Foreign direct investment (FDI) in Slovenia

FDI in Figures

Slovenia is completely open to foreign investment, in accordance with the principles of the European Union and the OECD, and does not discriminate between national and foreign investors. According to UNCTAD's World Investment Report 2023, FDI inflows to Slovenia totalled USD 1.62 billion, down by 8.5% year-on-year but still above the 2018-20 average (USD 1 billion). At the end of the same period, the total stock of FDI was estimated at USD 21.1 billion, around 33.9% of the country’s GDP. At the close of 2022, the distribution of foreign direct investment (FDI) inwardly in Slovenia by sector revealed manufacturing as the predominant sector, constituting 32.8% of the total, followed by financial and insurance activities (20.6%), and wholesale and retail trade including vehicle and motorcycle repairs (19.0%). Service activities remained dominant over the observed period, representing 64.3% of the total inward FDI in Slovenia for 2022, trailed by industry (33.2%) and real estate (2.4%). The leading five investor nations collectively held slightly over three-fifths of the entire stock of inward FDI in Slovenia by the conclusion of 2022. Inward FDI from EU Member States accounted for 78.8% of the total, with Germany and the US emerging as significant investors primarily as ultimate investing countries rather than initial counterparts. They ranked second and third respectively, trailing behind Austria, which controlled 15.5% of the total inward FDI stock. Germany had ultimate control over 14.3% of inward FDI (data Bank of Slovenia). According to the latest figures from the OECD, in the first semester of 2023, FDI inflows totalled USD 0.99 billion, down from USD 1.32 billion recorded in the same period one year earlier.

The country has a strategic location by the Adriatic Sea, along with developed infrastructures and a well-educated workforce. In recent years, Slovenia’s economy grew faster than most other EU member states, and the country has enjoyed rising incomes, growing domestic consumption, falling unemployment, low inflation, and burgeoning consumer confidence. However, around one-fourth of Slovenia’s economy remains state-owned or state-controlled, and foreign investors reported the lack of transparency in economic and commercial decision-making, time-consuming bureaucratic procedures, opaque public tender processes, regulatory red tape, and a heavy tax burden for high earners as the main factors hindering FDIs. As of June 9, 2023, the National Assembly of the Republic of Slovenia enacted legislation instituting a permanent FDI screening framework. Effective July 1, 2023, FDI notifications must be accompanied by evidence verifying the accuracy of the submitted information, which includes transaction documentation. According to the new FDI regulations, foreign investors are exclusively defined as non-EU entities. Slovenia ranks 33rd among the 132 economies on the Global Innovation Index 2023 and 44th out of 184 countries on the latest Index of Economic Freedom.

What to consider if you invest in Slovenia

Strong Points

Slovenia has many assets including:

• Strong political stability and good international relations reinforced by the country's accession to the European Union
• The adoption of the euro since 1 January 2009, which made it possible to eliminate the risks associated with the exchange rate
• A performing economy based in particular on a sustained growth rate (Coface forecasts a 4.9% growth rate in 2021), low inflation, excess external accounts since 2012 and very satisfactory recovery of tax revenues after the stock market crash of 2013
• The economy is more diversified and fits perfectly into the European production chain.
• Overall, the business environment is pro-business as evidenced by the country's 37th place in the 2020 Doing Business ranking.
• The geographical location in the heart of Europe, which gives companies in the country easy access to regional markets
• Quality infrastructure

Weak Points

Slovenia still faces a number of challenges, slowing the attractiveness of FDI, including:

• Very high government debt of 80.9% of GDP (OECD, 2021)
• Banking sector still recovering and remains vulnerable
• Reforms that are struggling to emerge because of frequent government instability
• A small domestic market
• Several formal and informal barriers to FDI (including high taxation and high social security contributions)
• Significant exposure to global economic fluctuations
• Exports are highly dependent on the EU economic climate
• A labour force shortage due to an ever-ageing population and stagnant population growth

Government Measures to Motivate or Restrict FDI

Slovenia has an ambivalent attitude towards FDI, which swings between openness and caution towards foreign investors. As a result, the government is trying to establish measures that would have a positive effect on job creation, knowledge and technology transfer and improved regional development, and could stimulate alliances between Slovenian companies and foreign investors.

State-owned concessions are available for investments of more than €500 000 in industry sectors, strategic services (customer service centres, distribution logistics centres, regional headquarters), research and development. The most sought-after investments are in so-called "green" technologies.

The government is trying to attract foreign investment in some underdeveloped and economically fragile regions. In addition, since 2013 the corporate tax has decreased (17%). Finally, the government has initiated the privatisation of several state-owned enterprises.

In Slovenia, the only free trade zone (FTZ) is the port of Koper. According to the Slovenian Customs Act, those trading in free trade zones are not required to pay customs duties and are not subject to any additional trade policy measures until the goods are brought into free circulation.

Bilateral investment conventions signed by Slovenia

Slovenia has signed several Bilateral Investment Treaties, accessible in this link.