exact scope and 
objectives of consumer policy. This in part explains difficulties in the effective 
enforcement of consumer laws; however, other factors which need to be addressed 
include a lack of expert staff, organisational deficits, and a lack of sensitivity to 
consumer questions among the judiciary. 
Justice and home affairs: Oversight of justice and home affairs questions falls to the 
justice and interior ministries. The administrative structures need to be able to deal 
effectively with asylum and migration questions, border management, police 
cooperation and judicial cooperation. There is an overriding need for sufficient and 
properly trained staff with a high degree of integrity. 
In Slovenia the justice and interior ministries are adequately staffed. The capacity to 
handle asylum and migration questions is not yet assured, since a new asylum-law - in 
line with EU requirements - is still being prepared, and currently very few 
applications for asylum have been made. Border management is adequate. Specialised 
police units have been established to combat organised crime, and they are generally 
effective. The judiciary is inexperienced and the judicial system inefficient; judicial 
cooperation is currently limited, but improving. The effective administration of the 
acquis in this area will require greater investment in the judiciary (in particular in 
human resource development, and training in EC law). 
Customs: Applying tho acquis in this area requires an adequate level of infrastructure 
and equipment, including computerisation and investigation resources, and the 
establishment of an efficient customs organisation with a sufficient number of 
qualified and motivated staff showing a high degree of integrity. 
In Slovenia the customs service employs 2,200 staff. Due to a high turnover of staff, it 
is difficult to estimate their efficiency, and therefore the adequacy of staffing levels. 
However, there are some positive developments to record. 
Financial control: The protection of the Community's financial interests requires the 
development of anti-fraud services, training of specialised staff (investigators, 
magistrates) and the reinforcement of systems of specific cooperation. The 
implementation of Community policies, especially for agriculture and the Structural 
Funds, requires efficient management and control systems for public expenditure, 
with provisions to fight fraud. Administratively it is essential to have a clear 
separation between external and internal control. Police and judicial authorities need 
108 
to be able effectively to handle complex transnational financial crime (including 
fraud, corruption and money laundering) which could affect the Community's 
financial interests. 
In Slovenia there is no central authority responsible for fighting against fraud. The 
National Court of Audit is not yet in a position fully to perform its audit function. The 
Ministry of Finance has only 5 staff at the Department for Budget Inspection. The 
effective administration of the acquis in this area will require major efforts to 
strengthen the institutional structures. 
4.3 General Evaluation 
With comprehensive reform efforts it could be envisaged that the necessary 
administrative structures would be in place in Slovenia, in the medium term, 
effectively to administer the acquis. 
If the necessary measures are taken, the Slovenian judicial system could be in a 
position, in the medium term, effectively to apply Community law. 
109 
C. SUMMARY AND CONCLUSION 
Slovenia submitted its application for membership of the European Union on 10 June 
1996. Its request is part of the historic process of ending the division of Europe and 
consolidating the establishment of democracy across the continent. 
In accordance with the provisions of Article O of the Treaty, the Commission has, at 
the request of the Council, prepared an Opinion on Slovenia's request for 
membership. 
Slovenia has not yet ratified the Europe Agreement signed on 10 June 1996. It must 
first modify its constitution to remove the restrictions on ownership of property which 
still affect nationals of EU member states. Slovenia's preparation for membership is 
therefore going ahead on the basis of the Interim Agreement which entered into force 
on 1 January 1997. The government has put in place the necessary mechanisms to 
coordinate its policies for European integration. 
The government has given particular attention to creating the institutional structures 
necessary to implement the White Paper of 1995 on the single market, a key element 
of the pre-accession strategy. The government agreed in May 1996 a three year 
programme of transposition of these measures and plans to define an overall strategy 
on these issues before the end of 1997. 
In preparing its Opinion, the Commission has applied the criteria established at the 
Copenhagen European Council of June 1993. The Conclusions of this Council 
stated that those candidate countries of Central and Eastern Europe who wish to do so 
shall become members of the Union if they meet the following conditions: 
- stability of institutions guaranteeing democracy, the rule of law, human rights and 
respect for and protection of minorities; 
- the existence of a functioning market economy, as well as the ability to cope with 
competitive pressures and market forces within the Union; 
- the ability to take on the obligations of membership, including adherence to the 
aims of political, economic and monetary union. 
A judgement on these three groups of criteria - political, economic, and the ability to 
take on the acquis - depends also on the capacity of a country's administrative and 
legal systems to put into effect the principles of democracy and the market economy 
and to apply and enforce the acquis in practice. 
The method followed in preparing these Opinions has been to analyse the situation in 
each candidate country, looking forward to the medium term prospects, and taking 
into account progress accomplished and reforms already under way. For the political 
criteria, the Commission has analysed the current situation, going beyond a formal 
account of the institutions to examine how democracy and the rule of law operate in 
practice. 
110 
h Political Criteria 
The Slovene institutions function properly, with the different powefs respecting the 
limits on their competencies and cooperating with each other. Elections in 1992 and 
1996 were free and fair. The opposition plays a normal part in the operation of the 
institutions. 
There are no major problems over respect for fundamental rights. Some 
improvements are still needed in the operation of the judicial systern, and in restoring 
property to former owners dispossessed under the communist reginie. The 
effectiveness of the fight against corruption needs further strengthening. 
Slovenia therefore presents the characteristics of a democracy with stable institutions 
guaranteeing the rule of law, human rights and respect for and protection of 
minorities. 
2. Economic Criteria 
After a period of falling GDP, Slovenia has had positive growth since 1993 (5.3% in 
1994, 3.9% in 1995, 3.1% in 1996). This has been achieved in conditions of balance 
in public finances and external accounts, and falling inflation (9.1% in 1996). 
Slovenia has 2 million inhabitants and GDP per capita is 59% of the EU average. The 
agricultural sector employs nearly 7% of the working population and contributes 5% 
of gross value added. Trade relations with the EU have grown considerably since 
1991 and now represent 65% of Slovenia's external trade. 
On the basis of its analysis, the Commission's judgement as to Slovenia's ability to 
meet the economic criteria established at Copenhagen is as follows: 
Slovenia can be regarded as a functioning market economy. It has advanced 
considerably in liberalisation and privatisation, and achieved a successful stabilisation 
of the economy. However, there is a lack of competition in some sectors, in particular 
the financial sector, the working of the market mechanisms still needs some 
improvement, and the necessary reforms of the fiscal and social security systems are 
not yet completed. 
Slovenia should be able to cope with competitive pressure and market forces 
within the Union in the medium term, provided that rigidities in the economy are 
reduced. It has a diverse export base, the workforce is skilled and highly trained, and 
infrastructure is relatively good. However, enterprise restructuring has been slow due 
to the consensual character of economic decision-making, and the incentives of 
workers and managers to preserve the status quo. Improvements in competitiveness 
have been hampered by rapid wage growth combined with low productivity growth. 
The low level of foreign direct investment reflects these structural problems, which 
need to be tackled. 
3. Capacity to take on the Obligations of Membership 
111 
Slovenia's ability to take on the acquis has been evaluated according to a number of 
indicators: 
- the obligations set out in the Europe Agreement, particularly those relating to the 
right of establishment, national treatment, free circulation of goods, intellectual 
property and public procurement; 
- implementation of the measures set out in the White Paper as essential for 
establishing the single market; 
- progressive transposition of the other parts of the acquis. 
Slovenia, which has not yet ratified the Europe Agreement, has made some progress 
in applying the corresponding dispositions of the Interim Agreement, and has 
achieved a satisfactory rate of transposition of the rules and directives set out in the 
White Paper. 
For most of the sectors related to the single market, and in particular on accounting, 
mutual recognition of professional qualifications and intellectual property, the 
legislative foundation is virtually in place. According to the Slovene authorities' own 
estimation, most of the necessary measures have been either partly or completely 
transposed. But further legislative'effort will be needed to achieve full absorption of 
the acquis. 
Notwithstanding the efforts which have been made, the progress made in transposing 
legislation still needs to be accompanied by concrete measures of implementation, as 
well as by the establishment of an effective administrative underpinning. Substantial 
work is still needed in the fields of public procurement, competition, insurance, 
freedom of capital movements, product comformity and standardisation. Introduction 
of VAT is a top priority. Implementation and application of legislation should be seen 
as essential elements of Slovenia's pre-accession strategy. Slovenia needs to go 
beyond primary legislation and cover also technical standards. 
As for the other parts of the acquis, if it continues its efforts, Slovenia should not 
have particular difficulties in applying it in the medium term in the following fields: 
education training and youth; research and technical development; 
telecommunications; audio-visual; small and medium enterprises; consumer 
protection; international trade relations; development; and customs. 
The current level and perspective for competitiveness of most of the Slovene industry 
enables a positive expectation on its capacity to cope with the competitive pressure 
and market forces within the Union in the medium term. There may however, be 
problems linked to certain labour market rigidities and for those sectors and 
companies, which have not yet undergone restructuring. 
12 
For the environment, very important efforts will be needed, including massive 
investment and strengthening of administrative capacity for enforcement of 
legislation. Full compliance with the acquis could only be expected in the long term 
and would necessitate increased levels of public expenditure. 
Slovenia has already made satisfactory progress in the transport field. If it continues 
its efforts in road freight transport and the railway sector, transport should not pose 
difficulties for accession. Slovenia has undertaken to make the investments necessary 
to establish TENs in order to ensure effective functioning of the single market. 
Slovenia should also be able to apply the acquis on employment and social affairs in 
the medium term. Efforts are still needed, however, on labour law and health and 
safety at work. Slovenia also needs to establish the autonomy of the labour 
inspectorate. 
As for regional policy and cohesion Slovenia has adopted a development policy 
which should permit it in the medium term to implement Community rules and 
effectively use structural funds. But it will need to strengthen considerably its 
financial control mechanisms. 
In agriculture, if progress is achieved on veterinary and phytosanitary controls, on 
strengthening the structures needed to apply the CAP, and. on re-structuring the 
agrifood sector as well as on strengthening its rural development policy, membership 
should not create significant problems for Slovenia in the medium term in applying 
the CAP in an appropriate manner. 
In energy efforts are still needed on monopoly operations, price fixing, access to 
networks and state intervention in the solid fuel sector. Slovenia has a nuclear power 
station at Krsko, which it shares with Croatia, and which produces 20% of its 
electricity. It was built according to western technology. A solution needs to be 
found for its nuclear waste. 
On the basis of the analysis of its capacity to apply the acquis, Slovenia could be in a 
position in the medium term to take and implement the measures necessary for 
removal of controls at its borders with member states of the Union. 
Slovenia's participation in the third stage of economic and monetary union, which 
implies coordination of economic policy and the complete liberalisation of capital 
movements, could present some difficulties given the incompatibility of the rules 
governing the central bank with those of the EU, and also the need to restructure the 
banking sector. It is premature to judge whether Slovenia will be in a position, by the 
time of its accession, to participate in the Euro area. That will depend on how far the 
success of its structural transformation enables it to achieve and sustain permanently 
the convergence criteria. These are, however, not a condition for membership. 
Slovenia should be able to apply the acquis on justice and home affairs in the next 
few years, even if particular attention needs to be paid to the operation of the judicial 
system, treatment of asylum seekers and the fight against organised crime. 
113 
Slovenia should be able to fulfil its obligations in respect of the common foreign and 
security policy. 
Since 1991 Slovenia has strengthened its relations with its neighbours and signed 
Friendship and Good Neighbourliness Treaties with them. There is, however, still a 
dispute with Croatia over maritime boundaries. 
4. Administrative and Legal Capacity 
If Slovenia undertakes substantial efforts to reform its administration, the necessary 
structures could be in place in the medium term to apply the acquis effectively. 
The capacity of the judicial system to ensure correct and uniform application of 
Community law is important, particularly for achievement of the single market. In 
current circumstances it is difficult to judge Slovenia's progress in this field. 
CONCLUSION 
In the light of these considerations, the Commission concludes that : 
- Slovenia presents the characteristics of a democracy, with stable institutions 
guaranteeing the rule of law, human rights and respect for and protection of 
minorities; 
- Slovenia can be regarded as a functioning market economy and should be 
able to cope with competitive pressure and market forces within the Union in the 
medium term; 
- Slovenia has to make considerable efforts to take on the acquis, particularly 
as regards the effective application 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 reform will be 
indispensable if Slovenia is to have the structures to apply and enforce the acquis 
effectively. 
In the light of these considerations, the Commission recommends that negotiations for 
accession should be opened with Slovenia. 
The reinforced pre-accession strategy will help Slovenia to prepare itself better to 
meet the obligations of membership, and to take action to improve the shortcomings 
identified in the Opinions. The Commission will present a report no later than the end 
of 1998 on the progress Slovenia has achieved. 
114 
identified in the Opinions. The Commission will present a report no later than the end 
of 1998 on the progress Slovenia has achieved. 
115 
ANNEX 
COMPOSITION OF PARLIAMENT 
RESULTS OF LAST GENERAL ELECTIONS (November 1996) 
Party Abbreviation Seats 
Liberal Democrats LDS 25 
People's Party SLS 19 
Social Democrats SDS 16 
Christian Democrats SKD 10 
Single list Social Democrats ZLSD 9 
Pensioners DeSUS 5 
Nationalist SNS 4 
Other 
+ 2 MPs elected by the Italian and Hungarian communities 
•1AQ> 
SINGLE MARKET: WHITE PAPER MEASURES 
This table is based on information provided by the Slovenian authorities and confirmed by them as correct as at the end of June 1997. It does not 
indicate the Commission's agreement with their analysis. The table includes directives and regulations cited in the White Paper which total 899. 
These have been listed in accordance with the categorization used in the White Paper and in relation to the policy areas covered. The table 
shows the number of measures for which Slovenian authorities have notified the existence of adopted legislation having some degree of 
compatibility with the corresponding White Paper measures. 
White Paper chapters 
1 .Free Movement of Capital slovcnia 
Number of White Paper measures 
2.FM and Safety of Industrial Products sloven,a 
Number of White Paper measures 
3.Competition slovenia 
Number of White Paper measures 
4.Social policy and action Slovenia 
Number of White Paper measures 
5.Agriculture SIovenia 
Number of White Paper measures 
6.Transport s,ovenia 
Number of White Paper measures 
7.Audiovisual s,ovenia 
Number of White Paper measures 
8.Environment s,ovenia 
Number of White Paper measures 
^Telecommunication slovenia 
Number of White Paper measures 
lO.Direct Taxation _ slovenia 
Number of White Paper measures 
11.Free movement of goods siovenia 
Number of White Paper measures 
12.Public Procurement slovenia 
Number of White Paper measures 
B.Financial services s,ovenia 
Number of White Paper measures 
14.Protection of personal data s,ovenia 
Number of White Paper measures 
15.Company Law slovenia 
Number of White Paper measures 
16.Accountancy slovenia 
Number of White Paper measures 
17.Civil law s,ovenia 
Number of White Paper measures 
18.Mutual rec. of prof. Quai. slovenia 
Number of White Paper measures 
19.1ntellectual property SIovenia 
Number of White Paper measures 
20.Energy slovenia 
Number of White Paper measures 
H.Customs law slovenia 
Number of White Paper measures 
22.1ndirect Taxation slovenia 
Number of White Paper measures 
23.Consumer Protection Sl0venia 
Number of White Paper measures 
Total Slovenia 
Number of White Paper measures Direc 
Stage 
I 
2 
3 
18 
56 
0 
3 
9 
12 
67 
93 
17 
19 
1 
1 
21 
31 
3 
9 
2 
2 
0 
0 
0 
5 
7 
13 
0 
0 
1 
2 
3 
3 
0 
1 
2 
2 
5 
5 
5 
10 
0 
2 
0 
15 
2 
8 
165 
295 tives 
Stage 
II/III 
1 
l 
40 
104 
0 
0 
2 
15 
22 
46 
11 
15 
0 
0 
0 
7 
0 
7 
1 
2 
0 
0 
0 
1 
0 
8 
1 
2 
3 
3 
2 
2 
0 
1 
16 
16 
3 
3 
0 
2 
0 
1 
0 
54 
0 
3 
102 
293 Regul 
Stage 
I 
0 
0 
0 
4 
0 
1 
0 
0 
15 
62 
7 
8 
0 
0 
3 
7 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
3 
5 
14 
0 
0 
0 
0 
30 
99 ations 
Stage 
II/III 
0 
0 
0 
I 
0 
0 
2 
2 
0 
2 
8 
13 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
1 
l 
0 
0 
0 
0 
0 
0 
2 
3 
0 
0 
105 
184 
0 
6 
0 
0 
118 
212 Total 
3 
4 
58 
165 
0 
4 
13 
29 
104 
203 
43 
55 
1 
1 
24 
45 
3 
16 
3 
4 
0 
0 
0 
6 
7 
21 
1 
2 
5 
6 
5 
5 
0 
2 
18 
18 
10 
11 
5 
15 
110 
201 
0 
75 
2 
n 
415 
899 
s M 
STATISTICAL DATA 
If not explicitly stated otherwise, data contained in this annex are collected from Statistical Office of 
the Republic of Slovenia (STATISTICNI URAD REPUBLIKE SLOVENIJE)" with whom Eurostat 
and Member States' statistical offices are co-operating since several years in the framework of the 
Phare programme. Regular data collection and dissemination are part of this co-operation process with 
the aim to enable the application of EU laws and practices in statistics. The data presented below have 
been compiled as far as possible using EU definitions and standards which in some cases differ from 
national practices. This may occasionally give rise to differences between the data presented here and 
those shown elsewhere in the opinion, which are generally based on the individual applicant countries' 
updated replies to the questionnaire sent to them in April 1996. The exact compatibility with EU 
standards on statistics and thus the comparability with EU figures can still not be guaranteed, 
particularly those statistics that have not been supplied through Eurostat, but have been delivered 
directly by the countries concerned. Wherever available, methodological notes are given describing 
content and particularities of statistical data presented in this annex. Data correspond to the information 
available as of May 1997. 
BASIC DATA 
Total Area 
Population ( end of the period) 
- Total 
- Females 
- Males 
Population density 
Urban Population 
Deaths rate 
Births rate 
Income and GDP per capita 
-Average monthly wage and salary per employee 
-GDP per capita 
Structure of production: share of branch GVA 
-agriculture 
-industry 
-construction 
-services 1990 1992 1993 1994 1995 
1000 hectare* 
2025 2025 2025 2025 
in 1000 
1989 1990 
1022.9 
967.1 
per 1 km2 
98 
in % of total population 
50.1 50.1 
per 1000 of population 
9.7 
10.0 10.0 
9.9 9.7 
9.8 9.5 
9.5 
European Currency Unit 
709 
6844 731 
7236 
in */• of Total Gross Vtlue Added 
5.5 
36.9 
4.8 
52.8 5 
32.1 
5 
57.9 
share of branch GVA in 1990 
• 0.0 
,52.8 share of branch GVA in 1995 
• 0.0 « 
36.9 a| -agriculture 
Q -industry 
rj -construction 
gj -services 
• - Others .57.9 32.1 a| -agriculture 
rj -industry 
Q -construction 
[U -services 
• - Others 
/?< 
NATIONAL ACCOUNTS 
Gross Domestic Product (Current Priées) 
Gross Domestic Product (Current Prices) 
Gross Domestic Product 
Gross Domestic Product 
Final consumption expenditure 
-of households and NP1SH 
-of general government 
Gross fixed capital formation 
Exports of goods and services 
Imports of goods and services 
Final consumption expenditure 
-of households andNPISH 
-of general government 
Gross fixed capital formation 
Exports of goods and services 
Imports of goods and services 1990 1991 1992 1993 1994 1995 
in Millions of National Currency 
196762 349408 1017965 1435095 1845831 2202021 
in Billions of ECU 
10.2 9.6 10.8 12.0 14.2 
in Purchasing Power Standard per capita 
8557.4 9354.2 10111.8 
% change over the previous year 
-8.9 
-8.4 
-11.0 
-1.7 
-11.5 
-20.1 
-22.4 -5.5 
-3.1 
-3.6 
5.3 
-13.9 
-23.5 
-22.9 2.8 
11.4 
13.6 
5.3 
11.9 
0.6 
17.6 5.3 
4.0 
4.6 
2.1 
12.6 
10.5 
10.7 3.9 
5.9 
7.0 
2.5 
20.8 
0.7 
11.6 
in */• of Gross Domestic Product 
70.6 
53.2 
17.4 
18.8 
90.8 
78.5 73.8 
54.8 
19.0 
20.6 
83.5 
74.2 75.5 
55.1 
20.3 
18.4 
63.1 
56.2 79.6 
58.5 
21.1 
18.7 
58.8 
57.7 77.3 
57.0 
20.1 
19.6 
59.1 
56.5 78.1 
57.7 
20.4 
21.2 
54.7 
55.9 
GDP (% Change over the previous year) 
, '*• ** *! •"* 
4* 
MAIN ECONOMIC INDICATORS 
Inflation rate RPI 
Industrial production volume indices 
Gross agricultural production volume indices 
Unemployment rate (ILO methodology) 
- Total 
- less then 25 years 
- 25 years and more 
Gross Foreign debt 
Balance of payments 
-Exports of goods 
-Imports of goods 
-Trade balance 
-Services, net 
-Income, net 
-Current account balance 
-Capital and fin. acc.(excl. reserves) 
-Reserve assets 1990 1991 1992 1993 1994 1995 1996 
percentage change over the previous year 
549.7 117.7 201.3 32.3 19.8 12.6 9.7 
previous year" 100 
96.5 106.4 
106.4 102 
103.6 101 
in % labour force 
9 
22.2 
7.1 7.4 
18.8 
5.6 7.3 
18.8 
5.6 
in Billions of USD 
0.028 0.164 0.902 1.603 2.97 4.01 
in millions of USD 
6683. 
-5892 
791 
180 
-91 
926 
-13 
-633 6083 
-6237 
-154 
375 
-51 
192 
-91 
-111 6830 
-7168 
-338 
723 
108 
540 
97 
-642 8345 
-9298 
-953 
725 
147 
-36 
376 
-220 8365 
-9218 
-853 
786 
89 
46 
552 
-587 
Inflation rate: Percentage change of yearly average over the previous year - all items index. Data refer to retail price index 
(official indicator of inflation rate in Slovenia). 
Industrial production volume indices: Industrial production covers mining and quarrying, manufacturing and electricity, gas and 
water supply (according to the NACE Classification Sections C,D,E). Index of Industrial Production covers enterprises 
with ten or more employees, except those engaged in the following activities: publishing, gas, steam and water supply. 
Gross agricultural production volume indices: Sliding average values of purchase prices in the last three years. 
Unemployment rate (by ILO methodology): -Percentage of the unemployed in labour force. This rate is derived from LFSS 
(Labor Force Survey) observing the following ILO definitions and recommendations where: 
Labor force employed and unemployed persons in the sense of the ILO definitions stated below. 
The employed all persons aged 15+, who during the reference period worked at least one hour for wage or salary or other 
remuneration as employees, entrepreneurs, members of cooperatives or contributing family workers. Members of armed 
forces and women on child-care leave are included. 
The unemployed all persons aged 15+, who concurrently meet all three conditions of the ILO definition for being 
classified as the unemployed: (i) have no work, (ii) are actively seeking a job and (iii) are ready to take up a job within a 
fortnight. 
In Slovenia, LFSS excludes persons in compulsory military service and persons living in non-private households. Workers 
on lay-off and persons on maternity leave are classified among persons in employment. 
Gross foreign debt: Debt is extracted form the OECD's External Debt Statistics. 
Balance of payments: Data is derived from IMF database, their comparability with respective EU statistics can not be 
guaranteed, but balance of payments is compiled mainly in accordance to IMF standards. Balance in trade of goods in 
accordance with balance of payments principles. Exports and imports are both in f.o.b. values. Net income includes 
direct, portfolio and other investment income, compensation of employees. Current account balance by definition of 
IMF 5th Manual, capital transfers are excluded. Reserve assets: it means changes in reserve assets during the year; (+) 
signifies an increase, (-) a decrease in reserve assets. 
Alo 
FOREIGN TRADE 
Imports and exports (current prices) 
- Imports 
- Exports 
- Balance of trade 
External trade volume indices 
- Imports 
- Exports 
Structure of Import by SITC (current prices) 
- (0+1) food and live animals, beverage and tobacco 
- 2 crude materials, inedible 
- 3 mineral fuels and lubricants 
- 4 animal and vegetable oils etc. 
- 5 chemicals and related products 
- 6 manufactured goods classified chiefly by material 
- 7 machinery and transport equipment 
- 8 miscellaneous manufactured articles 
- 9 goods not elsewhere classified 
Structure of export by SITC (current prices) 
- (0+1) food and live animals, beverage and tobacco 
- 2 crude materials, inedible 
- 3 mineral fuels and lubricants 
- 4 animal and vegetable oils etc. 
- 5 chemicals and related products 
- 6 manufactured goods classified chiefly by material 
- 7 machinery and transport equipment 
- 8 miscellaneous manufactured articles 
- 9 goods not elsewhere classified 
External trade price indices 
- Imports 
- Exports 1992 1993 1994 1995 
in millions of USD 1996 
7304 
6828 
-476 
previous year - 100 
in % of total Import 
8.2 
6.5 
7.1 
0.4 
12.2 
19.4 
31.8 
11 
in % of total Export 
4.8 
1.9 
1.1 
0.1 
10.3 
27.3 
30.3 
24 
previous year= 100 
102.1 
106.7 9492 
8316 
-1175 
7.4 
6.5 
6.6 
0.4 
12.1 
19.8 
33.8 
10.6 
3.8 
2.1 
1.2 
0.1 
10.5 
28.5 
31.4 
22.2 
116.3 
121.4 93 
83 
-10 
Imports and exports (current prices) and Structure of external trade by SITC (current prices): Trade data exclude direct 
re-exports, trade in services and trade with customs free zones as well as licenses, know-how and patents. The data are 
based upon the special trade system. Trade Classifications: Slovenia introduced the Combined Nomenclature in 1996. 
Before that a national classification based on the Harmonised System was used. Imports are recorded on CIF basis and 
are captured with the date the commodities are released into circulation in the country. Exports are recorded on FOB 
basis and are captured with the date on which the commodities cross the customs border. The customs statistics is 
utilized for monitoring of foreign trade data. Eurostat has converted National Currencies to the US dollar by applying 
the Intemational Monetary Fund annual average exchange rates. 
External trade price indices: The indices are calculated from data for normal imports and exports without processing and 
without data regarding the countries of the former Yugoslavia. 
Ill 
FOREIGN TRADE 
Structure of imports by main countries (current prices) 
1st partner 
2nd partner 
3rd partner 
4th partner 
5 th partner 
others 
Structure of exports by main countries (current prices) 
1st partner 
2nd partner 
3rd partner 
4th partner 
5th partner 
others 1992 1993 1994 1995 1996 
in % of total imports 
DE 
IT 
HR 
AT 
FR 25 
16.2 
9.1 
8.5 
8 
33.2 DE 
IT 
AT 
FR 
HR 23.7 
17.2 
10.3 
8.4 
6.8 
33.6 DE 
IT 
AT 
FR 
HR 23.2 
17 
9.7 
8.4 
6.1 
35.6 DE 
IT 
FR 
AT 
HR 21.7 
16.9 
9.8 
8.8 
6.2 
36.5 
in % of total exports 
DE 
IT 
HR 
FR 
AT 29.5 
12.4 
12.1 
8.7 
5 
32.3 DE 
IT 
HR 
FR 
AT 30.3 
13.5 
10.8 
8.6 
5.5 
31.3 DE 
IT 
HR 
FR 
AT 30.2 
14.6 
10.7 
8.2 
6.4 
29.9 DE 
IT 
HR 
FR 
AT 30.6 
13.3 
10.3 
7.2 
6.6 
31.9 
Structure of export by main partners 
in 1996 
31.9% 
6.6% Structure of import by main partners 
in 1996 
DE 
21.7% 
36.5% 
AT 
DE 
FR Austria 
Germany 
France HR 
IT Croatia 
Italy 
/IZ 
SOCIAL INDICATORS 
1991 1992 1993 1994 1995 
Population on 1 January 
Proportion of population by age 1 January 1995 
y0_14 
yl5_24 
y25_44 
y45_64 
y65_max 
Live births 
Deaths 
Infant deaths 
- Less than 1 year 
- Still birth 
Marriages 
Divorces 
Crude marriage rate 
Crude divorce rate 
Natural growth 
Net migration 
Total population growth 
Total fertility rate 
Infant mortality rate 
Late foetal mortality rate 
Life expectancy 
- Males 
- Females 
Life expectancy 
- Males 
- Females thousand 
1999.95 
21583 
19324 
178 
106 
8173 
1828 
4.08 
0.91 
1,13 
-1.55 
-0.42 
1.46 
8.25 
4.89 
69.54 
77.38 1998.9 1994.2 1989.41 
in % of total population 
total number 
19982 
19333 
177 
110 
9119 
1966 19793 
20012 
134 
93 
9022 
1962 
per 1000 of population 
4.57 
0.98 
0.33 
-0.2 
0.12 
1.34 
8.86 
5.47 4.59 
1 
-0.1 
0.71 
0.61 
1.31 
6.77 
4.68 
at birth 
,69.45 
77.25 '69.4 
77.29 
at 65 years 19463 
19359 
126 
105 
8313 
1923 
4.18 
0.97 
0.05 
0.45 
0.5 
1.32 
6.47 
5.37 
69.6 
77.4 
13.3 
16.8 J989 
18.5 
14.7 
32.3 
23.4 
12.1 
18980 
18968 
4.2 
0.8 
5.5 
IÎ 
LABOUR MARKET 
Economic Activity Rate (ILO methodology) 
Average employment 
Unemployment rate by age (ILO methodology) 
- total 
- less then 25 years 
- 25 years and more 
Registered unemployment (end of period) 1993 1994 1995 1996 
in percent of population age +1S 
57.6 58.7 57.6 
in thousand 
851 882 878 
in % of labour force 
9 
22.2 
7.1 7.4 
18.8 
5.6 7.3 
18.8 
5.6 
in */• ot economically active population 
14.2 14.5 14.4 
Average paid employment indices by NACE classes 
- Agriculture, hunting, forestry and fishing 
- Mining and quarrying 
- Manufacturing 
- Production and distribution of electricity, gas and water 
- Construction 
- Transport, storage and communication 
Monthly nominal wages and salaries indices by NACE classes 
- Agriculture, hunting, forestry and fishing 
- Mining and quarrying 
- Manufacturing 
- Production and distribution of electricity, gas and water 
- Construction 
- Transport, storage and communication 
Monthly wages and salaries indices 
- nominal 
- real 1993 1994 1995 1996 
Previous year = 100 
83.3 
118.3 
95 
79.7 
101.7 
92.2 
125.4 
103.6 90.1 
95.2 
106.5 
144.9 
94.3 
97.2 
118.4 
104.3 100.1 
115.1 
95.2 
95 
103.7 
98.2 
115.3 
104.9 
Economic activity rate (ILO Methodology): - Percentage of labor force in the total population aged 15+. This rate is derivated 
of LFSS (Labor Force Survey) observing the following ILO definitions and recommendations where: 
Labor force employed and unemployed persons in the sense of the ILO definitions stated below. 
The employed all persons aged 15+, who during the reference period worked at least one hour for wage or salary or other 
remuneration as employees, entrepreneurs, members of cooperatives or contributing family workers. Members of armed 
forces and women on child-care leave are included. 
The unemployed all persons aged 15+, who concurrently meet all three conditions of the ILO definition for being 
classified as the unemployed: (i) have no work, (ii) are actively seeking a job and (iii) are ready to take up a job within a 
fortnight. 
In Slovenia, LFSS excludes persons on compulsory military service and persons living in non-private households (so-
called institutional population). 
Unemployment rate (by ILO methodology): -Percentage of the unemployed in labour force. This rate is derived from LFSS 
(Labor Force Survey) observing the following ILO definitions and recommendations (see ILO definitions above). 
In Slovenia, LFSS excludes persons in compulsory military service and persons living in non-private households. Workers 
on lay-off and persons on maternity leave are classified among persons in employment. 
Average employment, Average paid employment indices by NACE classes: The data for entrepreneurial sphere cover 
enterprises and other organisations (private enterprises are included on|y if they have 3 or more persons in paid 
employment). Data come from the Labour Force Surveys. LFS data are therefore considered as annual data. The data 
cover also all budgetary, subsidised organisations and persons with secondary job are included. Armed forces, apprentices, 
employees on child-care and additional child-care leaves are excluded. 
Registered unemployment (end of period): Registered unemployment in per cent - percentage of unemployed registered in civil 
economically active population, based on Labour force sample survey (LFSS). Registered unemployment data are based 
on the monthly administrative unemployment register. 
Monthly wages and salaries indices: Monthly real wages and salaries indices are derived from gross nominal wages and salaries 
indices divided by consumer price indices. The data for entrepreneurial sphere cover enterprises and other organisations 
(private enterprises are included only if they have 3 or more persons in paid employment). The earnings of external 
associates and consultants are not covered. The data cover also all budgetary, subsidised organisations and persons with 
secondary job are included. Armed forces, apprentices, employees on child-care and additional child-care leaves are 
excluded. 
11*, 
PUBLIC FINANCE 
Government budget 
-Consolidated central government revenue 
-Grants 
-Consolidated central government expenditure 
-Consolidated general government expenditure 
-Consolidated central government deficit/surplus 
-General government deficit/surplus 
Government budget 
-Consolidated central government expenditure 
-Consolidated general government expenditure 
-Consolidated central government deficit/surplus 
-General government deficit/surplus 1990 1991 1992 1993 1994 1995 
in Billions of national currency 
606.06 
5.28 773.54 
-5.04 933.36 
-6.46 
in % of Gross Domestic Product 
42.2 
0.4 41.9 
-0.3 42.5 
-0.3 
Government budget: These data relate to central and general government as published in the IMF's Government Finance 
Statistics Yearbook (1996) (GFSY); included also is the country's presentation in the GFSY. 
Because the GFSY does not present statistics for general government, but for individual levels of government 
separately, the consolidated series presented here were obtained from central and local government data and adjusted 
in consolidation for the identified intergovernmental transfers. 
Even though the statistics cover the central and local government published in GFSY, the coverage may not be 
exhaustive if some central or local government units are not included in that coverage. A measure of the 
exhaustiveness of the coverage can be obtained by comparing in the GFSY the note on the coverage of data for 
individual countries with the list of central and local government units provided. 
It should be noted that the deficit/surplus used here is equal to revenue and grants minus expenditure, and does not 
take lending minus repayments into account (see further below). 
The netting of inter-government transfers carried-out in the attached tables is limited to the current and capital 
transfers consisting of the identified grants and current and capital subsidies between the levels of government. Other 
types of transactions occurring between government levels, such as the payments of taxes and employers' social 
security contributions, and the reciprocal purchases of goods and services are not normally classified as inter­
governmental transfers have not been eliminated in the consolidation process. Finally, whether the absence of data for 
current and capital transfers should be attributed to the absence of transfer or to lack of data is unclear; in all cases 
absence of information on transfers have been deemed to represent zero-transfers. 
a. Government expenditure consists of general government cash expenditures on current and capital 
goods and services, interest payments and current and capital transfers but excludes non-cash transactions. 
b. Deficit/surplus equals cash revenue and cash grants minus cash expenditure. This measure of the 
deficit/surplus differs from that used in GFS which equals cash revenue and cash grants, minus cash expenditure, 
minus net lending. This exclusion of net lending(consisting, in the GFS methodology, of operations in financial assets 
and liabilities carried out for specific policy purposes, rather than for liquidity purposes) brings the measure of the 
deficit/surplus presented here closer to the national accounts concept of net borrowing/net lending. Also, as a result of 
this exclusion, receipts from privatisation (classified as repayments in the GFS methodology) do not enter in the 
determination of the deficit/surplus presented in the attached tables (and therefore do not reduce the deficit). 
M 
FINANCIAL SECTOR 
Monetary aggregates 
- Monetary aggregate Ml 
- Quasi money 
Total reserves ( gold excluded, end of period) 
Average short term interest rates 
- lending rate 
- deposit rate 
Official discount rate (end of period) 
USD exchange rates 
Average of period 
End of period 
ECU exchange rates 
Average of period 
End of period 1990 1991 1992 1993 1994 1995 1996 
Billions (10*9) of US Dollars 
1.35 
4.45 1.62 
5.84 
Millions (10*6) of US Dollars 
787.8 1498.98 1820.79 2297. 
V* per annum 
49.61 
32.65 39.42 
27.89 
16 24.84 
15.32 
10 1 
1 USD-...SIT — 
• 27.57 
56.69 81.29 
98.7 113.24 
131.84 128.81 
126.46 118.52 
125.99 13 
14 
1 ECU - ...SIT 
34.164 
76.017 105.523 
119.516 132.604 
147.090 153.222 
155.551 155.025 
165.581 179. 
177. 
Monetary aggregates (end of period): Money (Ml) Includes demand deposits and currency outside banks. Quasi money 
(QM) Include time, savings and foreign currency deposits. Eurostat has converted National Currencies to the US dollar 
by applying the International Monetary Fund annual end of period exchange rates. 
Total reserves (gold excluded, end of period): The statistics on official foreign reserves are extracted from the IMF's monthly 
International Financial Statistics (IFS). Total reserves (gold excluded) are defined as the sum of central bank holdings of 
foreign currencies and other (gross) claims on non-residents; this definition excludes claims on residents denominated in 
foreign currency. According to the definition; official foreign reserves are calculated at market exchange rates and prices in 
force at the end of the period under consideration. Total reserves (gold excluded) published in IFS may differ from the 
figures published by the national authorities. Some factors contributing to possible differences are the valuation of the 
reserve position in the Fund, and a different treatment of claims in non-convertible currencies. 
Average short term interest rates: Data are extracted from the IMF's monthly International Financial Statistics (IFS). Average 
short-term lending and deposit rates relate to period averages. Lending rates generally consist of the average interest rate 
charged on loans granted by reporting banks. Deposit rates relate to average demand and time deposit rates or average time 
deposit rates. These rates may not be strictly comparable across countries to the extent the representative value of the 
reporting banks and the weighting schemes vary. 
USD exchange rates: International Monetary Fund exchange rates as present in the publication: "Statistiques Financières 
Internationales". 
/1\G 
INFLATION (12 months changes) 
Percentage change of the CPIs with the current month compared with the corresponding month of the previous year (t/t-12) 
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 
1993 
1994 
1995 
1996 20.6 19.9 
19.7 19.5 
8.3 8.5 19.7 
18.2 
9.6 21.7 
15.2 
11.5 20.6 
15.2 
11.0 21.6 
14.0 
10.6 22.3 
12.6 
10.8 22.5 
11.4 
10.5 22.0 
10.8 
9.7 20.9 
10.4 20.4 
8.9 
9.3 19.5 
8.9 
9.1 
Inflation (% change of CPF) 
•*•?(.r 
affair* C*W -?? 
-J 1 A 1 l_L-(_ 
Inflation (12 months changes): Inflation rates (12 months changes) are percentage changes of the CPIs with the current 
month compared with the corresponding month of the previous year. Inflation rates are based on national CPIs which 
are not strictly comparable between candidate countries or with those based on EU HICPs (different methods, 
concepts, practices in the calculation of CPIs). Inflation rates (12 months changes) is based on ILO data. 
nl-
INDUSTRY 
Structure of GDP by economic activities (NACE, current prices) 
• Mining and quarrying 
- Manufacturing 
- Production and distribution of electricity, gas and water 
Industrial production volume indices by NACE classes 
- Total 
- Mining and quarrying 
- Manufacturing 
- Production and distribution of electricity, gas and water 1993 1994 1995 1996 
in % of Gross Domestic Product 
1.2 
29.5 
2.7 1.3 
29.7 
2.8 1.2 
28.1 
2.8 
previous year- 100 
106.4 
94.9 
106.7 
107.8 102 
100.9 
102.6 
99.7 101.0 
100.4 
101.1 
100.8 
Industrial production volume indices by NACE classes 
- Total 
- Mining and quarrying 
- Manufacturing 
- Production and distribution of electricity, gas and water 1993Q1 1993Q2 1993Q3 1993Q4 1994Q1 1994Q2 1994Q3 1994Q4 
corresponding period of the previous year ~ 100 
1995Q1 1995Q2 1995Q3 1995Q4 1996Q1 1996Q2 1996Q3 1996Q4 
corresponding period of the previous year = 100 
109.6 
104.5 
110.5 
107.7 101.6 
97.7 
103.3 
84.1 98.8 
109.8 
100.6 
115.1 98.3 
93.4 
96.6 
95.5 94.9 
86 
96.2 
99.3 99.2 
103.5 
98.9 
99 103.4 
119.5 
103 
91.5 107.1 
94.6 
106.5 
112 
Structure of GDP by economic activities (NACE, current prices): 
calculated at market prices. The structure of GDP by economic activities (NACE) is 
Industrial production volume indices by NACE classes: Industrial production covers mining and quarrying, manufacturing and 
electricity, gas and water supply (according to the NACE Classification Sections C,D,E). Index of Industrial Production 
covers enterprises with ten or more employees, except those engaged in the following activities: publishing, gas, steam and 
water supply. 
INFRASTRUCTURE 
Railway network 
Railway transport 
- freight transport 
- passengers transport 
Number of telephone subscribers 
Number of inhabitants per passenger car 1993 1994 1995 
in Km per 1000 Km2 
59 
in million ton or passenger -km 
566 590 595 
in 1000 of population 
310 
inhabitants 
2.8 
nVi 
AGRICULTURE 
Land area by land-use categories 
-total 
- agricultural land 
- forest 
- arable land 
- permanent meadows and pastures 
Agricultural land by legal status 
- state enterprise 
- Cooperatives 
- others 1992 1993 1994 1995 1996 
in 1000 Hectares 
2025 
777 
1071 
245 
560 2025 
773 
1071 
245 
558 2025 
751 
1094 
234 
501 2025 
783 
1098 
230 2025 
230 
417 
in % of agricultural land 
Share of GDP 
- Agriculture, hunting, forestry and fishing (Nace A+B) 
Gross agricultural production volume indices 
Main crops by area 
- Cereals 
- of which: wheat 
- Potatoes 
- Sugar beet 
- Fodder beet 
Main crops by yield 
- Cereals 
- of which: wheat 
- Potatoes 
- Sugar beet 
- Fodder beet 1992 1993 1994 1995 1996 
in % of Gross Domestic Product 
4.3 4.3 
Previous year = 100 
96.5 106.4 103.6 
in 1000 Hectares 
117.5 
42.6 
30 
3 
6 119.6 
43.7 
29 
3 
6 110.5 
42 
23 
5 
6 107 
42 
24 
6 
6 107 
40.8 
22 
6 
4 
in 100 kg/Hectares 
36.2 
41.9 
122 
306 
171.8 38 
38.4 
127 
379 
190.5 51 
43.3 
174 
452 
319.3 50.3 
42.3 
190 
432 
313.1 39.4 
204 
485 
Sales or procurement of animal for slaughter 
- pigs 
- cattle 
- poultry 
Livestock breeding intensity (end of period) 
- cattle 
- of which: cows 
- sheep 
- P'gs 
- of which: sows 1992 1993 1994 1995 1996 
in 1000 tons of live weight 
39.2 
30.8 
58.5 41.6 
35.2 
64.5 43.8 
37.8 
63.8 
Heads per 1000 Ha of agricultural land 
603 
262 
23 627 
268 
35 
Heads per I0O0 Ha of arable land 
2440 2530 
Share of GDP: The structure of GDP by economic activities (NACE) is calculated at market prices. 
Gross agricultural production volume indices: Sliding average values of purchase prices in the last three years. 
./; ni 

Slovenia 
1995 
Legend: 
A/ Country boundary 
A/ Region boundary 
COUNTRY NAME 
REGION NAME 
CITY NAME 
Selected major settlements: 
(1 000 inhabitants) 
O 200 - 250 
• 250- 500 
• 500-1 000 
• >1000 
General information about the country: 
Age groups (in years): 
<15 
15- 65 
>65 
Living standard (in 1993): ECU 5 455 
(OOP par capita) 
Area: 20 256 km2 
Administrative regions: 12 
Population: 1 987 500 
Source: Stattatfca) Offlca of Tho RapubHo of Slovenia 
Cartography and geographic Information management: QISCO 
15 45 km 
eurostat 


ISSN 0254-1475 
COM(97) 2010 final 
DOCUMENTS 
EN 11 01 06 
Catalogue number : CB-CO-97-378-EN-C 
ISBN 92-78-22906-7 
Office for Official Publications of the European Communities 
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