Foreign investment, governance and economic performance

Slovenia’s productivity levels have converged rapidly towards the euro area and OECD averages since it began the transition to a market economy in the early 1990s. However, a gap of 30% in aggregate productivity remains vis-à-vis the upper half of OECD countries and productivity is low in a number of industrial sectors with high public ownership or low foreign ownership. The somewhat skewed pattern of asset ownership in the country is related to past government policies that either directly or indirectly favoured domestic public and private investors. For example, Slovenia’s initial privatisation programme favoured existing internal stakeholders, there was limited privatisation of public utilities and the two state-owned investment funds were allowed to acquire blocking shares in many of the country’s largest private firms. Foreign investment has also been deterred by labour market institutions that have raised the relative unit cost of employing workers compared to some other transition economies.