Source: EURLEX
Language: en
Format: md

**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 AustroHungarian 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_

_Source: Commission services, national_ _sources,_ _EBRD_

_External_

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

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 openmarket 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 panEuropean 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 crossborder 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 howtransfer.

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 audiovisual 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 f the 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 number of % share
industrial companies industrial
GVA employment

Raw material processing (steel, 11 924 17.5
metallurgy, cement, glass, ceramic,
paper, wood)
Mechanical & electronic engineering 15.5 1027 20
Textiles, clothing, leather/shoes 9 624 14
Foodstuffs 7 280 6

Automotive 5 1 5

Chemicals 6 468 5

Pharmaceuticals 5.5 12 2
Information technologies 2.5 332 2.5

11

924

17.5

20

14

6

5

5

2

2.5

15.5

9

7

5

6

5.5

2.5

1027

624

280

1

468

12

332

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 downstream 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 worldwide 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 SouthwestNortheast 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

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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 mediumterm, 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

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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

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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 timeshare 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.

**93**

_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 customsrelated 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 Taxfree 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

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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 countryby-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 expost 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.

Regul ations

### 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 a n d 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 tives

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

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

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

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

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

1990 1992 1993 1994 1995

**1000** **hectare***

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

**share of branch GVA in 1990**

**• 0.0**

**a|** **-agriculture**

**Q** **-industry**

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

731

7236

5

32.1

5

57.9

**a|** **-agriculture**

**rj** **-industry**

**Q** **-construction**

**[U** **-services**

**•** **-** **Others**

**European Currency Unit**

**in** ***/•** **of Total Gross** **Vtlue** **Added**

**share** **of branch GVA in 1995**

**• 0.0** **«**

**32.1**

**36.9**

**rj** **-construction**

**gj -services**

**•** **- Others**

709

6844

5.5

36.9

4.8

52.8

**.57.9**

**,52.8**

**/?<**

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**

2.8

11.4

13.6

5.3

11.9

0.6

17.6

-5.5

-3.1

-3.6

5.3

-13.9

-23.5

-22.9

75.5

55.1

20.3

18.4

63.1

56.2

3.9

5.9

7.0

2.5

20.8

0.7

11.6

78.1

57.7

20.4

21.2

54.7

55.9

_**4***_

**in** ***/•** **of Gross Domestic Product**

79.6

58.5

21.1

18.7

58.8

57.7

, ' * • - * - ! _• " *_

70.6

53.2

17.4

18.8

90.8

78.5

-8.9

-8.4

-11.0

-1.7

-11.5

-20.1

-22.4

73.8

54.8

19.0

20.6

83.5

74.2

5.3

4.0

4.6

2.1

12.6

10.5

10.7

77.3

57.0

20.1

19.6

59.1

56.5

GDP (% Change over the previous year)

**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**

102

103.6

7.4

18.8

5.6

101

7.3

18.8

5.6

96.5

**in** **%** **labour force**

**in Billions** **of** **USD**

106.4

106.4

9

22.2

7.1

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

_Alo_

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.

**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**

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

1996

93

83

-10

_**Ill**_

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.

**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

**Structure of export** **by** **main partners**

**in 1996**

**31.9%**

**6.6%**

1992 1993 1994 1995 1996

**in** **%** **of total imports**

**DE**

**IT**

**HR**

**AT**

**FR**

**DE**

**IT**

**HR**

**FR**

**AT**

25

16.2

9.1

8.5

8

33.2

29.5

12.4

12.1

8.7

5

32.3

DE

IT

AT

FR

HR

23.7

17.2

10.3

8.4

6.8

33.6

23.2

17

9.7

8.4

6.1

35.6

30.2

14.6

10.7

8.2

6.4

29.9

DE

IT

FR

AT

HR

DE

IT

HR

FR

AT

21.7

16.9

9.8

8.8

6.2

36.5

30.6

13.3

10.3

7.2

6.6

31.9

_**/IZ**_

**in** **%** **of total exports**

DE

IT

AT

FR

HR

DE

IT

HR

FR

AT

DE

IT

HR

FR

AT

30.3

13.5

10.8

8.6

5.5

31.3

**Structure of import by main partners**

**in 1996**

**DE**

**21.7%**

**36.5%**

Croatia

Italy

HR

IT

AT

DE

FR

Austria

Germany

France

**SOCIAL INDICATORS**

**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

**1991** **1992** **1993** **1994** **1995**

**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**

4.57

0.98

0.33

-0.2

0.12

1.34

8.86

5.47

,69.45

77.25

```
19982

19333

 177

 110

 9119

 1966

```

```
19793

20012

 134

  93

 9022

 1962

```

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

per 1000 of population

4.59

1

-0.1

0.71

0.61

1.31

6.77

4.68

at birth

**'69.4**

77.29

at 65 years

_**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)

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

83.3

118.3

95

79.7

101.7

92.2

125.4

103.6

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

7.4

18.8

7.3

18.8

7.1

5.6

5.6 5.6

**in** ***/• ot** **economically active population**

14.2 14.5 14.4

1993 1994 1995 1996

**Previous year =** **100**

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

_**11*,**_

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 (socalled 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.

**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

**in %** **of** **Gross** **Domestic Product**

42.2

0.4

773.54

-5.04

41.9

-0.3

933.36

-6.46

42.5

-0.3

## **_M_**

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 intergovernmental 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).

**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

1

24.84

15.32

10

**1 USD-...SIT** _**—**_

**81.29**

**98.7**

**105.523**

**119.516**

113.24

131.84

**1 ECU - ...SIT**

132.604

147.090

128.81

126.46

153.222

155.551

118.52

125.99

155.025

165.581

13

14

179.

177.

_**/1\G**_

**•**

**27.57**

**56.69**

**34.164**

**76.017**

**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".**

**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

```

**19.7**

**18.2**

**9.6**

**21.7**

**15.2**

**11.5**

**22.5**

**11.4**

**10.5**

**22.0**

**10.8**

**9.7**

**20.9**

**10.4**

**20.4**

**8.9**

**9.3**

**20.6**

**15.2**

**11.0**

**21.6**

**14.0**

**10.6**

**22.3**

**12.6**

**10.8**

**19.5**

**8.9**

**9.1**

```
1994

1995

1996

```

**20.6** **19.9**

**19.7** **19.5**

**8.3** **8.5**

**Inflation** **(% change** **of CPF)**

_**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.**

**•*•?(.** **r**

#### **_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

Industrial production volume indices by NACE classes

    - Total

    - Mining and quarrying

   - Manufacturing

    - Production and distribution of electricity, gas and water

Structure of GDP by economic activities (NACE, current prices):
calculated _at market prices._

1993 1994 1995 1996

**in** % **of** **Gross** **Domestic Product**

**1.2**

**28.1**

2.8

102

100.9

102.6

99.7

1.2

29.5

2.7

**1.3**

**29.7**

**2.8**

**previous year- 100**

**106.4**

**94.9**

**106.7**

**107.8**

101.0

100.4

101.1

100.8

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**

99.2

103.5

98.9

99

103.4

119.5

103

91.5

98.3

93.4

96.6

95.5

109.6

104.5

110.5

107.7

101.6

97.7

103.3

84.1

98.8

109.8

100.6

115.1

94.9

86

96.2

99.3

107.1

94.6

106.5

112

_**nVi**_

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

1993 1994 1995

in Km per 1000 Km2

Railway network

Railway transport

    - freight transport

    - passengers transport

Number of telephone subscribers

Number of inhabitants per passenger car

59

in million ton or passenger **-km**

566 590 595

in 1000 of population

310

inhabitants

2.8

**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

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

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** **Hectares**

2025

751

1094

234

501

2025

777

1071

245

560

2025

773

1071

245

558

2025

783

1098

230

2025

230

417

**in** **%** **of agricultural land**

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

36.2

41.9

122

306

171.8

38

38.4

127

379

190.5

119.6

43.7

29

3

6

110.5

42

23

5

6

**in** **100 kg/Hectares**

107

42

24

6

6

50.3

42.3

190

432

313.1

107

40.8

22

6

4

39.4

204

485

51

43.3

174

452

319.3

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 km [2 ]

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

L-2985 Luxembourg