Invest Talk Slovenia 3.0: Global FDI on the Decline, Europe Needs to Stay on its Toes

A global decline in FDI is not good news for Europe, although Slovenia has not seen a drop in FDI in the past two decades. Thinking ahead is key in being ahead, as Europe has been resting on its laurels, at least in tech development, the key sector shaping the economy of today, heard the participants of Invest Talk Slovenia at the Bled Strategic Forum.

Addressing the debate, Slovenia’s Economic Development and Technology Minister Zdravko Počivalšek said that the country was a reliable FDI destination, willing to deliver reforms to become even more welcoming to investors. Investors who are already present in Slovenia have recognised this and 40% of them have decided to undertake additional investments. Mr Počivalšek also said that by the end of June, FDI in Slovenia reached 1.4 billion euros, while the figure was just over 721 million euros in the first half of 2018, according to data from Banka Slovenije, the country’s central bank.

James Zhan, Director of Investment and Enterprise at UNCTAD, presented a survey showing a drop in FDI on the global level showing it had dropped by 19% to 1,200 billion US dollars, according to UNCTAD’s January data. What is more, FDI inflows to Europe have declined by 73% to 100 billion dollars, the lowest level since the 1990s. A rise in FDI is expected, but it could be jeopardised by risks such as the ongoing trade war, which has now developed into an economic cold war, according to him.

Aleš Cantarutti, State Secretary at the Slovenian Ministry of Economic Development and Technology, said that in order for Europe to catch up with the US, China and the rest of Asia, the continent needed to focus on new solutions and show more cooperation. He believes the most problematic sectors are those whose course of development is unclear, and that developing countries have an advantage in their growing populations, while the population of Europe is shrinking.

Rastislav Chovanec, State Secretary at the Ministry of Economy of Slovakia, believes that the EU’s problem lies in the fact that it is a collection of different languages, laws that are similar, but not necessarily compatible. European countries have become lazy, especially compared to China. Even the startups launched in Europe are usually bought by US companies. Countries are not compatible and need to go back to basics, develop sectors with potential from the ground up, according to Mr Chovanec.

Nonetheless, European countries are attractive for FDI due to their fiscal systems, the rule of law, regulatory transparency and qualifications, according to Luka Vesnaver, Partner-in-Charge of Financial Advisory Services at Deloitte Slovenia.

The debate also touched on FDI screening, a mechanism introduced by the EU and some member states to protect strategic sectors. Valerio De Luca, Executive President, Global Investors Alliance, praised the mechanism saying that some investments lacked transparency and were plagued by too many risks.

Boštjan Skalar, Executive Director of the World Association of Investment Promotion Agencies, said that the screening system could contribute greatly to sustainability of investments. But this mechanism is used above all by countries that are not in dire need of investments, whereas developing countries say that more regulation would deter FDI.