- Observatory: EMCC
- Published on: 02 March 2008
Disclaimer: This information is made available as a service to the public but has not been edited or approved by the European Foundation for the Improvement of Living and Working Conditions. The content is the responsibility of the authors.
This report explores the employment impact of globalisation and reviews the attitudes and responses of national governments and the European social partners to this phenomenon in Slovenia.
The Slovenian government has not intervened specifically because of the threat of relocation. It has, however, intervened because the jobs in some sectors have been threatened due to the loosing competitiveness of certain Slovenian industries.
Trade unions do not directly resist companies’ plans to relocate production abroad. The position of trade unions is that the main interest of workers is to support company restructuring, which would enable good jobs on a longer run. The request here is to do it gradually, in a soft and transparent manner. Similarly, practical is also trade unions position to foreign acquisitions; they are welcome if they increase longer-term company viability and promise good jobs.
Formally and legally Slovenia does not restrict foreign acquisitions. Beyond this formal/legal level there, however, seems to be quite important restrictions for foreign (and domestic) acquisitions of state-owned companies. The state has, directly and indirectly, controlling shares in a big number of important Slovenian enterprises and seems to be reluctant to embark on a more intensive privatisation, especially in the form of foreign acquisitions.
Slovenian Chamber of Commerce and Industry, as the main employers’ association in the country, does not have any explicit stated position on outsourcing, relocation and foreign acquisitions. Its view on that is very practical. If outsourcing/relocation is necessary for company’s development, it should be welcomed.
In general Slovenians have somehow neutral attitude towards globalisation and believe that inward FDI can have positive impact on the Slovenian economy. But on the other hand, they are very much afraid that developments in the EU may bring relocation of jobs in poorer EU countries.
Institutional responses to globalisation
Government action to prevent or reduce the extent of off shoring/relocation
Are there any recent examples in your country (i.e. over the past 3-4 years) of the government intervening to prevent particular activities from being relocated abroad or to reduce the scale of this?
If so, please give summary details and indicate the activities concerned
The government has not intervened specifically because of the threat of relocation. It has, however, intervened because the jobs in some sectors have been threatened due to the loosing competitiveness of certain Slovenian industries.
The employment data indicate that actually the only manufacturing industry which has experienced a really comprehensive decreasing of the number of employees since 2000 is textile and leather. Within the manufacturing sector, 33,100 out of 43,400 decreases in employment in 2000-2004 were in textile and leather (Statistical Office of the Republic of Slovenia). ERM fact sheets also confirm the textile and leather as being the manufacturing sector with the highest loss of jobs. One cannot attribute much of this directly to the relocation, but simply to the loss of competitiveness of these industries.
The problem of decreasing competitiveness of these industries was specifically tackled by the government within the process of EU integration. Thus, in the period 2000-2003 Slovenia had two specific sectoral programmes to handle the problems of their restructuring: (i) Programme for the adjustment of Slovenian textile and clothing industry to the conditions of EU internal market in 2000-2003, and (ii) Programme for the adjustment of Slovenian leather and footwear industry to the conditions of EU internal market in 2000-2003.
Ministry of Economy has a ‘Sector for Enterprise Rehabilitation and Restructuring’. The mission of this sector is to assist companies in restructuring. Activities of the Sector are based on Act on Assistance to the Rehabilitation and Restructuring of Enterprises in Trouble and the related Decree. Based on the Decree, in 2000-2004, textile industry (ISIC 17) got approximately EUR 4.4 million of state aids, clothing industry (ISIC 18) approximately EUR 12.1 million, and leather and footwear industry (ISIC 19) approximately EUR 11.6 million (Internal calculations based on official data on state aids). In 2005, however, the flow of state aids based on the Decree to the aforementioned industries stopped completely.
In 2003-2005, clothing industry was receiving between 23% and 25% of all the subsidies allocated to the Slovenian manufacturing. Subsidies for textile industry and leather and footwear industry have been much lower (Murn 2007). Two factors explain this situation; the fact that it is the clothing industry which is under the heaviest competitive pressures, and the fact that companies in this industry are much more numerous than companies in textile industry, and leather and footwear industry.
Social partner attitudes towards off-shoring/relocation
Have there been cases over the past 3-4 years where the possibility – or threat – of relocation of production has featured as a factor in collective bargaining?
If so, please indicate the cases concerned, how the possibility has been used and whether its use has become a more frequent occurrence.
The issues of the relocation threat, of course, appear in the collective bargaining, but not directly in the sense of some specific formulations or stipulations. It enters in the discussion by accentuating the need for company restructuring as a precondition of their longer term viability.
Are there any cases over the past 3-4 years where trade unions have successfully resisted plans to relocate production abroad or have managed to reduce the extent of this?
Trade unions do not directly resist companies’ plans to relocate production abroad. Relocations of production are rare in Slovenia. The process mostly goes via gradual abandoning of some parts of the production and swapping it by outsourcing the parts, which were previously produced in-house. The position of trade unions is that the main interest of workers is to support company restructuring, which would enable good jobs on a longer run. The request here is to do it gradually, in a soft and transparent manner. Trade unions are well aware that attempts to keep simple, low cost jobs in Slovenia are not viable in most cases.
If so, please indicate the cases concerned and outline their main features Are there any cases where trade unions have accepted the need for the relocation of production – or part of it – abroad as a means of maintaining or improving the viability of companies and so of preserving some jobs and even ultimately expanding them?
If so, please briefly describe the cases concerned
Typical situation in Slovenia is that trade unions accept the need for company restructuring in a way, which would gradually reduce the number and share of simple low skilled jobs. In fact most companies in the textile clothing, and leather and foot wear industry do have this kind of approach. Most of them gradually outsource some of the simpler parts of their production abroad, mostly to nearby countries of South East Europe, in rare cases also to China and India.
Simple low-skilled parts of production have already been abandoned by most of the companies. They have been swapped by outsourcing, less by relocation. Typical situation is when a company gradually decreases its own production, abandons some of the production programmes, and outsource some parts of the production (example of the footwear producer Peko who outsource the upper parts of shoes). Example of relocation is another (sports) footwear producer Alpina who relocate the production to China.
Government policy on foreign-owned firms controlling significant sections of the economy
Does the Government in your country have an explicit policy on restricting the acquisition of domestic companies in certain sectors by foreign-owned firms?
If so, please give summary details and indicate which sectors this applies to as well as whether any distinction is made between companies according to their nationality (e.g. whether non-European companies are treated differently from European ones)
As an EU member country Slovenia has rather narrow possibilities to legally restrict foreign acquisitions (free movement of capital). In 2001, Slovenia also adhered to the OECD Declaration on International Investment and Multinational Enterprises. Slovenia’s position under this Declaration provides only for very few exceptions to national treatment – in the production and trading of armaments, registration of an aircraft is only possible for aircraft owned by Slovenian nationals, granting of an operating or AOC license for performing airlines services is provided only to companies controlled by Slovenian nationals or to carriers complying with EU regulations on ownership and control (including principal place of business and activity, and majority owned by EU member states/nationals), only domestic legal persons may be shareholders of a company that may obtain a concession for permanent organisation of classical gambling in Slovenia, foreign natural and legal persons may not be shareholders in a company that has obtained a concession for organising special gambling in Slovenia (OECD 2002).
Beyond this formal/legal level there, however, seems to be quite important restrictions for foreign (and domestic) acquisitions of state-owned companies. These restrictions arise from the fact the state, directly and indirectly via the two parastatal Pension and Restitution Funds owns controlling shares in a large number of Slovenian enterprises, especially the most important ones. This does not hold only for the public utilities (transport, energy, telecommunications), but also for the financial sector (banking and insurance) and for the manufacturing sector. The process of the mass privatization in Slovenia ended with a rather dispersed company ownership, but with considerable equity shares of the Pension and Restitution Fund. In a situation of a dispersed ownership even 10%-20% shares of the Pension and Restitution Funds enable the state to control companies.
Thus, in spite of the fact that the state does not have/use formal legal instruments or economic policy instruments for restricting foreign – as well as domestic private - acquisitions it amply use its direct and indirect ownership position in the companies to do that. The policy of the state to foreign acquisitions can be summarized as follows:
- The state - as a direct owner - would like to retain at least the controlling share (25% plus 1 share) in the two main banks (Nova Ljubljanska Banka and Nova Kreditna Banka Maribor), as well as in the main insurance company (Triglav) and the largest telecommunication company (Telekom). The retainment of the controlling share of the state is directly motivated by the wish to prevent “uncontrolled” foreign acquisitions.
- According to the Decree adopted by the Government on 2006-07-27 The state – as an indirect owner with the ownership of the parastatal Pension and Restitution Funds – will gradually sell its shares in most of the companies. There will be no specific, less favourable treatment of foreign acquisitions in this case. This process should end in 24-30 months. The only exception is 18 so called strategic investments (the most important Slovenian enterprises), where the government does not want to accept any time frame as far as their sale is concerned. The goal, however, is to sell these companies and there is no formal discrimination between potential domestic and foreign investors.
Are there any restrictions on foreign-owned companies setting up branches or subsidiaries in your country either generally or in specific sectors?
Please indicate the sectors concerned and the stated reasons for the restrictions. Please also indicate whether the restriction apply to companies from other parts of the EU as well as from outside
Are there any sectors of the economy in which the acquisition of a domestic company has not been allowed over the past 3-4 years?
If so, please indicate the sectors concerned and the nationality of the foreign companies involved as well as the reasons given for the decision
The answer is yes and no. Formally, no but in fact, yes. For instance, the state announced the sale of the Nova Kreditna Banka Maribor, but when only foreign bidders appeared it cancelled the proposed sale. The state sold the minority share in Nova Ljubljanska Banka to Belgium KBC bank with a promise to later on enable KBC to acquire the majority share. The promise was not held. When Interbrew wanted to buy Pivovarna Union, the government and the public opinion clearly favoured the sale of Pivovarna Union to a local bidder Pivovarna Laško. At the end Interbrew did not succeed in acquiring Pivovarna Union.
Social partner responses to the take-over of domestic firms by foreign-owned ones
Have there been any recent cases (i.e. over the past 3-4 years) where trade unions have resisted foreign acquisition of domestic companies explicitly because of the nationality of the company concerned?
If so, please give summary details, indicating whether there is any evidence of different attitudes being shown towards European firms as opposed to companies from outside Europe
Opposition to foreign acquisitions in Slovenia is coming mostly from the politics (politicians who expect to get some point in the electoral body by defending the “national interest”), from managers (who are afraid of loosing their managing positions) and from one part of the academia. Trade unions do not resist in principle to foreign acquisitions. Their position is that the main interest of workers is to support owners, which would enable good jobs on a longer run. Any owner that has something to offer in this sense is welcome.
Have there been any recent cases (i.e. over the past 3-4 years) where domestic companies have resisted acquisition by a foreign-owned firm on the grounds of its nationality?
If so, please give summary details, indicating the nationality of the company concerned and whether there is any evidence of European and non-European companies being regarded differently in this regard.
The most obvious example of that is the failure of Interbrew to acquire Pivovarna Union. Generally speaking, almost any more sizeable (attempt of) foreign acquisition is accompanied by a campaign of some political parties, press and civil society against such an acquisition, where the reasons are mostly grounded on the nationality, with arguments like, “one should not sell the family silver, foreigners will close the production in Slovenia and sell the company, foreigners will reduce the employment, this activity is of a national interest and should remain in domestic ownership etc.” The fact, however, is that opposition to foreign acquisitions was successful only when supported by the decision of the state not to sell the shares.
Attitudes to globalisation
Have employers’ associations in your country adopted a stated position as regards the main aspects of globalisation – i.e. outsourcing or the relocation of production abroad and the acquisition of domestic companies by foreign-owned ones?
If so, please give summary details, indicating whether or not the position varies across sectors of the economy
No such explicit stated position has ever been adopted. The main employer’s association in Slovenia is the Chamber of Commerce and Industry. In its very recent publication (CCIS 2007) it tackles the issue of globalisation within the measures on how to improve the competitiveness of the Slovenian economy. Among eight areas of measures, the first relates to “Internationalization and globalization of the Slovenian Economy”, and the fifth “To make employment simpler – flexibility of labour market, labour legislation”. None of the measures proposed by the document, directly or indirectly, tackles the issue of outsourcing or relocation. Globalisation related measures contain the need for geographical diversification of Slovenian exports, improving the export structure in terms of increasing share of R&D intensive and higher value added products, increasing of inward FDI and improving of the functioning of Slovenian diplomatic network abroad.
Chamber’s Textiles, Clothing and Leather Processing Association is the one which is very much aware of the globalisation pressures faced by the companies, and their increasing need to engage in outsourcing and relocation as well. Enterprises, which are the most heavily threatened by the pressures of globalisation are those in the clothing industry (ISIC 18), which are far the most labour intensive (on average about 65% of all costs are labour costs). Enterprises from the textile industry (ISIC 17) are much more capital intensive, while in the leather and footwear industry (ISIC 19) only very few enterprises remain in Slovenia (two of them are highly specialized, one in sports and the second in children footwear, while the third one more or less successfully builds its competitiveness on own sales network). Some of the enterprises in the clothing industry try to find their way out by developing their own sales network and by promoting their own trade marks. They also tend to outsource part of the production abroad. Larger companies with high shares of subcontracting for foreign customers are gradually reducing the number of employees. The unofficial position of the Chamber is that the companies should do the best to survive and develop, if this is by outsourcing/relocating part of the production, one should not prevent enterprises to do that. Everybody is aware that current EUR 8.5 of labour costs per hour in Slovenian clothing industry is too high to compete in low skilled products. The prediction is that the employment in the Slovenian clothing industry will further reduce in the future.
The standpoint of the Chamber as far as foreign acquisitions is concerned is that this is the matter of the owners in each particular case and that the Chamber could not adopt a general ‘in principle’ position on this issue. The attitude of the Chamber to foreign acquisitions could, indirectly, be measured by the standpoints of the members of the Chamber’s Managing Board, which is its highest decision making body of the Chamber. The members of the Managing Board are predominantly the CEOs of the largest Slovenian companies, which are mostly in the domestic ownership. Traditionally, the opinion of the managers of domestically-owned companies in Slovenia is rather reluctant as far as foreign acquisitions are concerned.
Of course, the position of the owners may be different. The controlling share in most of the most important Slovenian companies is still held by the parastatal Pension and Restitution Funds, and in some cases directly by the state itself. The state seems to be rather reluctant to get out of this ownership and the issues like the ‘national interest’ are of importance here (see above).
Have trade unions in your country adopted a stated position as regards the main aspects of globalisation – i.e. outsourcing or the relocation of production abroad and the acquisition of domestic companies by foreign-owned ones?
If so, please give summary details, indicating whether or not the position varies across sectors of the economy
*A Eurobarometer survey on globalisation was carried out in 2003 in the EU-15 Member States. This might serve as a useful point of reference for the countries concerned, to see, for example, whether or not national attitudes expressed in the survey are in line with similar surveys which have been conducted nationally. The survey findings are available at:
Have there been any surveys of public opinion in your country over the past 3-4 years on attitudes towards globalisation or on the various dimensions of this (as listed above)?
If so, please summarise the main findings of these. Please give a breakdown, where possible, in terms of the characteristics of respondents (e.g. by sex, age, socio-economic group, education level, occupation, sector of employment or region).
In general Slovenians have somehow neutral attitude towards globalisation and believe that inward FDI can have positive impact on the Slovenian economy. Bur on the other hand, they are very much afraid that developments in the EU may bring relocation of jobs in poorer EU countries.
There are two relevant surveys of public opinion in Slovenia regarding the attitude towards globalisation. The first is the so called ‘Slovenian Public Opinion’ operated by the Faculty of Social Sciences from Ljubljana (Faculty of Social Sciences 2004). The issues related to globalisation are tackled rather non-systematically:
- In the survey from 2003, the people were asked about their attitude towards globalisation: 6.8% of the respondents have very negative attitude, 16.5% negative, 38.1% neither positive nor negative, 19.4% positive and 3.2% very positive (15.8% did not answer). The attitude towards globalisation is thus very much in the shape of ‘normal distribution’, neither in the favour of negative or positive side.
- In the survey from 2001, the people were asked, what will be the impact of inward FDI on the economic situation in Slovenia. 40.7% of the interviewees claimed that FDI will improve the situation, 15.1% believed that the situation will be worsened, and 20.3% believed that FDI will not bring changes (23.9% did not answer).
The second is the Eurobarometer for Slovenia (EC 2005), which in its Spring 2005 edition revealed that for 74% of the interviewed Slovenians the relocation of jobs to poorer member countries is their most important EU membership-development related fear.
Have these surveys made a distinction between the different dimensions of globalisation (as listed above) or have separate surveys been carried out on these dimensions?
If so, please summarise the main findings of these as regards:
off-shoring(or the relocation of production abroad;
the take-over of domestic companies by foreign-owned ones and/or the growing extent of control by foreign companies of parts of the domestic economy
the establishment of new plants and offices by foreign-owned companies
Where possible, please give a breakdown in each case in terms of the characteristics of respondents (e.g. by sex, age, socio-economic group, education level, occupation, sector of employment or region)
‘Slovenian Public Opinion’ operated by the Faculty of Social Sciences from Ljubljana (Faculty of Social Sciences 2004) tackles some of the issues. All in all, the answers show that Slovenians do have a preference for minority as opposed to majority foreign owned FDI, but this preference is not really strong.
- In the survey from 2001, the people were asked, what kind of inward FDI will have the best impact on the improvements of the Slovenian economy. 30.8% of the interviewees claimed that the best mode would foreign acquisitions with minority foreign equity shares, for 23.3% the best would be foreign acquisitions with majority foreign equity shares, and for 14.5% the best would greenfield FDI (31.4% did not answer).
- In the survey from 2001, the people were asked what attitude the Slovenian government should adopt to majority ownership of foreign investors in the Slovenian enterprises. 18.2% of the interviewees said that it should promote majority foreign ownership, 28.6% said that it should not promote majority foreign ownership, 23.6% said that it should not attempt to influence the ownership proportions (29.6% did not answer).
- In the survey from 2001, the people were asked, whether they agree that the Slovenian government promotes inward FDI and allows foreign investors to have majority equity shares in the Slovenian enterprises. 3.8% of the interviewees said that they fully agree, 40.1% agree, 33.8% disagree, and 6.7% strongly disagree (15.6% did not answer):
Have these surveys made an explicit distinction between globalisation and the process of European integration, by, for example, distinguishing between relocation of production to other EU Member States and relocation to countries outside the EU or between the take-over of domestic companies by EU-owned firms and take-over by a non-EU companies?
If so, please give summary details of the differences in response to EU integration as opposed to globalisation.
This is not relevant in the case of Slovenia. Far the dominant part of inward FDI in Slovenia is coming from EU countries (plus Switzerland and Croatia). Inward FDI from other countries is negligible. On the other hand far the predominant part of outward FDI goes to the countries of the former Yugoslavia, because Slovenian enterprises possess specific knowledge of these markets and business environments. Outward FDI to EU countries or outside the EU is still rather small.
Evropska komisija (European Commission). 2005. Eurobarometer 63.4 – Javno mnenje v Evropski uniji, Pomlad 2005, Nacionalno poročilo – Slovenija (Eurobarometer 63.4 – Public Opinion in the European Union, Spring 2005, National Report – Slovenia).
Fakulteta za družbene vede (Faculty of Social Sciences). 2004. Vrednote v prehodu III.: Slovensko javno mnenje 1999-2004 (Values in Transition III.: Slovenian Public Opinion 1999-2004). Ljubljana.
Gospodarska zbornica Slovenije (Chamber of Commerce and Industry of Slovenia – CCIS). 2007. Povečevanje konkurenčnosti slovenskega gospodarstva (Increasing the Competitiveness of the Slovenian Economy). Ljubljana.
Murn, A. 2007. Učinkovitost slovenske politike dodeljevanja subvencij oz subvencioniranja gospodarskih družb (Efficiency of Slovenian Policy of Enterprises Subsidization). Delovni zvezek (Working paper). Ljubljana: ZMAR (IMAD). Forthcoming.
OECD. 2002. OECD Investment Policy reviews – Slovenia. Paris: OECD.