By: Dr Matevž Tomšič
Who does not remember the times when Slovenia was not only the most developed republic of the former Yugoslavia, but also the most developed region in the former communist Europe? And not by a little, but with a significant lead. We listened to stories about how it would become the ‘second Switzerland.’ The once largest political party, the Liberal Democracy of Slovenia (who still remembers it?), even chose the slogan ‘Slovenia, a success story’ for one of its election campaigns. At that time, it seemed that the newly established state was well on its way to eventually becoming comparable with the most developed countries in Europe and the world.
Much has changed in the meantime. And much of it not for the better. In terms of key indicators of economic performance, Slovenia still ranks among the leading countries of Central and Eastern Europe. But it is no longer necessarily right at the top, as it was overtaken years ago by the Czech Republic in terms of GDP per capita, adjusted for purchasing power. Several other countries are now very close behind. And these are precisely the countries that many once looked down upon, back when their citizens arrived for holidays on the Adriatic in modest Eastern-brand cars with meagre equipment. If in those days they came in Škodas (which, to be fair, are now something entirely different than in communist times), Wartburgs, or Moskvitches, today they arrive in Mercedes, Volvos, or BMWs; if they once stayed in tents and caravans in campsites, they are now accommodated in high-category hotels.
And if we look to our immediate neighbourhood: Slovenia not only fails to catch up with its northern neighbour Austria but is increasingly losing its lead over its southern neighbour Croatia. Croatia, too, has often been looked down upon as less developed – part of the Balkans, unlike Slovenia, which has long prided itself on its Central European identity. Yet, Croatia has recorded higher economic growth than Slovenia over the past four years. Slovenia’s GDP per capita is still higher, but the gap is narrowing. True, regional disparities in Croatia are much greater than in Slovenia. But their capital, Zagreb, is already quite close to Ljubljana in terms of living standards.
What stands out most is the business environment. If, at the beginning of the transition period, it seemed that Slovenian companies would dominate across the former Yugoslav space, in recent years we have witnessed Croatian buyers taking over some of Slovenia’s once-flagship companies. Mercator, Kolinska, Panvita, and Celjske mesnine are just some of them. This, of course, is not the result of some conspiracy, but simply better corporate management. And, importantly, Croatia’s institutional environment has become more business friendly. It offers significantly lower taxation of wages, fewer administrative barriers, and fewer ideologically motivated product bans than Slovenia, where such restrictions have been piling up during Prime Minister Golob’s government (a typical example being the recent ban on flavoured e-cigarettes). All of this creates a more favourable environment for developing and implementing business ideas.
But it is not only about a more encouraging business environment. The reasons why Slovenia is being caught up – and, in many respects, overtaken – by some of the other former communist countries, including Croatia, are deeper. This primarily relates to the depth of the break with the communist past. To be sure, there are also communist nostalgics in Croatia, waving red stars and occasionally being quite loud. But such people are more of a curiosity and mostly an object of ridicule. Their influence on the electorate is negligible, and even in left-leaning parties their impact is limited. Meanwhile, in Slovenia, those who celebrate the former regime and its ‘heroes’ are in power. And their policies are aligned with this outlook. If things continue in this direction, our southern neighbour will, within at most ten years, surpass us in key measures of development.