Also: Slovenia’s President Danilo Türk gives an exclusive interview to Making It

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COUNTRY FEATURE: SLOVENIA

A country with spectacular mountains, thick forests, and a short Adriatic coastline, Slovenia was always the most prosperous and liberal corner of Yugoslavia. Multi-party elections in 1990 were followed by a referendum that chose independence, and since going it alone in 1991, the country has prospered. It moved quickly from a centrally planned economy to a market one, and embraced free trade, making it a model of economic success and stability for the region. Slovenia joined the European Union (EU) in May 2004, and was the first of the newcomers to adopt the euro currency in 2007.

Slovenia is, by a wide margin, the richest country in eastern central Europe, well ahead of its Balkan neighbours, and even ahead of Portugal, which has been a member of the EU since 1986. The high living standards enjoyed by the two million-strong population are largely a legacy of the past, when Slovenia was Yugoslavia’s trading arm. In the 1970s and 1980s, a large number of Slovenian manufacturing concerns obtained western technology through licensing agreements, and this enabled them to become internationally competitive. Since independence, and especially since the country joined the EU, traditional industries, such as textiles and truck-making, have contracted, but at the same time, there has been an increase in light manufacturing and higher value-added sectors, such as pharmaceuticals and electrical engineering.

Industries with strong links to Western European economies, and those that are highly export-oriented, have performed strongly. The best example is Revoz, the Slovenian subsidiary of the French carmaker, Renault, which for many years has been the top Slovenian exporter. Production increased by around 40% between 1998 and 2009. Despite the financial and economic crisis, 2009 was a record-breaking year for the Revoz plant, which produced 212,680 cars, 7% more than in the previous year. Since 2007, Revoz has been the first and only Renault plant to manufacture the Twingo model. The plant, which is located in the town of Novo Mesto, 40 miles south-east of the capital, Ljubljana, was awarded the most environmentally-aware company prize by Slovenia’s Environmental Development Fund in 2003.

Apart from cars and car components, other important sectors of Slovenia’s strong and diversified manufacturing base are domestic appliances and other electrical items, pharmaceuticals, and metal-processing. Two other examples of companies with strong export performances are Krka, an international generic pharmaceutical company, and Litostroj, a turbine manufacturer for small hydro-electric power projects.

Services have grown in importance since independence, reflecting a broader economy-wide shift away from traditional ‘smokestack’ industries. Investment in infrastructure and greater quality in the tourism industry have led to healthy growth in tourism services receipts.

Machinery and chemical products are among Slovenia’s main exports, with Germany its main market. In 2010, machinery and transport equipment represented 39% of total exports, manufactures 22%, and chemicals 16%.

At home and abroad, Slovenian companies have produced and marketed successful and highly innovative products. For example, Elan is among the top manufacturers of skis and snowboards; Seaway is one of the world’s leading boat development companies; Pipistrel is a successful light aircraft manufacturer; and Gorenje is a manufacturer of high-quality, design-oriented, domestic appliances.

Following years of uninterrupted growth, to a large extent fuelled by a rapid increase in investments and exports, Slovenia was one of the central European countries worst affected by the international economic and financial crisis. In 2009, the country’s export-oriented economy was hit hard, shrinking by 8%. Economic growth returned in 2010, with the recovery driven by an upturn in demand, particularly in the EU and Balkan markets, but this slowed again in 2011.■

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Interview with His Excellency Danilo Türk, President of the Republic of Slovenia

Looking at the current global situation – with the financial crisis, climate crisis, fuel crisis, food crisis – one could paint a gloomy picture. Has globalization failed us?

First, globalization is an old process that has been going on for centuries. For example, in the 19th century already globalization progressed with various innovations, including telecommunications and expanded navigation. The specific feature of the current phase of globalization is that it affects more people, in more places, at a much faster pace than in any other phase of globalization before. This is, to a large extent, due to the operations of today’s global markets for goods and services. Today, we should ask ourselves whether these markets are really put in the right normative framework?

This is the second question, which is at the centre of the globalization debate now. As you know, there has been a period during the past 30 years when deregulation was the primary order of the day. Regulation was seen as inimical to market forces and it was therefore not promoted. I think these times have passed and we are entering into a phase when the question of regulation has to be put on the global agenda and considered very seriously – and in fact, this is already happening. In 2009, after the first wave of the financial crisis, market regulation and global economic governance issues were at the centre of the debate, and have stayed there ever since. In the fields of financial services and global financial regulations in particular, there is a very serious need for a new era of sophisticated regulation, which should not stifle the dynamism of finance, but rather put the financial system into a framework, which will ensure its orderly functioning.

Coming to the impact of all these important global shifts, what can be done at the local level to mitigate these crises? Is regional integration a response to controlling the impacts of globalization?

This is an interesting question, particularly as it is a real challenge nowadays to define what is local. Of course, people live and act locally, but very often their local action is part of a much larger system. For example, if you go to a factory in Ljubljana that produces automotive light systems, it is, at the same time, a local production system and part of a global system of automotive manufacturing. So, the local manufacturers need to consider global trends and issues when thinking about their local logistical or managerial problems.

Globalization has really changed the understanding of what is local and what is global. The question of what can be done at the local level to mitigate global problems can therefore not be answered easily. The fact remains, however, that individual actions are happening locally rather than globally. If you take the emission of greenhouse gases, for example, much can be done through regulating and organizing local traffic, especially in large cities. Here, one cannot expect specific answers from global or even national regulators. Very often, the decisive response comes from the cities themselves. They themselves contribute to a large part of global greenhouse gas emissions, and they themselves can change that. So, much can be done locally, but one needs to use imagination and see how that fits into a larger scheme of things.

As far as the European Union (EU) is concerned regarding the regional framework for Slovenia, we appreciate the development of environmental standards in the EU. They help national policymakers to design stricter and more seriously conceived standards than would otherwise be the case. This, combined with the direction of the financial resources of the EU to related local infrastructure development, is very helpful indeed.

And again, in Europe everything regional is also local. To give you an example: a few weeks ago, I opened a new sports centre in Mokronog, a small town in the south-east of Slovenia. The centre has been built with environmentally friendly material and in an energy-efficient way. A part of the resources came from the EU, and EU standards were applied. As a consequence, local people at the opening talked a lot about the EU as a “local” actor in their local development efforts. You see, these are interplays that nowadays exist. Overall, I think that the EU has a very crucial role to play in mitigating global problems and environmental challenges.

In view of this positive appraisal, could the EU serve as a model for other regions as well?

Probably not – one needs to be realistic about these things and understand that circumstances vary considerably from one place to another. If you take the EU with its 500 million people and compare it to India, for example, with more than one billion people and a very different level of development, one can very easily understand that the same model of environmental protection or economic and social development is not conceivable. What needs to be done is to figure out how one can work at the global level to improve the performance of mitigation of environmental impact in different circumstances. How to combine different policy models into a workable global programme? One must not deny the differences but work with them.

In fact, this question exemplifies the increasing complexity of today’s global governance system, which functions without a single global centre of power, as we do not have a central global government. We will need to find a clever combination of the various normative, financial, and policymaking instruments, to make them suitable for the diverse local and regional circumstances and situations in our world. In Europe, we will largely coordinate these instruments within the framework of the EU. In India, it will be national policymaking, and the same will apply to China. This does not mean that all these governance instruments cannot be put together in a coherent fashion. On the contrary, I think, the challenge for global governance today is to make these different approaches converge.

But we are still in a long learning process in this regard. Take the experience of Copenhagen 2009 for example; you can see the difficulties because it was not yet clear then how one can put these different policymaking systems together. We need global rules and a global regulatory system, but we cannot simply say that we need to have a single legal framework with a compulsory power – this has not worked so far. But this does not mean that we should rule out the possibility for a coordinated regulatory system to emerge in the future, with the full understanding and participation of large national systems, such as India, China, Brazil, and other big players.

In the current network governance system, many people are expecting the G20 to be an answer to many global problems, as it is often seen as fast and decisive. Is this the way forward in global network governance?

Well, I think that one has to be very realistic about the G20. The G20 proved to be quite effective in 2009, and that produced a great degree of encouragement everywhere in the world. This shows that it is very important to have leadership – leadership with the appropriate amount of power – so that things can be moved forward.

However, in 2010 and 2011, we have discovered that the G20 has also lost a lot of steam and hasn’t been able to perform, just when much of the global economy is entering a new phase of the crisis. I believe that this should be a very clear sign to the G20 to remobilize.

Remobilization, of course, cannot be the end of the story. Once the main direction of future governance is developed, it needs to be put into a proper normative framework, and that normative framework will have to be legitimate. I therefore think the G20 – and I believe the members of the G20 understand this perfectly well – will have to operate within such normative systems as the United Nations and the International Monetary Fund. That is where the norms and rules of the game will have to be elaborated and determined in a participatory process.

A two-phase approach is therefore unavoidable. The first phase is the remobilization of the G20, and the second phase is norm-setting and legitimization of norms through appropriate institutions such as the UN and the IMF.

Looking at Rio+20 in 2012 in this context – what would be, in your view, the best recipe for success?

Rio+20 is coming very fast, and we do not have much time. The questions are whether the experience of the past years will be properly absorbed, and whether the most appropriate and realistic outcome will be envisaged in due time. I think that the time is really very short.

We, in Slovenia, will obviously be looking at the European Commission’s leadership, which has been fully involved in the negotiations and various conferences from Cancun to Durban and beyond. Therefore, the EU countries will coordinate their policies within the framework of the Union, and the Commission will lead the process.

EU countries understand that Rio in itself was a huge success with its Agenda 21, the climate change framework, and biodiversity as a major task. But the follow-up was rather varied, and did not succeed in every respect. It is important that the preparatory process towards Rio+20 finds a timely definition of sustainable development priorities and goals for the next decade.

UNIDO and others are looking at a new, sustainable industrial revolution. Would you agree with such an approach, which also means a stronger involvement of the private sector in the problem-solving processes?

Absolutely. I think that a new industrial revolution is not only called for but indeed is already happening. In this context, we should very carefully examine countries such as the Republic of Korea or China – very different in size but very similar in their ambition to change towards environmentally friendly technologies and green growth. That, I think, should be the priority.

Obviously, the private sector has a major role to play on such a development path. The private sector has been the driving force in technological change in the past and will remain so in the future.

In this context, UNIDO has shown a remarkable capacity to adapt – it has gone through several stages in a very short period of time. Now, I think, there is a real opportunity for UNIDO to play a coordinating role in bringing together all these different policies and models aiming at green growth. And, of course, many of these models and policies are based on private sector engagement.

This is not new. At the recent 50th anniversary of the OECD, I saw a very clear direction towards green growth. Indeed, wherever one goes, green growth is talked about as the desired policy direction. The main question remains whether the international community is sufficiently well-organized for defining this direction to move ahead. We have sophisticated methods for promoting this direction and, I believe, UNIDO can play a very critical role in this context.

Coming back to the local impact and responses to global sustainability challenges: where is Slovenia in all this?

First of all, Slovenia is a member of the EU. So, for us, its standards apply, and policies are designed in conformity with EU policies. Now, where we are lagging behind is in the use of our own natural resources for the purpose of technological change. For example, we are a heavily forested country. About 60% of our territory is covered by forests. I think that we are not using enough the opportunities of biomass for the production of energy. We are not using enough our wood as a material for energy-efficient houses. So, in certain areas, we are lagging behind. But, in others, we are doing better than average, for instance in the production and use of solar panels, which is somewhat surprising because we are an Alpine country. We are also doing better in areas such as water protection and purification, and so forth. You can see that this is a varied picture – in some technological fields we are more advanced, in some we are not. Our focus, however, should be on those technology areas where we lag behind and where we need to make more progress.

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Interview by Kazuki Kitaoka, UNIDO.

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● Dr Danilo Türk was born in 1952 in Maribor, Slovenia. He studied law, and followed an academic career at the Faculty of Law, University of Ljubljana, Slovenia. After Slovenia’s declaration of independence, Dr Türk took an active role in its diplomatic activity, and in 1992 he assumed the position of Ambassador of the Republic of Slovenia to the United Nations.

From 2000 to 2005, he served as UN Assistant Secretary-General for Political Affairs. In 2005, he returned to Slovenia, becoming professor of international law and vice dean of student affairs at the Faculty of Law of the University of Ljubljana.

He ran as an independent candidate in the 2007 presidential election and, with the backing of centre-left parties, won 68% of the vote, becoming the third president of Slovenia on December 22, 2007.