Slovenia WT/TPR/S/98
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IV. TRADE POLICIES AND PRACTICES IN SELECTED SECTORS
(1) AGRICULTURE
(i) Background
1. While agriculture's importance in the Slovenian economy is declining in terms of GDP (2.9%
in 2000 against 4.7% in 1991) and exports (5.5% against 8.5%), the sector continues to play an
important role in employment (about 10% of total employment) and in the social structure of thecountry.  Over half of the population still live in rural areas.  Even during the socialist period, the
large majority of land was privately owned.  After privatization and restitution, this proportion has
increased to 92% of total land.
 1  However, most farms are small, with an average of 5 hectares, and
only 5% of the total match the EU average size of 15 hectares.2  Full privatization of the majority of
state (socially owned or co-operative) farms is planned for the end of 2002.  State farms still produceabout one third of agricultural output.
3  Nearly 70% of agricultural land is in less-favoured
mountainous areas, and only 30% is arable land (totalling some 250,000 hectares).
2. The structure of agricultural output remained relatively stable throughout the 1990s, with
livestock production accounting for some 47% of gross agricultural output in 2000, and crop
production for 53% (Table IV.1).  Slovenia's main livestock production includes cattle, poultry, anddairy products, and pig and sheep meat.  Crop pr oduction is dominated by cereals, maize, potatoes,
fruit and sugar beets.  Slovenia is a net importer of foodstuff and agricultural products.  Exports
include meat, wine, hops, poultry, and dairy products.  Exports of agricultural products to former
Yugoslav Republics accounted for 61% of total Slovene agricultural exports in 2000, while imports
from those countries accounted for 10% of total agricultural imports.  Agricultural exports to the EU
decreased in 2000 to US$70 million or 21.4% of the total, while imports from the EU amounted to
US$350 million (54% of total agricultural imports).
Table IV.1
Gross agricultural output, 1991-00(Per cent)
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
Change in GAO volume 0.4 -10.1 -0.7 20.2 -0.1 0.7 -1.0 2.0 -2.6 2.4
Change in total crop output -0.7 -13.4 1.5 44.6 -3.5 1.3 0.5 2.8 -9.3 2.2
Arable crops 1.8 -21.0 0.2 49.3 1.1 -3.6 6.5 1.7 -8.2 -8.8
Fresh fruits -19.2 22.7 11.6 55.1 0.9 1.8 -46.4 31.8 -3.5 48.5
Grape -3.4 13.0 3.5 12.2 -35.0 35.1 13.2 -4.0 -19.8 32.2
Change in total livestock output 1.5 -7.2 -3.0 2.6 2.8 0.2 -2.2 1.3 3.5 2.6
Beef and milk 1.6 -2.0 -4.5 3.0 3.2 -1.3 -5.2 2.2 5.3 4.5
Pigmeat -1.5 -2.9 4.7 4.8 -4.4 -4.3 0.6 0.5 7.9 -5.9
Poultry and eggs 2.8 -19.3 -8.7 -2.1 11.7 7.6 2.5 -2.3 -4.8 1.2
Share in GAO
Crop production 49.5 45.6 52.5 50.4 44.3 42.1 44.4 44.7 44.5 53.0
Livestock production 50.5 54.4 47.5 49.6 55.7 57.9 55.6 55.3 55.5 47.0
Source: Statistical Office of the Republic of Slovenia;  and OECD (2001).
3. During the early phase of Slovenia's transition to a market economy, the agriculture sector
went through a deep crisis, caused mainly by the loss of the Yugoslav markets, changes in the policy
                                                     
1 Under the 1993 Law on Agricultural Land and Forest Funds, State funds were set up to administer the
leasing of state agricultural land.
2 The corresponding share in the European Union is 75%.
3 The food processing industry is also to be privatized, under current government policy.  However,
many co-operative food processing enterprises are experiencing financial difficulties and lack of interest frompotential investors (Turk and Rozman, 2001).WT/TPR/S/98 Trade Policy Review
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framework, and uncertainties associated with changes in ownership of arable land (triggering a wave
of retirement of older farmers).  As a result, output declined for both crop and livestock production,
particularly in 1992 and 1993.  As from 1994, production started to recover with the reorientation of
trade towards the EU, pushed by the Europe Agreement; the recovery of output also benefited from
increases in productivity and efficiency, as well as growing amounts of Government subsidies in the
context of the harmonization of agricultural assistance with the EU Common Agricultural Policy(CAP).
(ii) Policies
4. Slovenia started to formulate and implement its own agricultural policy only after
independence.
4  After launching the redistribution and privatization process, the authorities aimed to
bring agricultural policy rapidly closer to the CAP, in order to facilitate accession to the EU.  Theemphasis was placed on support for production and farm incomes, further increases in productivity
and efficiency, and promotion of the "multifunctional" role of agriculture (covering regional policies,
environmental aspects, social welfare, etc.).
5  Government assistance is provided through a
combination of border measures (tariffs and tariff quotas) and domestic support (mainly comprising a
system of guaranteed prices for some commodities, direct payments to farmers, tax concessions, and
input subsidies).  Structural policies include separate support and investment programmes in favour of
rural development, less-favoured agricultural areas, and village renovation.  Reflecting recent CAP
trends, since 1998 Slovenia has been promoting a gradual shift from market-price support to direct
payments, and from direct market intervention to structural reform in the whole sector.
Border protection
5. Border measures affecting agricultural products involve import tariffs for all products.  While
the large majority of tariff lines are expressed in ad valorem  terms, products considered to be sensitive
are subject to compound duties, combining an ad valorem  and a specific component (400 lines in the
MFN applied tariff).  In addition, market access for the most sensitive agricultural products is
regulated by tariff quotas, also with compound duties (Chapter III(1)(iii)(c)).  Calculating the ad
valorem  equivalents of the specific component of such duties, it is estimated that the simple average
applied MFN tariff on agricultural products (as defined by HS Chapters 1 to 24) was 15.3% in 2001(Chart IV.1); this is 5.8 percentage points higher than the average for industrial products.  While the
majority of ad valorem  tariffs are in the 5-10% range (with peaks at 45%), compound tariffs may
conceal much higher levels of protection, in particular for products that are subject to tariff quotas.
6
Ad valorem  equivalents of out-of-quota specific rates on these lines show that beef, dairy products,
and wine receive the highest protection, with rates exceeding 80% on some lines.7
6. Bound MFN tariffs rates are generally well above applied rates. In 2001, the difference
between the bound and applied MFN average rates for agricultural products (WTO definition) was 9.5
percentage points.  Such a difference leaves scope for increasing tariff protection without violating
WTO commitments, depending on world and domestic market conditions.  According to the OECD,
                                                     
4 Before 1991, policies regarding market and prices were entirely in the hands of the Yugoslav Federal
Government. Individual Republics retained jurisdiction over certain structural policies.
5 The objectives of Slovenia's agricultural policy, as set out in the 2000 Agriculture Act, include, inter
alia, retention of the population in rural areas, increase in agricultural competitiveness, support of agricultural
income, and protection of environment and nature.
6 Tariff quotas cover meat and meat products (beef and pork), dairy products (milk powder, butter),
cereals, sugar, and swine.
7 Five tariff lines covering beef meat, and three lin es covering milk and cream products carry out-of-
quota rates of between 90% and 100%;  the highest rate (293%) concerns wine.Slovenia WT/TPR/S/98
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in 1998 Slovenia resorted to temporary increases in applied tariffs for maize and wheat, and pigs and
pigmeat.8  The Government of Slovenia stated in the co ntext of this Review that applied tariffs have
always been maintained below bound levels.
7. Imports from the EU, CEFTA countries and other signatories of free-trade agreements benefit
from preferential access, including lower or zero duties on certain items and tariff quotas at
preferential rates.9  The list of (sensitive) products covered by tariff quotas is specific to each
agreement, with large differences in tariff ra tes and products (Chapter III(1)(iii)(c)).  Access
conditions under these quotas are reviewed and increased on a regular basis through the negotiation of
additional protocols.  The management of 14 lists of preferential tariff quotas, involving the fine-
tuning of complex systems of tariffs (specific tariffs), would seem to impose a very heavy burden on
Slovenia's scarce administrative resources, as well as on importers, who may encounter up to 15different import tariffs for the same product depending on its origin.
Domestic support system (direct payments and price support)
8. The instruments used for domestic support are being harmonized with those of the EU, in
preparation for accession.  In the period 1991-99, Slovenia relied mainly on administered prices and
per-hectare payments to farmers.  In 1998-99, administered prices applying to three food chains(wheat and flour, raw and pasteurised milk, and sugar beet and refined sugar) were phased out.
Related monopoly arrangements (in the wheat and sugar branches, for example) were also
terminated.
10  Slovenia moved towards the establishment of EU-like common market organizations, in
which intervention prices, generally set at lower levels, replaced fixed state-determined prices.  To
date, common market organizations have been established for cereals, sugar, seeds of agricultural
plants, hops, fresh fruit, vegetables, olive oil, wine grapes, beef, sheep and goat meat, and milk and
dairy products.
9. To offset the impact of lower guarantee prices on farmers' incomes, Slovenia has introduced
less distorting modes of support since 1995, such as direct payments and set-aside schemes, in line
with the first and second reform of the CAP.  This was achieved by gradually reducing external
protection and putting downward pressure on domestic prices; WTO commitments also encouraged
this evolution.  Initially confined to animal production (cattle and sheep), direct payments, which takethe form of area payments per hectare in the case of major crops (cereals, sugar beet, and vegetables)
and headage premiums for animal production, have been generalized to all major production.
11
                                                     
8 OECD (2001), p.20.
9 For example, Slovenia agreed under the Europe Agreement to lower most tariffs on imports from the
EU by some 50%.  Further liberalization was negotiated in 2000, providing for the complete elimination of
restrictions on "least-sensitive" products, and the reci procal elimination of export refunds and import tariffs
within agreed quotas for another group of commodities.
10 Until 1999, the Government set administered pri ces and controlled the purchase of milling wheat
from producers and its sale to grain millers.  Market intervention and controls were performed by the Agencyfor Commodity Reserves, which also had a near monopoly on imports.  In 1998, domestic millers were allowedto purchase grain from alternative sources, and in 1999 prices were liberalized.  The Government also stopped
fixing minimum purchase prices for sugar beet in the same year. In 1998, price controls on pasteurised milk
were abandoned;  the uniform out-of-farm set price for raw milk was abolished in 2001.
11 In 1998, direct payments were set for horse meat (headage payment) and for hops and sugar beet
(area payments per hectare).  They were extended to wheat and rye for the 1999 harvest, and generalized to mostother crops (other cereals, oilseeds and vegetables) in 2000.WT/TPR/S/98 Trade Policy Review
Page 64
Chart IV.1                                          
Tariffs on agricultural products by HS chapter, 2001
051015202530
01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24Per cent
Sourc e:  WTO Secretariat calculations, based on data provided by the Slovenian authorities.Average 
 (15.3% )
HS
01
02
03
04 05
06
07
08
0910
11
12
13
1415
16
1718
19
20
21
2223
24Description
Live animals
Meat and edible meat offals
Fish and crustaceans, molluscs and other aquatic invertebrates
Dairy produce, birds eggs, natural honey, edible products of animal origin  Products of animal origin, n.e.s.
Live trees and other plants;  bulbs, roots and the like;  cut flowers
Edible vegetables and certain roots and tubers
Edible fruit and nuts;  peel of citrus fruits or melons
Coffee, tea, mate and spicesCereals
Products of the milling industry;  malt;  starches;  wheat gluten
Oil seeds and oleaginous fruits;  miscellaneous grains, seeds and fruit
Lacs;  gums, resins and other vegetable saps and extracts
Vegetable plaiting materials;  vegetable products n.e.s.Animal or vegetable fats and oils and other cleavage products;  prepared edible fats; etc.
Preparations of meat, or fish or of crustaceans, molluscs or other aquatic invertebrates
Sugars and sugar confectioneryCocoa and cocoa preparations
Preparations of cereals, flour, starch or milk;  pastrycooks' products
Preparations of vegetables, fruit, nuts or other parts of plants
Miscellaneous edible preparations
Beverages, spirits and vinegarResidues and waste from the food industries;  prepared animal fodder
Tobacco and manufactured tobacco substitutesSlovenia WT/TPR/S/98
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10. In addition to direct price and income support systems, farmers can benefit from indirect
forms of aid. The most important scheme is the e xport promotion payments, aimed at reducing excess
supplies in the domestic market.12  The Government is responsible for the allocation of these
payments based on the situation of domestic and world markets.13  Other forms of indirect aid to
farmers include reductions on input costs (subsidies for animal breeding and other farm services),
special income tax treatment, as well as preferential credits and subsidized interest rates.14
11. Slovenia also operates a system of strategic reserves for wheat.  The Government's Agency
for Commodity Reserves became the main authority responsible for strategic reserves in 2000.
According to the authorities, the functioning of th e system is exclusively related to the prevention of
strong market disturbances and instability; in cases of serious shortages, limited quantities of wheat
may be imported duty free by the Agency.15  The Agency is not engaged in any domestic sale or
export activities.  According to the authorities, the stabilization and reserve functions performed by
the Agency do not have the character of a state-trad ing enterprise within the meaning of Article XVII
of the GATT 1994.
12. The gradual reform of domestic support instruments did not reduce budgetary outlays to
agriculture.  According to a recent survey of Sl ovenia's agricultural policies by the OECD, budgetary
allocations to the sector have increased by over one third in real terms (36%) since independence.16
The OECD's measure of producer support estimate (PSE) for Slovenia was above the OECD averageduring the period 1995-99 (40% against 35%), and nearly the same as for the EU (42%) (Table IV.2).
The level of producer support in Slovenia exceeded that of any central and eastern European countries
for which the OECD carried out the estimate.  Acco rding to the authorities, total PSE for 2000 was
38.9%.
Table IV.2
Producer support estimate (PSE) by commodity, 1995-99
(Per cent)
1995 1996 1997 1998a1999b
W h e a t 3 52 93 25 05 3
Maize 12 12 -3 3 11
Other grains (barley) 23 17 22 31 28
S u g a r 5 65 86 06 87 2
Crops 28 25 20 34 40
Milk 48 42 47 59 55
Beef and veal 33 25 42 46 55
P i g m e a t 3 21 83 54 96 2
P o u l t r y 4 02 82 72 04 0
Eggs 52 40 42 50 53
S h e e p m e a t 7 45 95 56 05 6
L i v e s t o c k 3 93 04 04 85 4
All commodities 37 29 37 46 52
a Estimates.
b Provisional.
Source: OECD (2001).
                                                     
12 Budgetary allocations for export promotion payments doubled between 1998 and 1999, reaching
some SIT 6.2 billion (around € 30 million). OECD (2001), p.88.
13 Milk processors are usually the main beneficiaries of these payments.  Other subsectors (such as
poultry, wine, and fruit) have also benefited from such assistance.
14 According to the OECD (2001), budgetary allocations for input subsidies are declining.  Subsidies
for farm services (advisory services to farmers, animal breeding) account for the bulk of total allocations.
15 The bulk of wheat imports is by private companies, based on market considerations.
16 OECD (2001).WT/TPR/S/98 Trade Policy Review
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Structural policies
13. The share of the agricultural budget allocated to structural adjustment and rural development
schemes is increasing, with a focus on less favoured areas and investment support.  Support to less
favoured areas (which cover 75% of the agricultural area) includes output-based support,
compensation for inputs, and direct payments specifically targeted at these areas.  Investment support
is delivered in the form of capital grants and interest rate subsidies on loans.  Agri-environmentalmeasures include payments geared to the protection of landscape, the reduction of nutrient and
pesticides impact, and the protection of bio-diversity.  General services to agriculture (extension,
veterinary and breeding services, research and education services) also benefit from public support.
The gradual increase in structural, rural development and agri-environmental programmes is reflected
in the notable shift from AMS-type measures to Green Box measures during the period ofimplementation of the WTO Agreement on Agriculture.
WTO
14. Under the WTO Agreement on Agriculture, Slovenia has undertaken commitments on
domestic support, market access, and export subsidies (Chapter II(3)(ii)).  These commitments were
expressed in ECUs (now euro).  According to th e authorities, the base total AMS value was ECU 74.7
million, and the final AMS value was ECU 61.8 million in 2000.  Slovenia has also undertaken the
commitment not to provide export subsidies.  Sinc e the entry into force of the Agreement, Slovenia
has notified each year (including in 2001) that it did not provide any export subsidies.
17
(2) MANUFACTURING
15. Manufacturing (including construction) accounts for about one third of GDP.  Around 8,000
enterprises are operating in the sector;  and while 90% are privately owned, some companies are still
socially owned or state owned.  The sector is relatively concentrated, with the largest 500 enterprisesaccounting for about 80% of output and exports.  Slovenia is specialized in the production of
intermediate and semi-finished industrial products, which include in particular metal products (iron
and steel), chemicals (in particular pharmaceuticals), textiles and clothing, industrial machinery,
electrical and electronic products, automotive products (cars and equipment), and wood (furniture)
and paper products.  In recent years, the share of labour-intensive industries has been declining(textiles and clothing), while that of higher-value-added production (pharmaceuticals, motor vehicles)
has increased. Manufacturing products account for over 90% of Slovenia's total trade.  The main
manufacturing exports are motor vehicles and parts (mostly assembled cars and tyres), medicines,
furniture and accessories, electrical and electronic products, garments, and construction material
(Chapter I(3)(ii)).  Manufacturing imports reflect to a large extent the structure of exports, and consistlargely of raw industrial material (iron) and intermediate products that are used as inputs for domestic
production and exports.
16. Contrary to the agricultural sector, the manufacturing sector has resisted relatively well the
loss of Yugoslav markets after independence.  Aided by the liberalization of trade (in particular with
the EU and CEFTA countries) and the relatively modern and sophisticated industrial base inheritedfrom the socialist period, Slovenia's manufacturing sector has been able to integrate in, and compete
with, neighbouring industrial clusters in the Europe an Union.  The rapid re-orientation of exports and
imports towards the EU posed major challenges to Slovenian enterprises, in particular the need to
upgrade facilities, restructure production, and raise productivity.  This process was successful in
industries such as pharmaceuticals, mechanical engineering, and paper and wood products, due to a
                                                     
17 See in particular WTO document G/AG/N/SVN/16, 14 March 2001.Slovenia WT/TPR/S/98
Page 67
combination of high investment rates and privatization.18  In other sectors, such as iron and steel,
textiles and clothing, footwear, and food products, restructuring and privatization efforts have been
slower and performance weaker.  In consultation wi th the European Union, the authorities adopted
comprehensive restructuring programmes for steel (in 2000), textiles and clothing,  and leather and
footwear (both in 1999).  The latter two programmes allow state aid until 2003 and the former until
the end of 2001.  State aid is granted and monitored according to Slovenia's new State aid policy(Chapter III(3)(i)).
17. Trade policy plays an important role in the transition to market-orientation.  To be fully
effective, trade liberalization needs be adequately sequenced with domestic reforms such as
privatization and deregulation of prices, which ha ve a common purpose of restoring a proper system
of incentives and relative prices.  The domestic reforms undertaken by Slovenia are presented inChapter III(3). The average applied MFN tariff in the manufacturing sector is currently 9.5%, with
tariffs ranging from 0 to 27% (Chapter III(1)(iii)(a)).  Ailing industries, including prepared food,
textiles and clothing products, footwear, and tran sport equipment, benefit from higher-than-average
tariff protection (Chart IV.2).  At a more disaggregated level (four-digits), sugar products, bakery
products, and alcoholic products are protected by average rates above 20%.  Imports of furniture,footwear, and motorcycles and bicycles are subject to rates between 15% and 20%.  Nearly all
industries display some degree of tariff escalation, providing a bias in favour of finished products.
(3) S
ERVICES
(i) Financial services
(a) Banking
18. After a short crisis in the early 1990s, Slovenia's banking industry has developed into a
profitable, relatively advanced and sound sector by regional standards.  A recent review ofsupervisory functions indicates that Slovenia's banking system is robust to possible macroeconomic
shocks.
19  All banks exceed considerably the 8% international capital adequacy requirement.  The
strength of balance sheets is partly due to the aggressive programme of bank rehabilitation adopted by
the Government after the 1992 banking crisis, and partly to the shelter created by restrictions on
foreign presence (in particular restrictions on branching and cross-border banking) and capitalmovements until 1999.
20  These restrictions have been, to a large extent, responsible for the
emergence of oligopolistic practices and market structures, despite the large number of players in the
market.21
                                                     
18 The European Commission regards Slovenia as an efficient niche competitor in the pulp, paper, and
printing market, as witnessed by growing exports to the EU.  It considers that the "high level of privatization hasbeen an important factor behind this positive performance".  European Commission (1997).
19 International Monetary Fund (2001).
20 The existence of custody accounts for foreign portfo lio investors in Slovenia, together with foreign
currency reserve requirements and a restrictive policy towards licensing severely limited the number of banksentitled to engage in foreign capital transactions.
21 See Feyzioglu (2000) for model calculations demonstrating the oligopolistic character of the market.WT/TPR/S/98 Trade Policy Review
Page 68
0510152025
25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57 59 61 63 65 67 69 71 73 75 78 80 82 84 86 88 90 92 94 96Per cent
Average  
(9.5%)
HS       Description
25         Salt; sulphur; earths and stone, etc.
26         Ores, slag and ash
27         Mineral fuels, mineral oils, etc.
28         Inorganic chemicals; organic or 
             inorganic compounds of precious
             metals, etc.
29         Organic chemcials
30         Pharmaceutical products31         Fertilizers    
32         Tanning or dyeing extracts etc. 
33         Essential oils and resinoids;
             perfumery, cosmetic or toilet
             preparations
34         Soap, organic surface-active 
             agent, washing prep., etc.    
35         Albuminoidal substances;
             modified starches; glues, etc.36         Explosives; pyrotechnic products;
             matches, etc
37         Photographic or cinematographic 
             goods
38         Miscellaneous chemical products
39         Plastics and articles thereof
40         Rubber and articles thereof41         Raw hides and skins and leather
42         Articles of leather, etc.
43         Furskins and artifical fur; 
             manufactures thereof
44         Wood and articles of wood, etc.
45         Cork and articles of cork
46         Manuf. of straw, of esparto, etc.   47         Pulp of wood or of other 
             fibrous cellulosic materialHS       Description
48         Paper and paper board, etc.
49         Printed books, newspapers, etc.
50         Silk
51         Wool; fine or coarse animal
             hair, etc.
52         Cotton
53         Other vegetable textile fibres 
54         Man-made filaments   55         Man-made staple fibres 
56         Wadding, felt and non-wovens;
             special yarns; twine, cordage, etc.
57         Carpets; other textile floor
             coverings
58         Special woven fabrics; lace, etc.
59         Impregnated, coated, covered or
             laminated textile fabrics, etc.
60         Knitted or crocheted fabrics    61         Articles of apparel and clothing
             accessories, knitted or crocheted
62         Articles of apparel and clothing
             accessories, not knitted, etc.
63        Other made-up textile articles;
             sets, worn clothing, etc.
64         Footwear, gaiters, etc.65         Headgear and parts thereof
66         Umbrellas, walking-sticks, etc. 
67         Prepared feathers and down, etc.
68         Articles of stone, plaster, etc.
69         Ceramic products
70         Glass and glassware
71         Natural or cultured pearls,             precious or semi-precious
             stones, precious metals, etc.HS       Description
72         Iron and steel
73         Articles of iron and steel
74         Articles of iron and steel
75         Nickel and articles thereof
76         Aluminium etc. 
78         Lead and articles thereof   
79         Zinc and articles thereof 
80         Tin and articles thereof81         Other base metals, etc.
82         Tools, implements, cutlery
             spoons and forks, etc.
83         Misc. articles of base metals
84         Nuclear reactors, boilers,
             machinery, etc.
85         Electrical machinery and
             equipment, etc.
86         Railway or tramway              locomotives, etc.
87         Vehicles other than railway
             or tramway rolling-stock; etc.
88         Aircraft, spacecraft, etc.
89         Ships, boats, etc.
90         Optical, photographic, etc. 
             apparatus91         Clocks and watches, etc.
92         Musical instruments, etc.
93         Arms and ammunition, etc.
94         Furniture, bedding, etc.
95         Toy, games, etc.
96         Miscellaneous manuf. 
             articles97         Works of art, antiques, etc.Chart IV.2
Tariffs on manufactured products by HS chapter, 2001
WTO Secretariat calculations, based on data provided b y the Slovenian authorities. Source :Slovenia WT/TPR/S/98
Page 69
19. Despite some initial steps taken in 1995-96, the consolidation of the sector started in 1998
(three mergers and one liquidation) and proceeded in 2001 (three acquisitions and one merger).  There
are at present 21 commercial banks, including four subsidiaries of foreign banks and one branch of a
foreign bank, three savings banks, and 53 savings and loan undertakings operating in Slovenia.
Aggregate total assets of all credit institutions accounted for 81.4% of GDP (end of September 2001).
The sector is characterized by a relatively high level of market concentration, the three largest banksaccounting for 56.5% of total banking assets, and the top seven for 80% of total banking assets.  Two
of the three largest banks are still state owned, although the process of privatization started in 2000
and continued in 2001.
22  Since 1999, the regulatory framework governing the banking sector has
been changed in order to harmonize Slovenian legislation with EU directives and increase the sector's
exposure to international competition. The main feature of the 1999 Banking Act is the removal ofrestrictions on foreign branching.  The legislation, which was required by the Europe Agreement,
aims at adapting Slovenia's legal environment to EU accession requirements.
20. As confirmed by the 1999 Banking Act and amendments to the Banking Act (adopted in
2001), which govern the conditions of establishment, operation, and supervision of credit institutions,
Slovenia applies a universal banking system, under which local banks and branches of foreign banksare allowed to perform a relatively broad range of financial services;  these include, inter alia ,
banking, financial leasing, factoring, issuance of electronic money, performance of custody services,
analysis and provision of information on the credit-worthiness of legal persons, trading in financial
derivatives, services in connection with securities, intermediation in sales of insurance policies, and
management of pension or investment funds.  Ba nks are precluded from providing insurance services
directly, but they can take stakes in insurance companies, and can sell insurance policies  as insurance
intermediaries or by establishing subsidiaries.  Foreign banks may establish commercial presencethrough wholly capitalized subsidiaries or, for the first time under the Act, branches.  Domestic and
foreign banks (as well as branches) need an authorization from the Bank of Slovenia to establish and
operate.  The criteria include minimum initial capital requirements (€ 5 million);  the fulfilment of
prudential rules;  requirements regarding the management bodies of a bank;  the submission of a
business plan for the first three years, an organizational structure, the bank personnel structure,accounting policies and procedure of internal auditing, a list of shareholders and special data for
shareholders who are owners of qualifying holdings,  and a list of persons connected with the owners.
There is no economic needs test, nor any other limitations on the number of (foreign) banks allowed
in the market.  Authorization from the Bank of Slovenia is required when a person or an entity attains
"qualifying holding" in the bank (i.e. direct and indirect holding of 10% or 20%, respectively, of theshares).
23  As the share of the banks' voting rights or of the capital increases further authorization is
needed (Article 19 of the Banking Act).  No difference is made between domestic and foreign persons
or entities.  Cross-border supply of services by foreign banks is currently not allowed.  Although the
Banking Act contains provisions relating to the single licence principle, home country control, and
direct provision of services, these provisions have been postponed until Slovenia's accession to theEuropean Union.  After EU accession, banks registered in EU Member States will be able to provide
services in Slovenia directly, without establishment.
                                                     
22 The first phase of privatization of Nova Lujbljanska Banka (NLB), the country's largest bank (with a
34.6% market share in November 2001), and Nova Kreditna Banka Marlbor (NKBM), the second largest bank(11.6% market share) started in 2000.  In May 2001, the Government endorsed a framework programme forprivatization of NLB and NKBM.  Under the programme for NLB, the first step is to sell the Republic of
Slovenia's shares to key investors (34% minus one share).  The model for NKBM is slightly different.  The
Government is planning to sell 65% of shares in NKBM to a strategic investor and keep 25% plus one share.
The process is fairly advanced and is expected to be completed in early spring 2002.  The third largest bank,SKB (10% market share), was taken over by a French bank (Société Générale) in April 2001.
23 See Article 4 of amendments to the Banking Act of July 2001.WT/TPR/S/98 Trade Policy Review
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21. Slovenia's GATS Schedule of specific commitments, as amended under the Fifth Protocol
(February 1998) reflects the legislative changes introduced by the Banking Act of 1999, as well as the
dismantling of exchange controls implemented in th at year.  However, since neither law was in force
at the time of the WTO financial services negotiations24, the Slovenian authorities scheduled certain
restrictions on foreign banking or operations under modes 2 and 3 with the following comment: "this
provision shall be abolished upon the adoption of the new Law on Banking".  This concerned inparticular provisions regarding the prior authorizat ion for foreign persons to become shareholders of
banks or acquire additional shares, and the incorporation of branches.  Slovenia's commitments under
the Fifth Protocol also included the removal of previous licensing guidelines on foreign-owned banks
and of some national preferences for certain banking activities, and the liberalization of banking
services for licensed branches and subsidiaries of foreign banks.
22. The Ministry of Finance is responsible for the regulatory framework of the banking system,
while the Bank of Slovenia is in charge of formulating implementing regulations and banking
supervision. Efforts have been made to strengthen banking prudential oversight, in the 1999 Banking
Act, based on the standards included in EU directives and the recommendations of the Basle
Committee on Banking Supervision.  The Banking Act also establishes a deposit guarantee scheme,allowing for compensation of depositors in case of bank failures.  In addition, the Act introduced
provisions regulating bankruptcy and liquidation of banks.  In 1999, a new Foreign Exchange Act
liberalized credit transactions for domestic firms, allowing them to borrow from non-resident banks.
25
A number of other measures, such as the elimination of foreign credit deposit requirements and theeasing of regulations regarding custodial accounts for foreign portfolio investors, helped to restore
normal financial relations between Slovenia and the rest of the world.  These measures, together with
the removal of restrictions on commercial presence of foreign banks contained in the Banking Actand the Fifth Protocol to the GATS, re-attracted foreign institutions and fostered competition in the
domestic banking market.
(b) Insurance
23. Slovenia's insurance sector is composed of a small number of companies, five of which have
a certain level of "unknown capital"  (i.e. public capi tal that cannot be determined exactly, or so called
"social ownership").  The largest company (owned by the State) holds more than 40% of the market.
For most of the 1990s, the companies were under-capitalized and provided low returns on equity.
Consistent with the gradualist approach followed in the financial sector, priority was given to the re-
capitalization and modernization of existing companies under the existing – and protected –
regulatory framework, rather than creating a competitive environment.  Under the 1994 Insurance
Company Law, foreign ownership could not normally exceed 15% of the capital of an insurance or re-
insurance company.
26  Additional shares of an insurance company could be bought by foreign
investors subject to case-by-case approval by the Insurance Supervision Agency, the market regulator.
Branching restrictions were similar to those in the banking sector.  Access to the re-insurance market
was restricted.  Major changes to the legislation (the Insurance Company Law and the Law onOwnership Transformation of Insurance Companies) were adopted in 2000, paving the way for
increased competition, foreign investment, and privat ization of socially owned enterprises.  As a
result of implementation of the new laws, a slow movement of consolidation began.  There are at
present ten commercial insurance companies operatin g in Slovenia, four of which are foreign owned
                                                     
24 WTO document GATS/SC/99/Suppl.1, 28 February 1998.
25 In 2000, some 40% of total borrowing by the non-banking sector took place outside Slovenia.
26 Under the 1994 law, foreigners were allowed to obtain higher than 15% share only with the approval
of the supervisory body.  This approval was needed also for domestic persons.  The 1994 law was moreprohibitive for reinsurance business;  foreigners were not permitted to acquire a majority stake in a reinsurancecompany in Slovenia.  The Insurance Act adopted in 2000 dismantled these restrictions.Slovenia WT/TPR/S/98
Page 71
or controlled.  There are also three specialized institutions that perform some sort of insurance
functions in the public interest.
24. The Ministry of Finance is responsible for the regulatory framework governing insurance.
The Insurance Supervision Agency is responsible for the supervision, formulating implementing
regulations, and licensing of new companies in the insurance sector.  Since June 2000, the Insurance
Supervision Agency, previously part of the Ministry, has become an independent body, reportingdirectly to Parliament.  The essence of the 2000 Insurance Act is fairly liberal.  There are no
ownership restrictions on insurance companies.  Foreigners may establish their own locally
incorporated subsidiary or acquire 100% of a list ed or unlisted insurance company, including through
privatization.  Commercial presence is required in order to offer insurance in Slovenia (the same
applies for re-insurance).  Insurance products must be supplied through a locally incorporatedinsurance company.  Once incorporated under Slovenian law, companies may offer any insurance
products.  However, separate legal entities have to be established for life and non-life products.  The
only compulsory insurance requirement relates to third-party liability policies for motor vehicles.
25. Slovenia's commitments under the Fifth Protocol to the GATS reflect the access conditions
described above, and, as in banking, anticipated the legislative changes (introduced by the2000 Insurance Act).  For example, the schedule provides that "the limitation on the maximum
ownership (99% at the time) shall be abolished with the adoption of the new law on insurance
companies".
(ii) Telecommunications services
26. Spurred by economic growth and the transition to a market economy, Slovenia's
telecommunications sector has experienced rapid growth since the beginning of the 1990s, with an
annual increase in the number of lines installed of approximately 10%.  While mainline penetration, at45.5 per 100 inhabitants in 2000 (against 24% in 1991), is average for transition economies, the
number of cellular telephone subscribers and internet users is well above the average (respectively
59 and 26 per 100 inhabitants).
27
27. Liberalization of the telecommunications sector has been gradual.  Until 2000, the
development of infrastructure and the provision of services relied exclusively on government fundingand the state-owned monopoly, Telekom Sloven ije.  The 1997 Telecommunications Law had
guaranteed Telekom Slovenije a monopoly over fixed network and voice telephony until the end of
2000.  In view of the need for investment and t echnical expertise, other services have now been
opened to private participation and competition.  While a subsidiary of the public operator was
initially running the two mobile telephony networ ks (with digital and analogue standards), the
Government attributed, a second licence for GSM mobile telephony at the end of 1997, through public
tender, and issued a new procedure for a third licence in 2001.
28  In addition, the market for value-
added services was fully liberalized.  More than 40 licences have been issued for the provisions of
internet services.  In order to make the company more flexible and more responsive to the new
competitive market environment, the Government has started to divest its majority holding inTelekom Slovenije (the current share is 65%).  Further divestiture is expected in the near future.
28. In 2001, a new Telecommunications Act was introduced to complete the deregulation of the
market.  The Act opened the fixed voice telephony market to competition by unbundling the local
                                                     
27 Data for 2000 taken from International Telecommunications Union (2000).
28 Between 1997 and 1999, a number of decrees were introduced regarding the granting of concessions
for the use of radio frequencies for mobile telephony services and paging services.  Mobitel, the subsidiary ofTelekom Slovenije for mobile telephony, dominates the market with a share of 75%.WT/TPR/S/98 Trade Policy Review
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loop, i.e. the lines linking individual subscribers to the network.  It provided for the creation of a
regulator, the Telecommunications and Broadcasting Agency (the Agency), which is mainly in charge
of price monitoring and administration of interconnections.  The regulator is responsible for the
granting of licences to new operators.  The Ministry of Information Society remains in charge of
telecommunications policy and of the main regulations  in the sector.  The Act also provided for the
creation of the Telecommunications Council, an advisory body composed of members chosen byParliament among telecommunications experts.  The Council provides opinions and recommendations
on telecommunications policy and affairs.
29. The 2001 Act liberalized both the construction of networks and the provision of basic
telecommunications services.  While under Article 27(2) a licence is still required for companies
wishing "to establish and operate a public telecommunications network, and provide public telephoneservices via fixed or mobile telecommunications network", Article 29 (7) specifies that the number of
licences issued "shall be unlimited, except in cases when this would preclude the efficient use of the
radio frequency spectrum".  The Act also made the network accessible to all operators under equal
conditions, for the purpose of network interconnection.  To guarantee such access, a set of obligations
are imposed by the Act on existing operators with "significant market power".  The procedure foraccessing local loops and the corresponding facilities is also defined in detail.
29  Prices are no longer
administered, but the Act authorizes the Government  to regulate rates.  The Agency has monitoring
powers over prices, in particular the prices of companies with significant market power.  A universal
service obligation is imposed on licensed operators.  Telekom Slovenije is required to provide
universal service without financial compensation for a period of at least two years after entry into
force of the Act.30
30. The relatively late liberalization of Slovenia's telecommunications sector is reflected in its
lack of participation in the extended GATS negotiations on basic telecommunications (1997).  Unlike
most other EU candidates, Slovenia made no offer and took no specific commitments during the
negotiations, and hence did not improve its 1995 GATS Schedule.31  The 1995 Schedule reflects the
state of domestic legislation at the time, i.e. the monopoly of Telekom Slovenije over fixed
telephony services and the liberal regime on enhanced, value-added services.  Slovenia'scommitments on enhanced services cover electronic mail, voice mail, on-line information and
database retrieval, enhanced facsimile, and code and protocol conversion services, but exclude on-line
information and/or data processing services.  Slovenia grants full market access and national
treatment for the services covered by its commitments, when they are provided through cross-border
supply or through consumption abroad.  For services provided through commercial presence, a licenceis required, and the public network must be used.
(iii) Transport
31. Due to its central geographical position in Europe, Slovenia has traditionally played an
important role in the transit of goods and services across the continent.  The return to peace in the
                                                     
29 Key parameters for competition, such as the interconnection fees that Telekom Slovenije can charge
new operators, have yet to be decided.
30  Under a general rule set out in the Act, if universal services are provided by an operator with a
market share of maximum 80%, the operator is entitled to a subsidy. The subsidy is to be covered by all thelicensed operators providing services to the public, under conditions that remain to be determined.
31 The 1995 Schedule reflected the monopoly of Telekom Slovenije over most telecommunications.  As
a general restriction to market access, it specifies that "the setting up and operation of telecommunicationsnetwork infrastructure as well as the provision of voice telephony, packet and circuit switched data services,telegraph, telex, mobile radio telephone, satellite and paging services are excluded".  WTO documentGATS/SC/99, 30 August 1995.Slovenia WT/TPR/S/98
Page 73
region further enhanced Slovenia's role as a major transit route between Greece and the rest of the EU.
Slovenia's integration into the pan-European transp ort corridors is not only important for the EU, but
also for the local economy, which draws substantial benefits from the expansion of Slovenia's
international trade.  As a result, Slovenia has undertaken major investments to upgrade its already
well-developed transport system:  modernizing its railway network, developing its road (highways)
system, and upgrading its seaport facilities in Koper.  Public investment in the sector is some 3% of
GDP, and is complemented by European funds.
32. Transport policy objectives include, inter alia , the provision of cost-effective and modern
transport services for persons and goods, the protection of public safety and the environment, and the
extension of trans-European networks to Slovenia.32  According to the European Commission,
"Slovenia's international transport sector already la rgely applies, or is well on the way to applying,
rules similar to the Union, in particular in the ai r, maritime, combined transport, road passenger
transport and road haulage fields."33  Recent regulatory developments include:
− the adoption of the new Law on Railways in 1999, which sets infrastructure access
conditions, and opens the way for the restructuring and the privatization of SlovenianRailways.  Current efforts to implement the Law focus on the supervision and the
accounting separation of infrastructure and operation activities of the SlovenianRailways;
− the adoption in April 2001 of the new Aviation Act, which harmonizes domestic
legislation with the EU acquis communautaire  on the various aspects of aviation
activities and issues (aircraft and flight personnel requirements, air transport
operations, and other aviation activities, airports, take-off areas, infrastructure of air
traffic navigation services, air traffic safety, etc.).  Slovenia confirmed its
commitments to accelerate the harmonization of its domestic legislation beforeaccession to the European Common Aviation Area (ECAA) Agreement, and is in the
process of introducing constitutional reforms that would facilitate its ratification.  The
entry into force of the Common Aviation Area implies for Slovenia, as well as for
other participants, the full liberalization of its aviation market at the end of 2002.
34
Other international developments include Sl ovenia's recent membership of the Joint
Aviation Authority (April 2001)35;
− the alignment of maritime transport legislation with that of the EU is also under way,
with a focus on safety (new harmonized ru les on safety checking of ships, on the
examination of pilots, etc.).  Internationally, Slovenia has ratified the Paris
Memorandum of Understanding on Port State Control in the area of oil pollution.Slovenia was admitted, in June 2001, to the white list of the STNC Convention,
which regulates certification of seafarers
36;  and
                                                     
32 More details on the objectives and implementation of Slovenia's transport policy can be found in
Slovenia's Ministry of Transport online information.  Available at:  www.sigov.si/mpz.
33 European Commission (1997), p.86.
34 Aviation activities are limited to international traffi c.  There is barely any domestic traffic given the
relatively small size of the country.  Ljubljana airport is serviced by the national carrier, Adria Airways, andother major European airlines such as Aeroflot, Air Fr ance, Austrian Airlines, British Airways,  and Lufthansa.
35 Slovenia has been a member of the International Civil Aviation Organization (ICAO) since 1992,
and of EUROCONTROL since 1995.
36 The Port of Koper plays a major role in Slovenia's transport system.  As one of the largest ports in
the region, it serves as the main sea gateway for Slovenian, Hungarian, and Austrian exporters, and as a majorport for Slovak, Czech, and German exporters.  An extensive railway system links the port to neighbouringWT/TPR/S/98 Trade Policy Review
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− harmonization of domestic legislation with that of the EU in road transport is
expected to be completed by the end of 2002.  The main legislation is already in
place, namely the Road Transport Act and the Law on Transport Contract in Road
Transportation.  Secondary legislation is being gradually formulated.  Harmonization
of road transport regulation is important as two thirds of inland international freight is
carried by road.
33. Slovenia's commitments under the GATS extend essentially to maintenance and repair
services as well as auxiliary transport services.  Slovenia did not take commitments on passenger and
freight rail and road services, nor on pipeline transportation and cargo handling.  Slovenia grants full
market access and national treatment for maintenance services and repair of rail and road transport
equipment, through commercial presence and consumption abroad.  Slovenia's commitments onauxiliary transport services extend essentially to freight forwarding and transport agency services, as
well as to warehouse and storage services.  For these services, Slovenia provides for market access
and national treatment for consumption abroad and commercial presence, with a limitation concerning
the need to establish as a legal entity in Slovenia to supply services under mode 3 (commercial
presence).
(iv) Tourism
34. Following independence, the tourism sector experienced rapid growth.  In 2001, more than
two million tourists visited the country and the number of overnight stays reached 7.1 million (foreign
tourist accounted for half of the total), an increase of 6% over the previous year.  Tourism is an
important source of foreign exchange: in 2000, receip ts reached close to US$1  billion.  At the end of
2000, the hotel and restaurant sectors accounted for about 2.5% of GDP.  While Slovenia is an
increasingly popular destination for international tourism, a large number of overnight stays are stilllinked to transit tourism and border (duty-free) shopping by neighbouring nationals.  Despite a strong
potential for development, the sector has been suffering from lack of investment.  Part of the problem
lies with the "denationalization" process, which involved difficulties in clarifying ownership of hotels
and other infrastructures.  While, in principle, the investment regime for foreigners is liberal (with no
ownership limits), administrative difficulties regarding the acquisition of land for the construction ofnew hotels as well as lengthy procedures to determine ownership of facilities have been the main
impediments to foreign presence in the sector (Chapter II(4)(i)(a)).
35. Aware of the potential for development of the industry, and of the growing competition from
neighbouring countries since the return to peace in the region, the Government of Slovenia has
introduced a number of programmes to support the industry and improve the quality of local services.In 2000, a total of SIT 2 billion of budgetary funds were earmarked by the Government for tourism
development; funds were also earmarked by the National Tourism Board for tourism promotion
(SIT 1.2 billion), with a particular focus on European markets; financial incentives of up to
SIT 1 billion were oriented for the improvement of the quality of services.  Furthermore, the Law on
the Development of Tourism provided some needed clarification to the legal framework governing the
sector, by clarifying the criteria for the supply of travel agency and tourist guide services, and
defining benchmarks for the quality of accommodation.
                                                                                                                                                                    
countries.  The rehabilitation of the existing railway network is under way, and a new direct railway link with
the Republic of Hungary was opened in May 2001.Slovenia WT/TPR/S/98
Page 75
36. Under the GATS, Slovenia made a number of specific commitments in the travel and tourism
sector.  It granted full market access and national treatment for travel agency services through
consumption abroad and commercial presence.  Cross-border supply of such services is restricted as
Slovenia requires that foreign providers establish commercial presence.  Market access and national
treatment is also accorded for food and lodging services through consumption abroad and commercial
presence, although commercial presence is subject to authorization in locations of particular historicor artistic interest as well as in national parks.  No commitments were made for tourist guide services.Slovenia WT/TPR/S/98
Page 77
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