17 Nov Small nation hides big successes
Tomaž Kostanjevec, CEO, SPIRIT Slovenia, showcases investment opportunities in Slovenia and the large efforts the organization has made in promoting the country’s robust industrial sectors abroad.
How healthy is Slovenia’s economy and how has it reacted to challenges laid down by the COVID-19 pandemic?
The Slovenian economy is well diversified and fits into the European production chain. Before the pandemic, our economy was recognized throughout Europe and was quite robust. We had around 2.5 percent expected growth in 2019 and 2.7 percent in 2020. In the last decade Slovenia experienced massive growth; our yearly GDP per capita has grown from €33,000 to €44,000. We have the eighth lowest corporation tax rate among EU members. Our debt levels have fallen dramatically. Both the government and entrepreneurs have been instrumental in this success. With more than 27 percent of total value added, Slovenia is the third most industrialized EU member state.
As the pandemic hit, the economy was strongly affected by containment measures and the collapse in international trade. At the same time, large-scale support measures were put in place to limit the damage on companies and employment. We did not close our economy down completely; we maintained our production lines throughout the crisis. This helped us keep our economy afloat and in better shape than many of our neighbors. Many of our partners were looking for new suppliers. We were there for them and helped them achieve their goals; we showed them that we are a reliable partner. We came out of the first and second wave of the pandemic stronger. We feel that our solutions to our economic problems were solid. In the next few years, we will do even better and recover quickly.
Can you give us an overview of SPIRIT Slovenia’s mission and main initiatives?
SPIRIT Slovenia is a central point for potential investors and international companies looking for new business opportunities. We treat each investor individually, assign a key contact in the agency and guide them through the entire investment process. We cooperate closely with a network of regional development agencies when identifying investment opportunities and locations. We are also the single point for integrating and reforming the Slovenian innovation ecosystem.
In 2019, SPIRIT Slovenia began a national communications campaign for the promotion of the Slovenian economy abroad with the slogan I Feel Slovenia. Green. Creative. Smart. The slogan reflects Slovenia’s economy and economic ambitions. By green, we mean our drive for sustainability, green technologies and corporate social responsibility. By smart, we mean our numerous high-tech and globally recognized solutions. By creative, we mean our innovative talent that creates added value in our companies. The campaign highlights Slovenia’s key competitive advantages in niche areas of the green economy, environmental technologies, robotics, mobility, digitization, development and research and the creative industries. We selected 41 Slovenian companies and organizations as ambassadors for this campaign because of their sustainable, innovative and smart solutions. They will significantly contribute to the recognition of a positive image of Slovenia and promote it as a stable and cutting-edge business environment. The improved innovation ecosystem that will grow over the next couple of years will bring larger added value to companies behind the campaign.
What current projects is SPIRIT Slovenia working on?
The main project we are focusing on is the presentation of Slovenia at the Dubai Expo. This is a national project, and all ministers and the state are behind it. Our agency in Slovenia oversees this project. Slovenia will symbolize the green heart of Europe, addressing visitors with authentic images and extraordinary multimedia presentations so they can experience parts of the country Slovenians are most proud of. Entering the beautiful Slovenian pavilion with its unique green façade, visitors from all over the world will experience stories about the unique interplay of nature, knowledge, innovation and breakthrough business. More than 130 Slovenian companies and the best of our education system and entrepreneurs will take part. We will showcase the finest of Slovenia in our sustainable pavilion.
Additionally, we are partners in the Slovenian Digital Centre, which is a key juncture in Slovenian progress and economic advancement. By the end of this year, the broader public will be provided access to the most advanced products, services and educational programs in the field of new digital technologies. This central event is part of the 2021 Slovenian Presidency of the Council of the EU and a unique European example of encouraging economies. The Slovenian Digital Centre puts the country on the international map in terms of innovativeness. A big part of the agency’s work is helping Slovenia’s small to medium-sized enterprises increase their competitiveness and accelerate their technological development.
Why is Slovenia an attractive place to do business and invest in?
Most foreign investors are attracted by Slovenia’s strategic position at the heart of Europe, our excellent transport, value chains, industry clusters and centers of excellence. Investors keen on locating their operations at the heart of a market with 500 million consumers will find Slovenia’s international commercial contacts and land-sea-air transport system ideal. For example, it is four days faster to connect to Asia and the Far East from Slovenia than from the north of Europe. We are only 3.5 hours from Vienna, 4 hours from Munich and 5 hours from Milan. We have a traditional and historical connection with Austria and Germany and share good exchanges and perspectives with these countries through decades of communication. We also have good connections with all countries in the former Republic of Yugoslavia, which share a similar language. We are well connected with industry. We also have a well-developed education system. Slovenian people are known for speaking foreign languages; most of our educated workforce speak at least two foreign languages, mainly English, German and Italian. Our workforce is skilled and highly productive. Developing infrastructure is a challenge we are currently addressing. We are building an additional railroad to the Port of Koper.
How important is research and development (R&D) to Slovenia and what is SPIRIT Slovenia doing to extend this capacity?
Slovenia allocates 2 percent of its GDP to R&D and gives up to 100 percent tax deductions on R&D expenses made in five years. We have 4,200 researchers per 1 million people; and, impressively, Slovenian Intellectual Property Office receives an average of one patent application per day. Industry accounts for 80 percent of private investment in R&D. Corporate income tax base for foreign investors can be reduced as the amount invested in R&D can be claimed for tax reductions of up to 63% of the pre-tax profit in the first year, with the remaining difference claimed over the next five years. If a company invest in R&D, there is an extra incentive for surplus in upcoming years. It is a bit complicated, but in the end investment in R&D is given back to the company.
With the help of the European Union, we are trying to develop an innovation ecosystem in Slovenia. SPIRIT Slovenia was assigned as a key stakeholder in codesigning and coordinating this ecosystem. We are exploring markets in Europe and other markets such as Estonia and Israel to extract best practices that are directly applicable to the Slovenian ecosystem. We will use this research to make changes in our education system and in our innovation framework. We have already addressed some of the challenges that companies had during the pandemic. We consequently offered grants for research, development and innovation projects and the establishment of production capacities and investment to mitigate the consequences of the COVID-19 crisis. Furthermore, we are preparing grants for maintaining innovation potential in companies by financing labor costs for researchers.
How much are small and medium-sized enterprises supported in the Slovenian ecosystem?
Slovenia is strong in promotion and support of startups and local entrepreneurs. According to the Global Entrepreneurship Monitoring survey, Slovenia ranks sixth among European countries in terms of the share of people who believe entrepreneurship is a good career choice. The long-term focus of SPIRIT Slovenia on promoting entrepreneurship and raising entrepreneurial culture has had a significant impact on these results. The idea of developing Slovenia as a dynamic hub for startups is now alive and successful startups are seen as source of connections, inspiration and experience. Many successful start-ups are willing to share their international experience and connections. As part of this ecosystem, SPIRIT Slovenia provides resources and competences for advisors and mentors in technology parks and incubators. Their supportive services are connected with national grants and other financial resources to further develop successful business models.
What companies are at the forefront of innovation in Slovenia?
Slovenia ranks sixth place in its number of hidden champions per million inhabitants. Only Germany, Austria, Switzerland, Luxembourg and Sweden are in front of us. According to Emerging Europe, Slovenia has 3.5 specialized small and medium-sized enterprises per one million inhabitants. We are small, but we hope that with our changing ecosystems we will make progress and improve. Slovenian companies are leaders in certain specific areas in high-tech and niche technologies. In the automotive industry, Akrapovič is a global market leader in high-end titanium exhaust systems for motorcycles and cars. Polycom is a world leader in gas springs for the automotive industry and number one in the Central and Eastern Europe region in the niche market of thermoplastics and metal parts. Hidria Holding is number two or three globally in the production of diesel cold-start systems for internal combustion engines. We also have hidden champions in the aerospace industry, such as C-Astral Aerospace and their drones. In the electrical equipment industry, ATech is number on in the world in the biomass combustion controller market. Domel is a leader in the commercial vacuum-cleaner motor segment. In the field of machining and fabricated metal products, Tajfun Planina is a global leader in logging winches and firewood processors. We also have leading firms in the field of healthcare and lifestyle solutions based on preventive genetic testing and the commercial production of cellulose nanocrystals and bacteriophages. Companies in this field are Geneplanet, Biosistemika and BIA Separations.
How significant is Slovenia’s mobility sector?
Mobility is a traditional sector in Slovenia; our country is a world production hub for mobility components. We have successfully incorporated mobility trends such as digitalization, circular economies, low-carbon technologies and artificial intelligence. We have seen quite a lot of foreign direct investment in Slovenia in this area. We have Magna International, which is part of Austrian foreign direct investment. We also have a connection with France, which has been in Slovenia building cars for several decades. Our firms are not so globally known, but very well known in the mobility field. We are producing electromotive wheel technologies, batteries for electric cars, utilization systems and self-driving vehicles through artificial intelligence. We cover almost all development fields in this niche.
What sectors offer the most opportunities in terms of investment?
The automotive, mobility and information and communication technology industries are very promising sectors in Slovenia. We have a wide range of subcategories and network developments on different subsectors such as fraud prevention software. The biotech, medical and pharmaceutical sectors are also well known; we have a good connection with Switzerland in this area. Electronics is another strong sector. Our firms are specialized in the export of communicators for electric motors and electronic components for household appliances. Gorenje is an appliance company that is well known in France. We are also traditionally well known for machining and metalworking. This field takes up the largest share of our exports, with subcategories in construction, metal products, surface treatment and rolling of metals. We also have a strong robotics sector. Additionally, Slovenia has an excellent food sector, and we are now a European gastronomic region; we pay attention to organic products with high added value. In Slovenia we have a lot of success stories in various fields, but we are sometimes too modest to reveal them to the world. This year marks 30 years as an independent state and this is a good opportunity to raise awareness of our potential. Foreign direct investors will find that Slovenia is a good partner. We not only have strong connections with the EU, but also the U.S., Russia, China, Japan and the Far East. Slovenia is a land of infinite potential for business.