Slovenia likes to boast that international comparisons rank it among the most successful transition countries, with economic trends that continue moving closer to those of EU member states. Despite stable economic growth, balanced public finances, an open economy, falling unemployment and the possibilities available to improve development, companies have not achieved their full potential in terms of competitiveness yet. The efforts of Slovenian entrepreneurs are therefore directed at raising the competitive abilities of small and medium-sized companies.

The Beginnings

Slovenia came out of the years of a command economy at the beginning of the 1990s not completely unprepared or inexperienced for the transition that followed. It began the path to a market economy as an industrialised country with a number of globally-recognised companies. It also had a rich history of the private sector, especially in crafts, while also being used to liberal trade policies with countries of the EU and having a well-qualified workforce. Hence, it was not surprising that the beginning of 1990s saw a boom of small business. The number of entrepreneurs grew particularly quickly between 1990 and 1994, when the market offered many opportunities to fill voids.

The liberalisation of foreign trade, access to foreign currency and reduced red tape all helped to spur on entrepreneurship in Slovenia during these years. The relatively restrained privatisation process of large companies also inspired many to create their own companies. Statistics show that many Slovenian entrepreneurs - well above the average in other countries- have opted to establish a small company of their own because they could otherwise not find employment. However, the early boom is over and the number of small and medium-sized companies has seen a slight fall between 1999 and 2003. Analysts are split on the reasons for the decline: some say that the market is experiencing a natural selection process, with the weakest being eliminated, while others believe that an unfriendly business environment is to blame.

The Situation Today

The latest figures speak of 101,358 small and medium-sized companies in Slovenia. This represents 98.6 percent of all companies operating in the country. These kinds of enterprises employ 262,314 workers, which is 42.5 percent of all those employed in the private sector. Every 22nd Slovenian was involved in running small or medium-sized company last year. This places Slovenia somewhere in the middle of Europe; the highest rate was in Iceland, where that number stood at every 9th person, while Russia had the lowest rate with every 40th person being entrepreneurial active.

Last year there were about 58,000 up-and-coming entrepreneurs. Half of this number will not succeed. Small- and medium-sized companies are most vulnerable at the onset of their operations. The fact that the failure rate is high, calls for greater state involvement. The most important step in this is the promotion of the entrepreneurial spirit that is needed to create the foundations for solid development.

Like elsewhere in Central Europe, small and medium-sized companies in Slovenia rely most on loans from commercial banks for funding their operations. Entrepreneurs also have possibilities to seek loans from state and local funds that finance small enterprises, as well as to ask for assistance from various ministries, especially when investments in new technologies, the creation of new jobs, or the penetration of foreign markets is involved. The amounts of risk capital in these companies are relatively small, which mirrors the fact that only a few companies meet the criteria for investment.

The state has created three programmes to help small and medium-sized companies in the period between 2002 and 2006. These are aimed at promoting small enterprise. Measures include the transfer of know-how needed for development, improving the competitiveness of the companies with investment in research and development and the penetration of foreign markets, strategies for greater productivity with integration and clustering, and the creation of a support-based environment that fosters the creation and development of small and medium-sized companies.

Gearing Up for the EU Market

The government has also gone about implementing programmes that would assist companies in getting ready for the common European market, which Slovenia will be a part of when it joins the EU on 1 May of 2004. The state will therefore lend a hand to these companies as they experience the transition from operating on the Slovenian market of 2 million people to being a part of a common market of 450 million people.

Small and medium-sized companies in the country are sure to feel a difference when the country joins the EU: new legislation, differences in administrative procedures, language barriers, new standards and unfamiliar market conditions will all take their toll. This makes it crucial for companies to get acquainted with what they can expect, in terms of challenges and opportunities, after Slovenia joins the EU. As part of efforts aimed at getting Slovenian small businesses ready for the EU, the government established the Euro Info Centre back in 1993. Initially located in Ljubljana, the centre has built a network around the whole country, assisting companies in their preparations for the single market. The centres operate within the framework of the Small Business Development Centre, which also offers support and consultancy services to entrepreneurs.

It is difficult to predict what European Union membership will mean for Slovenian small and medium-sized companies. Some will surely feel the positive effects it is expected to have on the possibilities for a company to grow and develop. A number may find that the going will get too tough and their businesses will have to be shut. One of the solutions put forward by the Small Business Development Centre to be as prepared as possible for the new conditions is "clustering" between small businesses. This allows companies to connect into a network of complementary companies that would establish joint means of communication and participation, thereby reducing the costs of penetrating new markets. The results of current efforts in clustering have been very encouraging.