ISSN I581-63II
anagin
Managing
Global
EDITOR
^^	V f * V + J
journal
Managing Global Transitions
International Research Journal
EDITOR
Boštjan Antoncic, University of Primorska,
Slovenia
ASSOCIATE EDITORS
Egon Žižmond, University of Primorska,
Slovenia
Dušan Lesjak, University of Primorska,
Slovenia
Anita Trnavčevič, University of Primorska,
Slovenia
Roberto Biloslavo, University of Primorska,
Slovenia
EDITORIAL BOARD
Zoran Avramovič, University of Novi Sad,
Serbia and Montenegro
Terrice Bassler Koga, Open Society Institute,
Slovenia
Cene Bavec, University of Primorska,
Slovenia
Jani Beko, University of Maribor, Slovenia
Vito Bobek, University of Maribor, Slovenia
Štefan Bojnec, University of Primorska,
Slovenia
Suzanne Catana, State University of New
York, Plattsburgh, usa
David Dibbon, Memorial University
of Newfoundland, Canada
Jeffrey Ford, The Ohio State University, usa
Tim Goddard, University of Calgary, Canada
Noel Gough, University of Canberra,
Australia
George Hickman, Memorial University
of Newfoundland, Canada
Robert D. Hisrich, Thunderbird - The Garvin
School of International Management, usa
Andras Inotai, Institute for World Economics
of the Hungarian Academy of Sciences,
Hungary
Hun Joon Park, Yonsei University,
South Korea
Štefan Kajzer, University of Maribor, Slovenia
Jaroslav Kalous, Charles University,
Czech Republic
Leonard H. Lynn, Case Western Reserve
University, usA
Monty Lynn, Abilene Christian University, usa
Neva Maher, Ministry of Labour, Family and
Social Affairs, Slovenia
Massimiliano Marzo, University of Bologna,
Italy
Luigi Menghini, University of Trieste, Italy
Marjana Merkac, College
of Entrepreneurship, Slovenia
Kevin O'Neill, State University of New York,
Plattsburgh, usa
David Oldroyd, Independent Educational
Management Development Consultant,
Poland
Susan Printy, Michigan State University, usa
Jim Ryan, University of Toronto, Canada
Hazbo Skoko, Charles Sturt University,
Australia
David Starr-Glass, State University of New
York, usa
Ian Stronach, Manchester Metropolitan
University, uk
Ciaran Sugrue, Dublin City University,
Ireland
Zlatko Šabic, University of Ljubljana,
Slovenia
Mitja I. Tavcar, University of Primorska,
Slovenia
Nada Trunk Širca, University of Primorska,
Slovenia
Irena Vida, University of Ljubljana, Slovenia
Zvone Vodovnik, University of Ljubljana,
Slovenia
Manfred Weiss, Johan Wolfgang Goethe
University, Germany
Min-BongYoo, Sungkyunkwan University,
South Korea
Pavel Zgaga, University of Ljubljana, Slovenia
EDITORIAL OFFICE
University of Primorska
Faculty of Management Koper
Cankarjeva 5, sI-6104 Koper, Slovenia
Phone: ++386 (0) 5 610 2021
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E-mail: mgt@fm-kp.si
www.mgt.fm-kp.si
Managing Editor: Alen Ježovnik
Editorial Assistant: Nataša Kitić;
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Cover Design: Studio Marketing jwt
Text Design and Typesetting: Alen Ježovnik
Managing Global Transitions
International Research Journal
VOLUME 4 • NUMBER 2 • SUMMER 2006 • ISSN I58I-63II
Table of Contents
99 The Editor's Corner
101 Globalization, Transition and the
Discourse of Management
TonCi Ante KuzmaniC
Suzana Sedmak
115 eu Integration Process: Will Turkey
Overcome the fdi Obstacles?
Mehmet Basar
Sebnem Tosunoglu
129 Economic Efficiency in Transition:
The Case of Ukraine
Anatoliy G. Goncharuk
145 The Influence of Previous Visitation
on Customer's Evaluation of
a Tourism Destination
Maja KoneCnik
Mitja Ruzzier
167 Competitiveness of Slovenia
as a Tourist Destination
Doris Gomezelj Omerzel
The Editor's Corner
I am happy to announce that from this year (volume 4) instead of two
we shall be publishing four issues of the journal per year. It will now be
a quarterly journal with Spring, Summer, Fall, and Winter issues. It con-
tinues focusing on the transition research and emphasizing openness to
different research areas, topics, and methods. International and interdis-
ciplinary research nature of scholarly articles published in the journal is
also maintained.
The current issue covers topics of the discourse of management, for-
eign direct investment obstacles in the European Union integration pro-
cess, the economic efficiency in transition, and customer evaluations and
competitiveness of tourist destinations. It starts with a paper of Tonci
Ante Kuzmanic and Suzana Sedmak on the process of the transition in
Slovenia and its connection to the concepts of managerialism and man-
agerial discourse. In the second paper, Mehmet Basar and Sebnem To-
sunoglu analyze Turkey's performance in attracting foreign direct in-
vestment and highlight the key obstacles for foreign direct investment
in Turkey. In the third paper, Anatoly G. Goncharuk deals with measur-
ing economic efficiency in Ukraine. The fourth and the fifth paper both
focus on issues related to tourist destinations. Maja Konecnik and Mitja
Ruzzier investigate the customer's perspective on a tourism destination
brand through four dimensions and the influence of previous visitation
on the four dimensions. Finally, Doris Gomezelj Omerzel presents the
model of destination competitiveness analyzed on the basis of survey
data from Slovenia.
Boštjan Antoncic
Editor
Globalization, Transition and the
Discourse of Management
Tonci Ante Kuzmanic
Suzana Sedmak
Globalization is a heavily debated phenomenon and can be studied
from many perspectives. In the present paper the perspective of the
discourse of management is presented. Management as an idea and as
practice is also a critically contested phenomenon in today's fast chang-
ing world. In this paper managerial discourse as an aspect of global-
ization is studied. The concepts of globalization, managerialism and
managerial discourse are introduced and their interdependence is de-
scribed. Special attention is given to the process of the so-called tran-
sition in Slovenia and its connection to the concepts of managerial-
ism and managerial discourse. During the process of transition from
one economic and political system to another, managerial discourse be-
came adopted in Slovenia and soon constituted itself as a standard or
even dominant discourse in business and economics. Some examples
are drawn from Slovene newspapers and other publications to demon-
strate first the difference between the socialist (self-management) dis-
course and managerial discourse, and second, to demonstrate the dif-
fusion of managerial discourse to other spheres of social and political
life.
Key Words: managerial discourse, globalization, transition
jEL Classification: ai, A13, A14
Introduction
One possible explanation of the 1989 revolutions in Eastern and Central
Europe can be given by using a rather large and somehow deeper con-
cept of globalization.1 Such an explanation is dealing not solely with the
so-called 'inner conflicts and problems' of the region, but rather with a
larger context of globalization ranging from the globalization of markets
and that of trades to the globalization of ideas, politics and ideologies
(Gilpin 2001). To put it in another words, fundamental or even revolu-
tionary changes were caused not only by inner conflicts and blockades
Dr Tonci Ante Kuzmanic is Associate Professor at the Faculty
of Management Koper, University of Primorska, Slovenia.
Suzana Sedmak is an Assistant Lecturer at the Faculty of Management
Koper, University of Primorska, Slovenia.
of the ex-socialist region(s), but also by larger, global contexts and con-
textual pressures (from global markets to the processes of globalization
of democracy). These still lasting processes mostly put forward the so-
called 'formation of the new claims' (Sassen 1998, xx-xxxvi) from the
global surrounding, fortunately, not in a violent form (with some ex-
ceptions, of course, see, for example Hadžic 2004), since the Eastern and
Central European societies were already half-prepared for the change (es-
pecially after the events in Poland connected with Solidarnosc). In the
last 15 years or so the events used to be analysed mainly in terms of mar-
kets and (un)employment, of bdp or investments etc., and to a lesser
extent in terms of political changes (democracy) as well as in connec-
tion with the new processes of various so-called 'integrations' (European
Union, Nato, see Kaldor and Vejvoda 2002).
The Globalizing Discourse
In this paper we are not dealing with globalization in the above men-
tioned form. We are rather trying to emphasize the role of a less visi-
ble form of globalization within the context of the Eastern and Central
Europe. Namely, our interest goes to globalizing aspects that deal with
something which could be termed as 'globalization of discourse', more
concretely to the globalization of the very 'discourse of globalization'. The
preliminary results of our research2 show that, at least in Slovenia, the
globalization of that kind of discourse occupied almost all public and
private channels of communication and even thinking, mainly directly
(through media, scientific discourses, translations etc.) or indirectly (by
way of personal communication based on dominant forms of media lan-
guage). More precisely, our research shows that a special kind of that
globalizing discourse into the region has taken the form of management.
By speaking about managerial discourse we are opening up a problem re-
garding forms and channels of communication through which the glob-
alization came in the region as well as the topics on which it persists that
dominate all other public or private sub-discourses.
One of the phenomena that have started to gain more attention in
debates about globalization in the region is the spread of a relatively
new form not only of discourse but also of organizational behaviour
that tends to cross political, economic and cultural boundaries. The pro-
fusion of this form of organizational behaviour and discourses that is
becoming a preferred way of behaving (thinking, feeling and doing),
not only in various organizations but in a society as a whole, is termed
managerialism.3 This form may not be obvious; in fact it wasn't at all
until the turn of the 20th century. But today it does seem to be a normal
state of affairs, or better, of mind. (It is interesting - and symptomatic -
that the transition processes in the region are also described as 'normal'.)
We are facing a quite interesting situation: everybody is getting used to
look on organizational issues from the exclusive point of view of man-
agers, without any consciousness of that exclusivity. Everybody (public
parlance as well as that in private surroundings) is turning to manage-
ment practices with the assumption that they will provide a solution for
all kinds of problems; not only economic or business problems in a nar-
rower sense, but also political, social, and even individual issues. It seems
that management practices accompanied by an ideology ('the emergence
of a new ideology', Entemann 1993) are supported by a whole set of values
that have been successfully globalised.
When we refer to managerialism, we actually have in our minds the
managerial discourse in its three meanings, first as a tool of globaliza-
tion, second as its form, and third as its very context. The point we would
like to emphasize is that managerialism is first of all a kind of discourse
which, at least within the mentioned region, is playing a double role:
that of mega-discourse as well as that of meta-discourse. Managerial-
ism is a mega-discourse in the sense that it covers almost all possible
topics of thinking (it seems that by using the term managerialism it is
possible to say everything), and it is a meta-discourse, first of all because
it implicitly and explicitly presents itself as the language beyond ideol-
ogy, a kind of pure language. To put it in postmodern (poststructuralist)
parlance, it is playing the role of master-discourse, of master-language
in regard to which generality, objectivity and purity (trans-ideology)
of other languages/discourses are something partial, if not less or com-
pletely unimportant. To put it in more concrete terms: self-management
as one master-discourse was - of course not mechanically, but by way of
the complex play of negation/confirmation - replaced by another one,
that of management or managerialism. Subjects as carriers of discourse
have undergone dramatical (revolutionary!) change. 'The Worker and
Worker's Party' were replaced by 'The Manager and Managerialism'. If
in the past it was possible to explain - at the level of discourse - almost
everything by the use of the magic word of Worker, now it is possible
to explain almost everything by use of magic word of Manager. If it was
possible to give the solution to almost all problems by use of the high-
est Sign-of-all-signs, that of Worker, now is, likewise, possible to give the
solution to almost all the problems by the very use of the highest Sign-
of-all-signs, that of Manager.
As far as the language and the kind of former discourses in the re-
gion are concerned, there used to be an important difference between
the regions of former Yugoslavia and other parts of the so-called Eastern
and Central Europe. While the larger part of the region (under direct in-
fluence of the ussr) used to understand itself in terms of the state and
party language of work, Yugoslavia used to be self-defined as the state
and social system of the so-called self-management (samoupravljanje).
We are not saying that the system of self-management was not a party
or a state system, similar to that in the region that was under the influ-
ence of the Soviets, but that the kind of media self-understanding of the
Yugoslav form of socialism used to be quite different, especially at the
level of discourse (and ideology). The discourse of self-management was
for at least 30 years, in a way, domesticated, the population considered it
as something already known and domestic. Then, during the transition
period the new managerial discourse completely replaced the old one. It
seems to us that the new discourse was somehow domesticated, too. The
replacement of discourses was not abrupt as in other countries with the
Soviet-like system. We could guess that those countries which had not
been forced to internalize the self-management discourse adopted and
internalized the new discourse somehow more easily than those coun-
tries of Central and Eastern Europe, where the state-party discourse was
not so deeply accepted. In other words, the changes dealing with transi-
tion at the level of understanding were less dramatic and less visible in
former Yugoslavia than in other parts of Eastern and Central Europe.
Managerial Discourse in Slovenia in the Period of Transition4
Discourse for us is a set of meanings that represent some aspect of the
social and political world in a particular way. It is an element of all social
processes and as such it may initiate, enable, and influence changes in
the social world. We could claim that every reform comes with a new
discourse which tries to replace the old one. The greater the reform is
- that is, the more aspects of political, economic, and/or social life it
incorporates - the greater is the difference between the old and the new
discourse.
When Fairclough talks about language in the new capitalism, he claims
that language 'is becoming more central and more salient [...] than in
earlier forms of capitalism' (Fairclough 2002,163). He deduces this from
the frequent description of new capitalism as knowledge or information
based. It is not just knowledge based, he claims, but also
[...] discourse led, for knowledges are produced, circulated
and consumed as discourses (economic, organizational, man-
agerial, political, educational and so forth). Moreover, dis-
courses are dialectically materialized in the 'hardware' and
'software' of organizations, enacted as ways of acting and inter-
acting, and inculcated (through a variety of processes includ-
ing, e. g. 'skills training') as ways of being, as identities. [...]
So that transformations of organizations (workplaces, univer-
sities, local government, etc.) under the pressure of restruc-
turing and re-scaling are partly, and significantly, semiotic and
linguistic transformations.
The difference between the socialist (so-called self-management) dis-
course and the managerial discourse can be illustrated by comparing two
texts published two decades apart. The first text is taken from the first
1980 issue of a publication Luški glasnik, and the second from the first
2000 issue of the same journal (the original version in the Slovene lan-
guage follows in the endnotes).5
(1) This year the working people and members of the commu-
nity of our republic will have to strive for a consistent stabi-
lization of economic movements and development in general.
In particular workers who are directly involved in the interna-
tional exchange of goods and services will be confronted with
additional efforts. [...] The year 1980 brings additional tasks
and obligations also to workers of Luka Koper (Port of Koper).
We will have to demonstrate exceptional efforts and will have
to strive for realization of the tasks and aims agreed. [...] by
compiling a sanation programme over the past years we have,
with the support of the wider social community, achieved an
important economic, political and self-management success.
[...] Major success has been achieved in the consolidation of
self-managing and mutual relationships, and the affirmation
of the role and position of the League of Communists in the
process of strengthening security and social self-protection.
Undoubtedly, this has been made possible by a successful so-
lution of the key problems regarding social standards, the
distribution of personal income and the introduction of a
new business organization as a starting point for the future
self-managing reorganization. [...] The defined tasks demand
from each worker of Luka Koper a responsible and disciplinary
behaviour in the process of the income as well as in the process
of deciding about its distribution.
(2) Business excellence as a goal. Last year, as in many years in
the past, Luka Koper achieved good business results. The offer
of services is accustomed to the needs of users all the time and
is being developed in the sense of upgrading the basic port ser-
vices with the aim of assuring logistic, marketing, investment,
financial and commercial assistance. By focusing on customer
care we have achieved market success. [...]
We are oriented towards quality of services. In order to fur-
ther adapt our activities to the needs of customers we have de-
cided to upgrade the system of quality by introducing elements
of business excellence. Knowledge and technology, upgraded
with elements of integral quality, are reflected also in expendi-
ture operations. [...]
Development of human resources and modernization. We
are aware of the importance of the human factor for the suc-
cessfulness of the operations, that is why this year's human re-
source activity will be oriented towards integration of the hu-
man resource development system in everyday practice, real-
ization of measures for achieving customer satisfaction, qual-
ification of successful leadership and management teams, and
an increase in education levels of employees. Our investments
will be oriented towards technological modernization, autom-
atization and informatization of technological processes in ac-
cordance with market directions and activities.
In the first paragraph the stress is placed on the role of the worker. The
tasks and aims that the workers are supposed to realize are not assigned
to the individuals by someone else but are, as explicated, agreed upon.
The Worker is the agent; it is implied that he is active and has the power
and responsibility to affect and change his social and political environ-
ment and not just affect his firm's business successfulness. While in the
text from the 1980 the use of the 1st person plural6 is emphasized, in the
text from the year 2000 the use of the 1st person plural is not explicit any
more, although we cannot claim it disappeared. The word that has 'dis-
appeared' is the word 'worker'; it has been replaced by the words human
resource and employees. The stress is placed upon the customer and the
entire firm's effort is directed towards satisfying the customer; nobody
talks about changing the whole society any more.
It is not possible to separate managerial discourse from managerial
ideology, which legitimizes existing power relations. When we accept
things as they are, as taken for granted, then ideology is at work. 'The
most effective use of power occurs when those with power are able to
get those who have less power to interpret the world from the former's
point of view. Power is thus exercised through consent rather than co-
ercion.' (Mumby and Clair 1998,184). This is recognizable from the next
two paragraphs taken from a local newspaper; the article is about unem-
ployment and dismissals in one of the Slovene regions called Slovenska
Istra. The journalist includes a few statements by the secretary of the lo-
cal union:
Slovene trade unions, which are the first that have to fight
for the rights of employees (that is indeed what people expect
from them) are of the opinion that the present situation has
been caused by insufficient investments. 'Far too many com-
panies are opening new offices in the coastal towns and creat-
ing new jobs' comments Euro Brozic, secretary general of the
Coastal Trade Union Organization. The blame goes mainly to
the government which is not able to create favourable condi-
tions. [...] According to Brozic the worst problem lies in the
fiscal policy and in the fact that Slovenia is in general a state
full of limitations in all areas.
In the former socialist system the people felt safe. When
they got a job, they held it until retirement. Today we live in
capitalism, which is inexorable with people who are not pre-
pared to further educate or retrain themselves or even change
their job. Brozic is of the opinion that we should also look
behind the scene. 'Companies are ruined, but the problem is
that there are not enough investments, development plans and
projects. Even banks are not able to create a more favourable
environment.'7
Managerial discourse has found its way through the local workers' or-
ganization to legitimize managerialism. The secretary of the union does
not doubt in managers or owners of the companies; he joins them in
claiming more freedom from state regulations; and blames the govern-
ment for the actual situation (job losses). The journalist also takes that
point of view when claiming that the capitalist system in which we live
today is inexorable mainly towards those individuals, 'who are not pre-
pared to additionally educate or retrain themselves', or even 'change their
jobs'. So, we have two possible sources of this unfavourable situation for
the workers. One is the state and its rigid regulations, the other the inflex-
ible individual himself. The claims for deregulation and flexible workers
sound very managerial-like. In such a way the existing power relations
are legitimized.
Managerial discourse also affects everyday life. From the newspa-
pers, magazines, television etc. we get some advice on how to improve
the management of our own life, and an insight into skills of self-
management:
Who does not want to know himself better and discover his
own talents? We will hardly find anyone who does not wish
to develop his personal or work related skills. An old saying
states that we learn throughout our whole life. We learn for
ourselves, to attain better working and life conditions. It is also
true that sometimes, due to circumstances beyond our control,
we take wrong decisions that affect our personal and career
achievements. We are becoming more and more conscious of
the fact that we can change a lot in our life, we just have to
discover/identify our objectives.6
We are advised to run our own life as if it were a business; to start
planning early in life to achieve the goals we want. The importance of
lifelong learning is stressed also in the next article where the idea of a
kind of index containing all the hobbies, activities etc. of an individual,
starting from his early years and the very first hobbies, is suggested (sec-
ond paragraph):
Happy and active people restore their energy by studying
throughout their whole life, upgrading their knowledge and
discovering new spaces [...] Our future employer could - from
the list of our additional skills and activities - gather if we are
dynamic and well-read, if we have some special interests and
predispositions that could best suit his/her needs. Different
interests make a good impression - they show our innovative-
ness and readiness to take on new challenges.9
Globalization, Transition and the Discourse of Management 109
Conclusion
It is clear that the language of management has become the language
(dominant and authoritative language) of postsocialist societies. The
more it presents itself as objective and neutral, the more it is ideological
and supports managerialism as the new dominant ideology which has re-
placed the old one, that of self-management. Objectivity and neutrality
of managerial discourse is just one of the possible forms of naturalis-
ation; not solely of all relations in the concrete society but above all of
the common picture in which everything appears to be natural. It is not
accidental that in the last fifteen years the main discursive machinery has
been based on the 'argument' of normality, neutrality and naturalness
of management (capitalism) and that of not-normality (unnaturalness)
of self-management (socialism). In other words, quite an old matrix of
theological demonism (based on the distinction between Good and Evil)
is again on the ride. At least as far as the managerial discourse is con-
cerned one would say that we have moved from a one-sided (socialist)
type of discursive demonism (after 1945) towards another one-sided po-
sition within the law of the movement of one and the same pendulum.
Everything which used to be positive has now become negative, and vice
versa. In that sense managerial discourse is not a neutral tool for com-
munication (among people and organisations) but a symbolical space
within which that revolutionary change has taken place. Last but not
least: the neutral term transition is in that sense one of the best symp-
toms of the managerial ideology and its discursive practice.
Notes
1.	Speaking about globalization we have in mind mostly a heterogeneous
conceptual development of global discourse presented in Kofman and
Youngs (2003).
2.	The paper is part of a larger research project report currently in
progress at the Faculty of Management Koper. The research 'Man-
agerial Discourse: Ideological, Political and Ethical Dimensions' is a
combination of field work (approximately 100 structured interviews)
and theoretical investigations. It should be accomplished in 2007.
3.	Managerialism is a term that was coined at the beginning of the 1990s
mainly within the conceptual debates in the us and British academia
and some sub-academic research circles. One of the best conceptual-
izations of managerialism can be found in Entemann 1993. Some au-
thors operate within the conceptual framework of the so-called man-
agerial revolution. Parts of the debate dealing with managerial rev-
olution can be found in Koch 1998 (jobs, wealth and happiness as-
pects), Hammer and Champy 2001 (company and corporation as-
pects), Chandler 2002 (historical aspects of the usa), Brown 2001 (as-
pects of marketing), Shenhav 2002 (philosophical and theoretical as-
pects) etc. To a certain degree the debate and researches about man-
agerialism are still within the larger context of influence being put for-
ward by P. F. Drucker's search for new definitions in his Post-capitalist
society (Drucker 1993).
4.	We are not, of course, equalizing globalization with transition, but si-
multaneously we would not like to offer a kind of 'radical difference'
between the two being based on schematisation. The problem we are
facing here is a highly complex and extremely important one. To put
it in simplified form, transition ought to be the kind of 'neutral' (an
sich, apriori in the Kantian sense) time/period in which 'something' is
changing itself into something else than it used to be. However, that
is just one side of the rather complicated matrix. There is at least one
important aspect we would like to emphasize in this connection. The
main context we are living in and writing from is something which is
usually termed as 'transition'. It is a more or less ideological designa-
tion, since it is functioning mainly in the sense of the so-called neu-
tral 'objective term' (in the Weberian sense). The transition grasped
in that highly ideological meaning is, at the level of pure appearance,
functioning as something objective. In that sense 'something' ought
to be in the process of transition from 'something' to 'something else',
to 'something different'. For example, from 'socialism' to 'capitalism',
from 'totalitarianism' to 'democracy', or from 'non-market' to 'market
economy'. Actually this is not the case, or better, this is just one, visible,
but less important side of the coin! Since, and that is the main prob-
lem, globalization is not something 'out there', is not 'the thing' at the
end of 'the story', but globalization is - as well as transition - a pro-
cess itself. To put it differently, there is another side of the coin, that
much less visible (but more important one) in connection with the
so-called transition. Namely, the very process of transition is already
the process of globalization. Globalization is putting itself into func-
tion in the very process of transition and not only at its presupposed
end. Observing just from the static, 'analytical' (including ideological)
point of view, globalization and transition are definitely not the same.
Simultaneously, observing the 'same thing' from the point of view of
the process, of its dynamical side, they are at least 'going together' - if
not even behaving as one and the same process.
5.	Luški glasnik is the internal publication of the organization Luka Koper
(Port of Koper). The original version of the two texts in the Slovene
language follows.
(1)	Letošnje leto bo pomenilo za delovne ljudi in obcane naše republike
leto izjemnih naporov za dosledno stabilizacijo gospodarskih gibanj
in razvoja na sploh. Še posebej bomo sooceni z dodatnimi napori vsi
delavci, ki s svojimi proizvodi in storitvami neposredno sodelujemo
v mednarodni menjavi blaga in storitev. [...] Delavci Luke stopamo v
leto 1980 še z dodatnimi obveznostmi in nalogami, ki bodo od vseh za-
htevale izjemne napore in dosledno borbo za uresnicitev dogovorjenih
nalog in ciljev. [...] v preteklih letih izvajanja sanacijskega programa
smo ob podpori širše družbene skupnosti dosegli pomembne gospo-
darske, politicne in samoupravne uspehe. [...] Najbolj pomembne
uspehe smo dosegli na področju utrjevanja samoupravnih in medse-
bojnih odnosov pri uveljavljanju vloge in položaja zk pri utrjevanju
varnosti in družbene samozašate. Brez dvoma je k temu pripomoglo
uspešno razreševanje kljucnih vprašanj družbenega standarda, sistema
delitve osebnih dohodkov in uvajanja nove poslovne organiziranosti
kot izhodišca za bodora samoupravno reorganiziranost. [...] Opre-
deljene naloge zahtevajo od slehernega delavca Luke odgovorno in
disciplinirano obnašanje tako v procesu dohodka kakor tudi pri od-
locanju o njegovi delitvi.
(2)	Poslovna odlirnost kot cilj - lansko leto je Luka Koper koncala,
tako kot vrsto zadnjih let, z dobrimi poslovnimi rezultati. Ves cas
ponudbo storitev prilagajamo razvoju potreb uporabnikov in jo razvi-
jamo v smeri nadgrajevanja osnovnih pristaniških storitev z zagotav-
ljanjem logisticne, marketinške, investicijske, finanme in trgovinske
podpore. Rezultat skrbi za zadovoljstvo kupcev so tržni uspehi. [...]
Temelj je kakovost storitev. Kakovost storitev je ena naših temeljnih
usmeritev. Da bi naše dejavnosti še bolj prilagodili zahtevam strank,
smo se odlocili za nadgrajevanje sistema kakovosti z vpeljavo elemen-
tov poslovne odlicnosti. Znanje in tehnologija, nadgrajena z elementi
celovite kakovosti, se odražata tudi na stroškovnem poslovanju. [...]
Razvoj kadrov in posodobitve. Zavedamo se pomena cloveškega de-
javnika za uspešnost poslovanja, zato bo kadrovska dejavnost letos us-
merjena v integracijo sistema razvoja kadrov v vsakodnevno prakso,
uresnicitev ukrepov za doseganje ciljev zadovoljstva zaposlenih, us-
posobitev uspešnih vodilnih in vodstvenih timov in izboljševanje izo-
brazbene strukture zaposlenih. Skladno s tržnimi usmeritvami in ak-
tivnostmi bodo naložbe usmerjene v tehnološko posodabljanje, av-
tomatizacijo in informatizacijo tehnoloških postopkov.
6.	In the Slovene language the person can be expressed by a pronoun and
also by the verb conjugation.
7.	Slovenski sindikati, ki so med prvimi, ki se morajo boriti za pravi-
ce zaposlenih (kar od njih ljudje tudi pricakujejo), menijo, da je za
nastali položaj krivo premalo investicij. »Pri nas se odpira premalo
novih podjetij, ki bi ustvarjala nova delovna mesta,« komentira gener-
alni sekretar Obalne sindikalne organizacije (oso) Euro Brozic. In za
to je kriva predvsem vlada, ki ne ustvari ugodnih pogojev. [...] Najhu-
jši problem pa je po Brozicevih besedah davcna politika in to, da smo
že na splošno država, polna omejitev na vseh področjih.
Ljudje so se v nekdanjem socialisticnem sistemu pocutili varno. Ko so
dobili službo, so jo ponavadi obdržali do odhoda v pokoj. Danes pa
živimo v kapitalizmu, ki je neizprosen predvsem do tistih, ki se niso
pripravljeni dodatno izobraževati, prekvalificirati ali pa menjati služb.
A pogledati je treba tudi v zakulisje sistema, poudarja Brozic. »Družbe
propadajo, a problem je, da ni dovolj investicij, razvojnih nacrtov in
projektov. Ugodnega okolja za to ne pomagajo ustvarjati niti banke.«
8.	This is an advertisement for Zavod za alternativno izobraževanje. The
original version:
Kdo se ne bi želel bolje spoznati in odkriti lastnih skritih talentov?
Verjetno bi med nami težko našli posameznika, kaj bi v svojem življe-
nju še lahko uankovito razvijal na osebnem ali poslovnem podrocju.
Star pregovor pravi, da se uamo celo življenje, in uämo se zase, da bi
dosegali kvalitetnejše pogoje za življenje in delo. Res pa je tudi, da nas
vcasih splet okolišan pripelje do napamih odloatev, ki so najveckrat
povezane s kariernimi in osebnimi dosežki. Vedno bolj pa smo os-
vešceni, da lahko v svojem življenju še marsikaj spremenimo, ce le pre-
poznamo svoj cilj.
9.	It is a part of a newspaper article Živiš, dokler se uaš, by Sonja Grizila
(Jana, 6th September 2005, 37-38). The original version follows:
Zadovoljni in dejavni ljudje obnavljajo svojo energijo tako, da se vse
življenje uajo, dopolnjujejo prejšnje znanje in odkrivajo nova vesolja.
[...] Bodoci delodajalec bi iz spiska dodatnih znanj in dejavnosti lahko
razbral, kaj nas zanima, smo dovolj dinamicni in razgledani za želeno
službo, imamo morda kakšna posebna nagnjenja, ki bi bila zanjo ko-
ristna, predvsem pa naredijo številna razlirna zanimanja dober vtis:
kažejo, da smo najbrž inovativni in se ne ustrašimo novih izzivov.
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of the managerial revolution. Oxford: Oxford University Press.
eu Integration ProCess: Will Turkey
OverCome the fdi ObstaCles?
Mehmet Basar
Sebnem Tosunoglu
This paper analyses Turkey's performance in attracting foreign direct
investment (fdi) and highlights the key obstacles for fdi in Turkey.
When compared with its main competitor countries, which includes
the group of new Eu member states and other candidate countries, it
can be concluded that Turkey has a very low rate of fdi inflow. It can
be argued that one of the major problems behind the low performance
in fdi inflows is macroeconomic instability. In this paper we will also
perform an empirical analysis to examine the relationship between fdis
and macroeconomic instability in the eu new member states and the
candidate countries. According to the regression results, it was found
that the gdp and openness have positive effects on the fdi, whereas
current account balance and inflation have been found to be negative.
On the other hand, the results related to external debt run opposite to
our expectations.
Key Words: foreign direct investment, eu integration, determinants
of fdi, panel data analysis, eu candidate countries
jEL ClassifiCation: F15, F21, C33
Introduction
Membership of the European Union (eu) is vital not only for accessing
to the single market of the eu, but also having access to the structural
funds of Europe, not forgetting economic growth and political stability.
To start with, eu integration processes are likely to have primarily been
of political nature. Also, membership criteria require that the candidate
country must have achieved a functioning market economy as well as the
capacity to cope with competitive pressure and market forces within the
Union (European Council 1993).
Empirical studies illustrate that many of the individual institutional
reforms required for eu accession have influenced fdi receipts positively.
Dr Mehmet Basar is Assistant Professor at the FaCulty of EConomiCs
and Administrative Sdernes, Anadolu University, Turkey.
Dr Sebnem Tosunoglu is Assistant Professor at the FaCulty of
EConomiCs and Administrative SdenCes, Anadolu University, Turkey.
Therefore, membership in the eu makes a country more attractive for
fdi than other countries (Bevan-Estrin and Grabbe 2001).
In May 2004, the eu expanded from fifteen to twenty-five member
states. Eight countries from Central and Eastern Europe - the Czech Re-
public, Estonia, Hungary, Latvia, Lithuania, Poland, Slovak Republic and
Slovenia - together with the Mediterranean islands of Malta and Cyprus
joined the eu. Bulgaria, Romania, Croatia and Turkey are the candidate
countries.
This paper analyses Turkey's performance in attracting fdi and high-
lights the key obstacles for fdi in Turkey. It can be argued that one of the
major problems behind the low performance in fdi inflows is macroeco-
nomic instability. In this paper we will also perform an empirical analysis
to examine the relationship between fdis and macroeconomic instabil-
ity in the eu new member states (from Central and Eastern Europe) and
the candidate countries. Malta and Cyprus are excluded from the analysis
due to the lack of data availability.
The paper will focus on three main sections. The first section clarifies
determinants of fdi and effects of eu integration process on fdi inflows.
The second section compares fdi in Turkey with the new member states
of the eu and other candidate countries. In the third section the relations
between fdi and macroeconomic instabilities in the new member states
and candidates are empirically analyzed by using panel data regression.
Determinants of fdi and the eu Integration Process
There are a number of policies and perspectives developed to illustrate
the level and structure of fdis. These policies will be grouped under
three headings in this study: overall economic policies, national fdi poli-
cies and international fdi policies. Even though there are various factors
affecting the fdis, it can be claimed that among other factors, the most
underlying feature is the economic structure of a country. The policies
aiming to strengthen the macroeconomic structure will highly influence
the fdi. These policies could be related to market size, to the cost of
investments, to the policies of openness, to the economic and political
stability and to the financial health. Primarily, in developing countries,
the market size is an important factor to attract fdi. The economic vari-
ables such as population, gdp, gdp per capita and gdp growth rate can
be used in identifying the market size. Also, another factor which may
affect fdi, is the cost of investment. Some of the other important deter-
minants for fdi are the economic, political and financial stabilities. At
this point, the most important variables for the stability should be clar-
ified, namely, the exchange rates, inflation rate, current account deficit,
budget deficit and external debts. Another important determinant that
can be evaluated within the overall economic policies is the openness of
a country. It can be claimed that a country can attract more fdi if the
ratio of foreign trade to the gdp increases (Basar and Tosunoglu 2005).
National fdi policies related with fdi are important to attract for-
eign capital to the country. Consequently, governments have gradually
started to eliminate the barriers which prevent investments and have
designed general investment climates. The fdi incentives used to at-
tract fdi in developing countries can be analyzed in three groups (Sass
2003). The first group is fiscal incentives, which consequently reduces
the tax burden of investors. The main components of fiscal incentives
are: tax credit, tax relief, tax rebate, exemption from custom duty, re-
duction of tax base, vat exemption, accelerated depreciation, reinvest-
ment allowance, tax holiday and loss accrual. The second group is fi-
nancial incentives given directly to investors. These are soft loans, grants,
sovereign guarantee on investment credits, exports guarantee, insurance
and credit, subsidized funding for various purposes. The other incentives
include preferential government contracts, real estate supplied below
market price, promotion of institutional investment, small and medium
size enterprises (sme) development programs, customs free areas, spe-
cial economic zones and industrial parks. Beside traditional economic
determinants, the literature suggests that other factors, namely interna-
tional fdi policies may be equally important. In the 1990s, the globaliza-
tion trends throughout the world witnessed great changes in the strate-
gies and policies applied in the countries in which fdis were carried out
(Banga 2003).
In the globalization process, in addition to all macroeconomic deter-
minants, regional integrations have provided great contributions to the
fdi inflows. In this context, there have been unexpected and remarkable
developments in fdi in recent years. Increasing competition among de-
veloping countries to draw foreign investors and reducing bureaucratic
procedures preventing significant foreign investments have had impor-
tant effects upon these developments. Moreover, the developments men-
tioned above have increased the numbers of both bilateral and regional
agreements (Banga 2003). Regional economic integration has been one
of the most significant changes in the international business environ-
ments during the past two decades. International economic integration
accelerates the free movement of created production factors across na-
tional boundaries and makes a theory of international trade based on
immobile factors irrelevant. The static and dynamic effects of economic
integration modify world production by providing new opportunities to
multinational enterprises (Kim 2003).
In succession with these improvements, membership of the eu has re-
markable effects for the fdis. eu enlargement offers some major open-
ings into new export and financial markets. The accession into the eu
could be seen as a process during which the barriers to exchange of
goods, services and factors of production between the eu and the can-
didate countries are removed and common policy principles and norms
of behaviour are adopted (Vilpišauskas 2002). The removal of barriers
to trade results in an increased access to the new markets. Consequently
it creates new opportunities for companies to expand their activities be-
yond the national borders and provides consumers with a wider range
and a better quality of products and services. It also creates conditions
for the growth of competition. The present trading arrangements be-
tween the eu and the candidates already guarantee tariff-free trade for
most industrial products. Tariff reduction can produce economic bene-
fits through increased trade, the reduction of distortions in the economy,
and less bureaucracy and form-filling.
The analysis of economic impacts of the eu single market has shown
that this integration process has led to a medium and long-term in-
crease of growth rates in the participating economies. This above average
growth makes the total region more attractive, not only for domestic in-
vestors but also for foreign ones (Zakharov and Kušic 2003).
Notably, after the foundation of the eu, a considerable increase of in-
tra and inter-regional fdi flows was observed among the member coun-
tries. Ireland experienced a real fdi boom after its eu accession in the
year 1973. Another success story is the accession of Spain and Portugal to
the eu in 1986. Indeed, after their accession to the eu, Spain and Portu-
gal experienced large inflows of fdi. The respective shares of fdi in gdp
rose from 1.1 percent and 0.8 percent in 1981-1985 to 2.1 and 2.9 percent
over 1988-1992 (Kaminski 2000).
Also, commitments to eu access can increase the level of fdi, thereby
improving national economic performance. In contrast, countries ex-
cluded from the eu, typically because of poor progress in the adoption
period will receive lower levels of fdi because their country credit rat-
ings tend to be poor (Bevan and Estrin 2000). In the accession process,
eu pre-accession funds offer real commercial opportunities for candi-
date countries. Since membership in the Single Market is likely to gen-
erate additional economic benefits for the candidate countries, from the
candidate countries point of view it would be rational to extend trans-
ition periods to the adoption of eu acquis, which requires significant
investments. In other words, the enlargement is somewhat based on a
consistently applied rule which states that the candidate countries have
to transpose and enforce the norms and principles which are applied in
the eu.
Accession of candidate countries also includes the alignment of exter-
nal trade regime (including the adoption of the eu common external tar-
iff ), the adoption of product and process standards (ranging from quality
standards of toys, pharmaceuticals, electronic equipment, etc. to safety at
work and environmental norms), and application of other eu common
policies (common agricultural policy, transport policy, regional policy,
etc.). The effects of adopting these measures on the economies of can-
didate countries depend on the nature and degree of adjustments to the
acquis as well as the level of integration already achieved (Vilpišauskas
2002).
The candidate countries have also already started to adopt harmonised
European standards and recognised accreditation systems for certifica-
tion and testing bodies. This should help eliminate the difficulties some-
times faced by those trying to sell their products to these states. In ad-
dition to these, liberalisation of services, such as energy and telecoms,
should provide new opportunities in previously inaccessible market sec-
tors.
The fdi Performance of Turkey and a Comparison with
eu New Member States and the Candidate Countries
Turkey is the largest economy in Eastern Europe, the Balkans, the Black
Sea basin and the Middle East and also one of the sixth biggest trading
partners of the eu (Loewndahl and Loewndahl 2001). However, when
compared with its main competitor countries, which includes the group
of eu new member states and other candidate countries, it can be con-
cluded that Turkey has a very low rate of fdi inflow. Table 1 indicates that
Turkey's fdi inflows of $636 million in 1993 increased to $940 million in
1998 and amounted to $3,265 million in 2001. It can be stated that the
fdi inflows between 1993 and 2000 were stable. However, the economic
crisis experienced in 2001 caused a significant fdi decline in 2002. After
table 1 Net fdi Inflows (current million us dollars), 1993-2003
Country	1993	1994	1995	1996	1997	1998	1999	2000	2001	2002	2003
Czech Republic	654	878	2,567	1,435	1,286	3,700	6,312	4,987	5,640	8,496	2,514
Estonia	162	214	201	150	266	580	305	387	542	284	890
Hungary	2,349	1,144	4,878	2,362	2,223	2,084	2,019	1,694	2,594	2,862	2,506
Latvia	45	214	179	381	521	356	347	410	163	253	299
Lithuania	30	31	72	152	354	925	486	378	445	712	179
Poland	1,715	1,875	3,659	4,497	4,908	6,365	7,270	9,340	5,712	4,131	4,123
Slovak Republic	198	269	236	350	173	562	354	1,925	1,584	4,123	571
Slovenia	112	116	150	173	334	215	106	135	503	1,686	337
Turkey	636	608	885	722	805	940	783	982	3,265	1,038	1,562
Bulgaria	40	105	90	109	504	537	818	1,001	812	904	1,419
Croatia	120	116	114	510	532	932	1,467	1,089	1,558	1,123	1,998
Romania	94	341	419	263	1,215	2,031	1,041	1,037	1,156	i,i44	1,844
Source: World Development Indicators (www.worldbank.org).
the 2001 crisis, the amount of fdi decreased to $1,038 million in 2002. It
is worth noting that at the same period, Poland, the Czech Republic and
Hungary proved to be the top three beneficiaries for inward fdi.
fdi inflows to eu new member states declined from a record $26 bil-
lion in 2002, to a low of $18 billion in 2003. This was almost entirely due
to the end of privatization in the Czech Republic and Slovakia. In the rest
of the other countries, the decline in fdi inflows was small (unctad
2004). If we compare the amount of fdi inflows to Turkey with these
countries, the fdi inflows to Poland are 4.3 higher, Hungary 2.1 and
Czech Republic 3.1 higher than those to Turkey. On the other hand, when
compared with the other candidates, the picture is different. The amount
of fdi inflows to Turkey is the same as for Croatia and Romania and two
times higher than for Bulgaria. To clarify this state of affairs, it will be
helpful to bring out the economic structures of the new member states,
Turkey and other candidates.
When taken into consideration the overall economic policies, Turkey
has many advantages in its evaluation. Firstly, compared with other
countries, Turkey has advantages from the characteristics of gdp and
the growth rate of gdp that are reflected as indicators of the market size.
During the period of 1990-2003, the growth rate has shown a trend of
table 2 Key Economic Indicators, 2003
Country	(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)
Czech Republic	89,715	3	8,855	0	34,629	-11.7	-5,660	1.2828
Estonia	9,082	5	6,693	1	6,972	3.1	-1,199	1.59
Hungary	82,731	3	8,398	5	45,784	-6.2	-7,210	1.2809
Latvia	11,072	7	4,716	3	8,802	-1.5	-916	0.9751
Lithuania	18,215	9	5,308	-1	8,342	-1.9	-1,278	1.11
Poland	209,562	4	5,400	1	95,219	-4.5	-4,599	0.7137
Slovak Republic	32,518	4	6,048	9	18,378	-3.7	-281	1.56
Slovenia	27,748	3	13,937	6	11,512	-2	-98	1.13
Turkey	240,375	6	3,452	25	145,662	-9.7	-7,905	0.5994
Bulgaria	19,860	4	2,550	2	13,288	-0.4	-1,675	1.1629
Croatia	28,797	4	6,403	0	23,451	-4.6	-2,066	1.12
Romania	56,951	5	2,570	15	21,280	-2	-3,311	0.8035
Column headings as follows: (1) gdp (current million us dollars); (2) gdp annual
growth; (3) gdp per capita (us dollars); (4) inflation (%); (5) external debt total (cur-
rent million us dollars); (6) budget balance (as percentage of gdp); (7) current account
(current us million dollars); (8) openness (imp. + exp./gDp).
Source: World Development Indicators (www.worldbank.org) and imf International Fi-
nancial Statistics (ifs.apdi.net).
increase with the exception of some years. Therefore, it can be claimed
that, ideally, Turkey should draw more fdis. Although it is not empha-
sized in the table, Turkey has many other advantages. These can be listed
as follows: being located in a strategic location, having an educated,
qualified and young work force, having communication and other in-
frastructures that are needed to meet the needs of investors, and having
a lower labor cost. It has to be emphasised that population and work-
force are the main advantages of Turkey from the respect of attracting
the fdis. By 2015, Turkey's population is projected to stabilize at the level
of approximately 80 million and the size of the adult population - in
other words, the potential active labor force is - projected to increase at
a constant rate over the next two decades in contrast to the eu countries
and the candidates. Furthermore, Turkey has a liberal legal framework
tied to the fdi since 1954. However, there are some disadvantages in the
Turkish economy. Firstly, for the last twenty years, the Turkish economy
has been suffering from a high inflationary environment (Yilmaz 2003).
Even though various governments in office have tried to apply policies
to decrease the rate of inflation, the rate of inflation is still higher than in
other countries. Secondly, the amount of Turkey's external debts is an-
other crucial problem. Indeed, the rate of the external debts to the gdp is
about 60%. According to the optimistic forecast of the Undersecretariat
of the Turkish Treasury, it will decrease to 50% in 2008 (Undersecretariat
of Turkish Treasury 2004). The amount of the external debts is about
$145 billion and this prevents a decrease in the real interest rates to the
desired levels. Henceforth it increases the country risk. In addition, high
amounts of interest payments, inefficient tax collection, deficits in social
security systems, insufficient privatization efforts, the problems of the
public sector enterprises and uncontrolled expenditures are all causing
budgetary deficits.
Besides all these macroeconomic instabilities, the political instability
can also be a key obstacle. There have been several elections in the last 15
years which have caused jitters on the economy. It has to be noted that
the frequently changing governments have given their priorities to short-
run political benefits and in the long-run have not been sensitive to the
economic problems. Table 3 demonstrates Turkey's locational advantages
and disadvantages for fdi.
As indicated in table 3, the macroeconomic and political instabilities
are the major obstacles of low volume of fdi in Turkey. If Turkey can
manage to eliminate macroeconomic and politic instabilities, it stands
to reason that it should attract more fdi. In this context, first of all, in
Turkey it is necessary to control public debts; to decrease the rate of infla-
tion and to provide macroeconomic stability. To achieve all these positive
conditions financial discipline should be ensured.
Turkey is a candidate country. It is clear that being a candidate makes
Turkey attractive for fdis because when compared with its European
competitors, Turkey has many advantages. Its full membership depends
on its adaptation to all the norm and standards of the eu. Being part of
the eu will make Turkey attractive to the fdi.
It has to be reminded that the fdi inflows are closely related to the
business environment, tax policies of the state, property rights, sectoral
license, customs and standards. In this context, the legal adjustments
improving the investment environment related to all these factors men-
tioned should be harmonised. Also, these adjustments will help not only
in compliance with eu acquis, but also to develop a more competitive
investment environment for Turkey (Dutz-Us and Yilmaz 2003).
Since 2001, Turkey has realized important structural reforms to sustain
table 3 Turkey's advantages and disadvantages for fdi	
Key Location Factors	Competitive Position
Economic size	Strong
Economic growth	Strong
Population size	Strong
Per capita incomes	Medium
Labor costs	Strong
Regional integration zone	Strong
Labor skills and supply	Strong
r &d and innovation based	Weak
Telecommunications & internet infrastructure	Medium
fdi legislation	Strong
Facilitation process	Medium
Political commitment	Weak
Incentives	Strong
Investment promotion	Weak
Economic instability	Weak
Policy certainty	Weak
Political interference, bureaucracy, and corruption	Weak
Source: Loewndahl and Loewendahl 2001.	
the economic growth, to improve the investment environment and to at-
tract more fdi inflows. Undoubtedly, the most significant is the Law on
Foreign Direct Investment (no. 4875), which was enacted in 2003. This
new Law on fdi was designed to reflect the Turkish liberal approach
(see http://www.treasuary.gov.tr). It constitutes the legal infrastructure
of fdi. However, it is too early to evaluate the influences of the law on
fdi level. It is expected that the law will positively contribute to the fdi
inflows. These adaptations aiming to improve the investment environ-
ment should be strictly sustained. These continuing efforts are also vital
for full membership of Turkey in the eu.
Methodology
Using panel data regression analysis, this paper explores whether or not
the macroeconomic determinants of fdi affect fdi inflows in the eu
new member states and candidate countries. The study will also help to
determine the policies that can be employed for increasing the amount
of fdi inflows for the candidate states. As mentioned previously, there
are many factors affecting fdi. In this study, fdi inflows are analyzed
by using five important variables. The independent variables used to ex-
plain fdi read as follows: the rate of inflation (inf), external debt/GDp
(extd), the current account balance/GDp (cab), import+export/GDp
(openness) and gdp. It is expected that the gdp and openness are posi-
tively correlated with fdi inflows; however, inf, extd and cab that are
the components of the country risk, are expected to be negatively corre-
lated with fdi.
sources and description of data
The data source for the dependent variable is the World Development In-
dicators (wdi) published by the World Bank. The independent variables
were obtained from wdi, eurostat and imf, International Financial
Statistics. The models are estimated by using stata statistical software.
The panel data set used in this study consists of twelve countries. The
data collected were limited to the year of 1993-2003, due to the data avail-
ability problem.
modeland estimations
In the panel data regression analysis, two panel analytical models, Fixed
Effects Model (fem) and Random Effects Model, can be used. In some
cases, fem can produce significantly different results than rem. The
Hausman test is applied to assess whether fem or rem is more appro-
priate in the panel data regression model (Chan and Gemayel 2003). In
this study, the Hausman test was applied and, according to it, the fem
was preferred to the rem.
In this study, we estimate fixed effects regressions with a data set from
eight new member states and four candidate countries. In our model,
fdi and gdp are measured in logarithmic form. In addition to this,
extd and cab included in the model by using one period lagged val-
ues in order to avoid endogeneity problems. Table 4 shows the estimated
results obtained by using panel data between 1993 and 2003.
According to the panel data regression results, it is worth noting that
gdp and openness are significant and positive correlated with fdi in all
models. The results of model a illustrate that the coefficient of gdp and
openness are positive and significant at 1% level, confirming the market
size positevely correlated with fdi. The results did not differ from what
was expected. Also, in the results of our analysis, the coefficient of the in-
table 4 Determinants of fdi inflows, 1993-2003 (lsdv model,
dependent variable is ln fdi)
Model a
Model b
Model c
Model d
gdp	1.4813"	[0.3405]	1.0861"	[0.3598]	0.8952s	0.3860]	1.1024"	0.3445]
Inflation -	0.0006	[0.0004]	-0.0001	[0.0007]	-0.0003	[0.0007]	0.0000	0.0007]
Openness	1.1274"	[0.4264]			1.126/	[0.4980]	1.0238s	0.4858]
Ext. debt /GDpt-1			0.97267	[0.5364]	1.1465s	0.5171]		
CAB/GDpt-1			-3-2336r	1.8569]			-3-993ß	1-7340]
Bulgaria	0.0158	[0.3624]	0.2465	[0.3755]	0.6123	0.4443]	-0.008	0.3543]
Croatia	0.0109	[0.3462]	0.3645	[ 0.4745]	0.7123	[0.4773]	-0.005	0.3453]
Czech Republic	-0.3954	[0.5952]	0.7462	0.7974]	1.0157	[0.8156]	0.0732	0.5906]
Estonia	0.7255	[0.4987]	1.0816s	[0.4612]	0.6531	[0.5577]	0.1244	0.5263]
Hungary	-0.2621	[0.5341]	0.309	[0.6486]	0.6481	[0.6635]	-0.105	0.5241]
Latvia	0.7328^	[0.3679]	0.74317	[0.4069]	0.9017®	[0.3978]	0.4196	0.3688]
Lithuania	-0.1307	[0.3110]	0.1529	[0.4532]	0.418	[0.4213]	-0.3955	0.3194]
Poland	-0.64	[1.0010]	0.1509	[1.0968]	1.303	[1.2325]	0.1212	1.0238]
Romania	-0.4367	[0.5701]	0.0618	[0.7070]	0.9347	[0.7688]	-0.1601	0.5750]
Slovak Republic	-0.585y	[0.3421]	-0.0684	[0.4739]	0.0903	[0.4759]	-0.736^	0.3367]
Slovenia	-1.1547a	[ 0.3244]	-0.3042	[0.5222]	-0.2681	0.5309]	-0.966"	0.3366]
Turkey -	-2.3234®	[1.0733]	-1.5915	[1.0920]	-0.4842	1.2473]	-1.4244	1.0829]
Constant	-15.918s	[7-7331]	-6.3551	8.1744]	-3-1775	8.6413]	-6-9973	7-8315]
Observations	128		117		118		117	
R2	0.733		0.745		0.736		0.748	
Adj. R2	0.7		0.707		0.698		0.71	
F-stat.	22.164		19.666		18.99		19.958	
Notes: a significant at 1%, ß significant at 5%, y significant at 10%; standard errors in
brackets.
flation was calculated negatively but it is too small and insignificant. This
result can be explained by the multiplicity of the extreme data related to
the inflation rates in the countries included in the survey.
In the second stage, we include extd and cab variables which indi-
cate the country risk to the model. The results of model b illustrate that
the coefficient of gdp is positive and it is significant at 1% level. On the
other hand, the result of extd runs opposite to our expectations. The
positive relation between extd and fdi was an unexpected result. This
could be explained by the accounting relation current account balance
and external debt in the balance of payments. Another reason for this
is that the integration efforts of countries to join the eu have a positive
impact on fdi. Despite the fact that the amount of extd is increasing,
the integration process reduces the country risk and this fact can affect
the fdi positively. Moreover it was found that there is a negative rela-
tion between cab and fdi. This result is parallel to what was expected.
In the third stage, extd and cab were included separately to the model
because of the accounting relation (model c and model d) and we found
the coefficients of these variables are significant at 5% level.
Finally, we examined the effects on countries by using eu member-
ship dummies; it was concluded that the coefficients are not significant
in general, except in the Slovak Republic, Slovenia and Latvia. We found
the coefficients of Latvia to be positive and significant in three models
(model a, model b, model c), illustrating that Latvia fdi inflows are
greater than would be expected. On the other hand, when we looked at
the results related to Slovenia and Slovak Republic in two of four mod-
els (model a and model d), the coefficients are significant and negative.
We can say that these countries draw less fdi than expected. Similarly,
Turkey draws less fdi than expected according to the results of model a.
Conclusion
fdi can have strong and positive effects for national economies. There
are a number of policies and perspectives developed to enhance the level
and structure of fdis. Even though there are various factors affecting the
fdis, it can be claimed that the economic structure of the countries is the
most important and foreseen factor. However, in the globalization pro-
cess, in addition to all macroeconomic determinants, regional integra-
tions have provided great contributions to the fdi inflows. Under these
circumstances, membership of the eu has a remarkable influence on the
fdis. Therefore, membership of the eu is vital for access to European
single markets, access to European structural funds, and improvement
of economic growth and political stability.
The panel data regression analysis presented in this study has shown
the key determinants of fdi inflows to the eu new member states and
the candidate countries. In this paper, we have found that the gdp and
openness have a positive effect on fdi, whereas current account balance
and inflation have been found to be negative. On the other hand, the
results related with external debt run opposite to our expectations.
Of our eu membership dummies, we found that only the Latvia coef-
ficient is positive and significant in three models, illustrating that Latvia
fdi inflows are greater than would have been expected. On the other
hand, we found Slovenia, Slovak Republic and Turkey's coefficients are
significant and negative. We can easily say that these countries draw less
fdi than expected.
Indeed, Turkey as a candidate country has better conditions from the
respects of gdp and the gdp growth rate when compared with its Eu-
ropean competitors. However, in Turkey, there are serious obstacles pre-
venting the fdi inflows to Turkey, significantly high rates of inflation, ex-
ternal debts and current account deficits. This study shows clearly how
crucial the macroeconomic instability is in attracting or deterring the
fdi. For this reason, candidate countries, and Turkey in particular, need
to implement some policy measures in order to attract fdi. To do so,
firstly, the economic obstacles that seem to prevent full membership of
the eu should be developed. Moreover the political determination on
this issue should be sustained. Finally, Turkey must eliminate macroeco-
nomic and political instabilities.
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5th Annual Conference, Madrid, 11-13 September.
EConomiC Effidenoy in Transition:
The Case of Ukraine
Anatoliy G. Goncharuk
Although a market economy is by definition more effective than a cen-
trally planned economy, various countries in transition have faced the
problem of economic inefficiency. The aim of this paper is to develop
a comprehensive measure of economic efficiency using the production
function framework and estimate it for the Ukraine economy. There
exist namely a vast amount of indicators that support our hypothesis
on the diminishing efficiency of the Ukraine economy in the last years.
Our in-depth analysis shows that the diminishing efficiency is a con-
sequence of ineffective investments and innovations as well as of an
increasing intensity of materials use.
Key Words: economic efficiency, productivity, factors, labour, capital
jEL ClassifiCation: 047, C3
Introduction
The transition from an administrative-command economy to a market
economy raises many theoretical problems unknown earlier, since this
transition is an absolutely new historical process. And one of the key
problems of the former administrative-command economy that conse-
quently led to transition was the declining economic efficiency of these
economies.
The centrally planned economy practically divested itself of scien-
tific and technological progress, thereby there were no effective mo-
tives for progress at a workman and enterprise level. Especially this con-
cerned the industries that produced goods aimed for final consumption,
such as agricultural and food-producing industries. The administrative-
command economy was based on bulky and planned distribution of
scare resources characterized by: domination of heavy industry and the
defense establishment, with inability to respond dynamically and ade-
quately to consumer needs, slow-moving production apparatus and con-
stantly accumulated pervasive disproportions in production. Besides, in-
activity of the economy was accompanied by professional inactivity of
Anatoliy G. GonCharuk is Assistant Professor at the Department of
Management, Odessa National PolyteChniC University, Ukraine
the labour force, and the essential system of employees dismissal, re-
training and reeducation could not be built. Increasing crisis in the so-
cialist economies was not accompanied by liquidation of low-effective
and obsolete enterprises, there was no flow of capital towards more ef-
fective industries, and enterprises didn't create motives for renovation of
production as is usually the case in developed market economies. In the
centrally planned economy in comparison with the market economy the
lesser part of gdp was directed to personal consumption and the vast
amount was addressed to social objects.
Thereby the administrative-command system was not able to provide
high economic and social efficiency of the economy in comparison with a
market one. Therefore the transition process to a market economy model
in terms of efficiency of the economy could be considered as an advanced
process.
At the same time, transition to market economy was accompanied by a
drop in efficiency indicators practically in all cases. Among the specialties
of that decline one may accentuate following major ones:
1.	change in labour productivity is inevitable under structural trans-
formation, liquidation of inefficient manufacturing, creation and
increase of apparent unemployment, changes in social needs in
goods and services;
2.	growth of energy and material intensity of the economy by reason
of cancellation of government subsidies and price liberalization;
3.	growth of social inequality by reason of cancellation of many state
social guarantees and increase of capitalization of the economy.
However, while in countries implementing radical market reforms
(Poland, Slovenia, Hungary etc.) this decline was uncontinuous (2-3
years) and then came hasty and persistent growth, there were fluctua-
tions of labour productivity dynamics in countries with gradual reform
(Bulgaria, Romania) or continued decline in countries with inconsistent
reform (Russia, Ukraine etc.).
The most pervasive and durable bust of economic efficiency was ob-
served in Ukraine where during the first 9 years of transition the labour
productivity declined twice as much. Despite the certain success of that
country during the last few years in economic growth, monetary and
currency stability, expansion of external trade and investments, increase
of household incomes and savings, there are a lot of factors that restrain
high-efficient growth of the Ukrainian economy and constrain the level
and rate of that growth. This paper is dedicated to analyses of those fac-
tors and to the estimation of the actual level and dynamics of economic
efficiency of the Ukraine economy.
Definitions and Methodology
There exist different definitions of economic efficiency and frameworks
for estimation of its basic indexes. The most common are described be-
low.
Economical efficiency was defined by the Italian scientist V. Pareto as a
state when the needs of all society members are satisfied as fully as possi-
ble, with given limited resources (Kuznetsova and Osadchaya 1993). That
state is called Pareto efficiency or Pareto optimality. According to Pareto
theory resources allocation in perfect competition conditions is effective.
In perfect competition economy all benefits are produced (production
efficiency) and allocated (consumption efficiency) effectively. Besides,
the combination of produced benefits cannot be changed for improve-
ment of consumer positions (exchange efficiency) (Vidyapin 1999).
However the economy that according to Pareto is effective isn't socially
effective, whereas an optimal resources allocation leads to formation of
social inequality and, in order to smooth it, the social economic policy
of the government is engaged. Therefore the Pareto efficiency conception
cannot be applied to the majority of factual situations where political
arrangements improve the estate of one group of people at the expense
of another.
Moreover, according to Pareto, the motion from state monopoly to
free competition during the transition process means a gain of economic
efficiency. It was immidiately noticed in the introduction that this pro-
cess is accompanied by a drop in economic efficiency in the majority of
transition countries. So it refutes Pareto's conception of transition econ-
omy.
When speaking about economic efficiency one should emphasize also
the analytical conception of operational efficiency developed by Farrell
(1957) that divides economic efficiency into technical and allocative com-
ponents (multipliers). Technical production efficiency reflects an ability
to derive a maximal output from a given set of the factors of produc-
tion. Allocative efficiency (efficiency of allocation or 'Pareto efficiency')
reflects an ability to use resources in optimal combination considering
their relative cost and applied production technology. The economy may
be called technically inefficient if it uses overmuch resources to produce
output goods. In terms of allocation, the economy is inefficient if it uses
a nonoptimal combination of resources to produce output goods.
The following definition of economic efficiency was used as the basis
for given research. Economic efficiency is obtaining the maximum out-
put under minimum production factors input. It defines efficiency of the
total economy.
The following measures of using particular factors of production (i. e.
labour, capital) are often used for estimation of economic efficiency:
labour productivity, capital productivity ratio, materials-output ratio
etc. The other common indicator of the efficiency that measures the im-
pact of more than one factor is the multifactor productivity, that is de-
fined as the ratio of total output goods with respect to input resources
(total costs). Practically, multifactor productivity considers the influ-
ences of two factors - labour and capital (The EConomist 2004). Formally
multifactor productivity A can be recorded in the following way:
F
A = mry	(,)
where Y denotes total output goods (base index of output), F(K, L) is
production function and denotes the average rate of labour capital input
(K) and labour input (L).
A can be seen as an aggregate indicator of economic efficiency in con-
tradistinction from particular indicators like average labour productiv-
ity (y) or average capital productivity (g). Furthermore A can be denoted
as the average from y and g (with expedient measure). Assuming that
F(K, L) = KaLl~a is a production function of Cobb-Douglas then:
A = gay1-a,	(2)
where A already denotes the weighted geometrical average of y and g.
That means that the base index of A must be set between the base indexes
of y and g with the same base. The ratings of the ratio between capital
and labour received from the data from the national accounts system, are
most commonly used as the weights a and a - 1, the estimates of output
elasticity dependent on two factors. Standard practice presumes a setting
of the estimation of factor rates via expert evaluation on the level of 0.3
and 0.7 correspondingly for capital and labour (oecd 2001; Dolinskaya
2002; Voskoboynikov 2003; Bessonov 2004; Jongen 2004). The given pa-
rameters values of production function (2) have a key role in formation
of the efficiency to labour factor and are very near to the values obtained
by P. Douglas in the 1920's. At once during the last few decades the role
of labour in formation of output goods declined essentially as a result
of industrialization and the rising degree of mechanization and automa-
tion process. Indeed, under the existing technology level, when the role
of person in various branches consists just in control for machine run-
ning, it is impossible to speak about the domination of the labour factor
in the economy. As evidence, one may adduce the empirical values of
production function parameters obtained from statistics data of the So-
viet economy for the period 1960-1985 and the amount for labour and
capital correspondingly 0.5382 and 0.4618 (Granberg 1988).
Besides, the approach described above is imperfect more because it
overlooks the rest of the key production factors - inventory and en-
trepreneurship. The last is the fourth factor of production whose content
consists in the most effective rearrangement of all other factors for the
purpose of production of goods and services. In the present conditions,
the process innovations, pioneer products, organization innovations etc.
are necessary features of entrepreneurship. Relative economic efficiency
denotes a choice of such a combination of all production factors existing
in limited volumes that permits the results to be achieved with the least
costs by using business, production and management know-how.
Being exclusive from consideration of all factors but labour and fixed
capital, the two-factor production function is grounded by scientists on
the following: labour and capital are the results of production processes
at the previous stages where capital assets and labour force were also
used, therefore all factors can be reduced to those two factors (Chetyrkin
and Klas 1986). However, inventory is also a primary production fac-
tor that should be taken into consideration especially in the case of
economies that do not possess any ample funds of raw materials by own
resource production and are reluctant to import those in quantities for
production needs. Therefore there exists the necessity to develop a com-
prehensive measure of economic efficiency that considers the influences
of all basic factors and is not limited only to labour and capital.
Departing from the Cobb-Douglas production function with constant
returns to scale (scale effect) and adding to that the missing, in our view,
factors of production, the following production function was obtained:
Yt = ALai Ka2 Ma3 Ea,	(3)
where Yt is total output (gdp), A is total factor productivity, L, K, M, E
are the factors of production, correspondingly, employment (labour),
fixed capital stock (means of labour), material resources store (subjects
of labour) and injection to innovations (entrepreneurship).
are parameters of function, and define elasticity of output by particular
input resources.
The parameters a may be defined by rearrangement power equation
(3) to linear form by taking the natural logarithm and applying the
method of regression analysis. That linear form has the following view:
ln(Yt) = ln(A) + «iln(L) + «2ln(K) + a3ln(M) + a4ln(E).	(4)
Variable A in equation (3) is standard residual and indicates the re-
turn (output) from all used basic factors of production. That is, A is in
fact a comprehensive measure of economic efficiency of the economy.
Re-denoting the given measure as EE after ordinary transformation, the
following formula was derived for comprehensive measure of economic
efficiency:
EE = ybl gb2 mb3 eb4,	(5)
where y is the average efficiency of use of the direct labour (labour pro-
ductivity), g is average efficiency of application of the means of labour
(fixed capital productivity or output-capital ratio), m is average effi-
ciency of application of the subjects of labour (output-materials ra-
tio), e is average efficiency of application of the accomplishment of en-
trepreneurial innovations (output - innovations cost ratio), b1, b2, b3, b4
are dynamic parameters of function defined by the following formulas:
y\	yi	yi	yi
bi=\ogy—, b2=\oh—, h=\ogm—, fc4 = loge—.
It is rational to use the ratios (indexes) and not the absolute values
as benchmark data since factors may have various dimensions during
the construction of production functions. Accordingly benchmark data
about resources input, efficiency of resources application and production
output must be performed as time series of corresponding economic in-
dexes. Thereby the dynamics of economic efficiency may be measured by
following index:
T = Tbl . Tb2 . jb3 Tb4	(6)
Lee = 1y Lg 'm ^e >	V6/
where Ig, Iy, Im, Ie are correspondingly indexes of average fixed capital
productivity, labour productivity, output-materials ratio and output -
innovations cost ratio.
The presented equation (6) is in substance a four-factor production
function and averaging function, namely the dynamics of economic ef-
ficiency is a certain average value of the dynamics of efficiency of use of
direct labour, means of labour, subjects of labour and accomplishment
of entrepreneurial innovations.
Estimates of the Parameters
Practical application of the equations described above requires a real es-
timate of factor costs and corresponding parameters of specified func-
tions.
The estimate of employment level, particularly in a period of eco-
nomic depression in Ukraine, encounters the problems of underemploy-
ment and latent unemployment. The high percent of registered employ-
ment that was observed during all the transformation period is bound
up with the impossibility of dismissal of part of the disengaged payroll
in the layoff process. That led to reduction of workweek and workday
duration, expansion of employees on administrative leave and part-time
employed, thus leading to the underemployment gain. Therefore we will
use actual working hours instead of the number of employees to estimate
a real value of direct labour costs and hourly output per employee for an
estimate of labour productivity.
The measure of fixed capital stock collides with the problem of ad-
equate estimate of value of fixed capital that is really used in business
activity. As noticed by R. Solow, capital in stock doesn't mean capital
in work (Solow 1957). The estimate of fixed capital unadjusted for wear
and for unused share is kept out from measurement of the real efficiency
of its usage. When fixed capital in stock in a period of economic de-
pression is standing, the estimate of fixed capital depends on utilization
rate. Moreover, balance sheet value estimation of the fixed capital during
the transformation period in Ukraine did not correspond to its market
value, which has never been precisely estimated, because of inadequate
indexation, especially during the hyperinflation period. As a result, it was
the distorted amortization system that did not reflect a real usage of fixed
capital in the production process.
According to various scientists (Griliches and Jorgenson 1967; Costello
1993) the problem of fixed capital utilization record and its inadequate
estimate may be solved by application of the data about power use as an
indicator of fixed capital utilization rate. However that necessarily would
lead to overestimating capacity utilization and we could not estimate the
real fixed capital stock if it considers the significant scope of the hidden
sector of the economy.
Thereby the obtainment estimate of real fixed capital stock under dis-
table 1 Estimates of regression model parameters for equation (6)
Multiple correlation coefficient	R =	0. 9721
Coefficient of determination	R2 =	= 0. 9450
F-statistics	F =	30. 089
Number of Observations	N =	: 12
t-statistics	3. 087; 2. 723; 3. 143; 2. 278	
Source: Own calculations.
torted systems of balance sheet value estimation and depreciation, the
impossibility of estimating a real utilization rate and absence of any data
about market value, is impossible. In that situation it seems apposite to
apply an amount of annual fixed asset formation (in comparable prices),
which generally are realized purposely for use in the production process,
as an evaluation of capital value dynamics. In connection with that, we
define corresponding assumptions about full utilization and application
of invested fixed capital in production of gdp.
There are annual data about material costs in the economy (in com-
parable prices) used as a material resources store applied in production
of gdp.
The value of injection to innovations is defined as the amount of
funding of research-and-development activities on the domestic en-
trepreneur's account.
All following estimations are based on the data about the state of
the official sector of the Ukrainian economy received from International
Labour Organization, State Statistic Committee of Ukraine, Ministry of
the Economy of Ukraine and other official sources.
To define the parameters of function (6), namely the elasticities of gdp
by particular measures of resources costs, multiple regression analysis
by annual data was carried out (chain indexes of figures in comparable
type), consequently for years 1991-2003 the following equation was ob-
tained:
Y = l0.428K0.2I2M0.I60E0.20I	(7)
Since the amount of factors elasticities approximately equals 1 (accu-
rately 1.001) hence the scale effect is practically absent and the obtained
function (7) may be considered as linear homogeneous.
The parameters of the obtained model are reported in table 1. They
denote its high accuracy and closely related variables. According to those
the dynamics of real gdp at 95% is defined by the dynamics of four
table 2 Estimates of regression model parameters for equation (8)
Multiple correlation coefficient	R =	0. 9951
Coefficient of determination	R2 =	= 0. 9901
F-statistics	F =	150. 637
Number of Observations	N =	11
t-statistics	2. 583; 2. 293; 2. 745;2. 622	
Source: Own calculations.
factors - working time, fixed asset formation, material costs and en-
trepreneurial innovations. The unimportance of parameter A and its
proximity to 1 indicates that the average productivity of all factors prac-
tically didn't fluctuate for the total considered period.
The elasticity of economic growth by working time, as it turned out, is
the most (0.428) that is the evidence of the determinative influence of the
human factor on economic dynamics in Ukraine. This is below the value
(0.4618) calculated for the Soviet economy for 1960-1985 years (Granberg
1988) and indicate an increasing influences of other factors on gdp dy-
namics. The obtained value of elasticity of output growth by labour for
Ukraine in comparison with the corresponding parameter of production
function for most developed capitalistic countries in the post-war period
(1950-1977), is lesser than in usa (0.447) and Great Britain (0.506) and
more than in the less developed Japan economy (0.397) in that period
(Chetyrkin and Klas 1986). The similar comparison with the countries
which carried out transition successfully, denotes low enough value of
the elasticity of output with respect to labour in Ukraine: in Slovenia this
parameter amounts 0.507 (Novak 2003), in Czech Republic that amounts
0.58 (Dupaigne and Henin 2002), in Poland it is equal 0.66 (Kolasa and
Zoikiewski 2004).
Parallel analysis was carried out on the basis of base indexes (1992=1)
that gave rather different results for parameters of production function:
Yt = 0. 929La383Ko-292Mai90Ea061.	(8)
According to the parameters described in table 2, the obtained regres-
sion equation (8) is valid. Those denote that independent variables in-
cluded there define Ukrainian gdp dynamics on 99%. The given func-
tion in comparison with the function based on chain indexes, denotes
the reduction of multifactor productivity that constrained gdp growth
during the analyzed period in Ukraine. Moreover the magnitude of pa-
rameters by all four factors in the last equation (8) less than 1 (0.926)
0.8
0.71-1-1-1-1-1-1-1-1-1-1-1-1
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Fi gure 1 Basic dynamics of economic efficiency and labour productivity in Ukraine
in years 1992-2004 (1 - growth rate of economic efficiency, 2 - growth rate
of labour productivity)
indicates diseconomies of scale. Obviously the influence of production
consolidation on the efficiency of the Ukrainian economy is negative.
Evident is also a considerable increase of elasticity of output by capital
(fixed capital and inventory investments) at the cost of drops of elastici-
ties by labour and entrepreneurial innovations. Received low estimates of
the elasticity of output with respect to labour for Ukraine (0.383) in com-
parison with the above mentioned developed and transition economies
confirms the conclusion of Easterly and Fisher (1994) that the value of
this parameter in the developed countries is greater than in developing
countries.
Estimate of economic efficiency of the economy
The results of estimated production function (8) in comparison with dy-
namics of labour productivity (ratio of gdp to actual working hours by
all employees of the economy) are shown in figure 1.
We can establish that the economic efficiency of the Ukrainian econ-
omy for the last 12 years declined - towards the end of 2004 it was ap-
proximately at the level of 1995. The tendencies of its increase in 1996-
1997 and 1999-2002 years were aborted. That may be explained by the
following reasons:
1. the financial crisis in 1998 extremely negatively influenced economic
efficiency of the Ukraine economy; in contradistinction to the 1993-
1994 years period, the diminishing economic efficiency in 1998 was
connected with a decline in productivity of all four production fac-
tors;
2. in 2003-2004, the falling of economic efficiency of the economy re-
sulted from simultaneous decline in productivities of fixed capital
investments, material resources and innovations.
The total falling of economic efficiency for all the analyzed period
amounts to 8.5%.
Comparing both diagrams in figure 1, the following may be noted:
1.	when in 1992, the falling of labour utilization efficiency accelerated
the recession of overall economic efficiency of the economy, then in
1995-1996 the former already constrained the gain of the latter;
2.	the similarity of dynamics of both measures in 1997-1998 indicates
the essential role of labour in the composition of economic effi-
ciency during those years;
3.	the high growth rate of labour productivity in 1999-2002 compen-
sated the falling of efficiency of other factors' use and largely sup-
ported a gain of overall economic efficiency of the economy;
4.	during 2003-2004 the overall value of economic efficiency of the
economy declined because of inefficient utilization of investments
and innovations as well as an increase of intensity of materials use
(materials-output ratio), nevertheless the growth rate of labour
productivity speeded up.
Estimated dynamics show that fluctuations of a level of economic ef-
ficiency of the economy occured in a narrow enough interval, consid-
erably smaller than changes in the volumes of manufacture and labour
productivity level. It is possible to explain this by smoothing and mu-
tual compensative influence of four allocated factors on this dynamics.
So, within significant falling values of one factor, others grew or changed
slightly and on the contrary.
The small variation of economic efficiency for the analyzed 12 years of
transition to a market testifies to weak structural transformations, an in-
efficiency of carried out market reforms and technological backwardness
of the Ukrainian economy which up till now is the most power-intensive
country in the Europe. Such freezing of an inefficiency of economy was
promoted by cheapness of the energy carriers received by Ukraine from
abroad (from Russia, Turkmenistan and other countries), hard protec-
tionism and a high degree of monopolization in the domestic market.
Besides the high degree of corruption of authorities, the absence of an ef-
fective judicial-legal system, hard administrative and fiscal pressure upon
economic subjects and other negative phenomena became the reason for
the 'shading' of a significant part of the national economy. As a rule, in a
'shadow' the most successful business left. As a result, there was created
the paradoxical situation in the official sector of the economy at which
the significant part (up to 50% and it is more) of enterprises was unprof-
itable, i. e. they were the potential bankrupts. And because of the absence
of effective economic legislation and for a number of other reasons, such
a situation in Ukraine was maintained during many years. Therefore the
transition from command-administrative to a market economy was de-
layed in this country.
Thus, with liberalization of the the prices for energy carriers, demo-
nopolization and increase in the level of a competition in the domestic
market, alleviation of the influence of the state on the business economic
efficiency of official economy of Ukraine will grow and its 'shadow' com-
ponent will be reduced.
Conclusions
The paper contains the results of analysis of the dynamics and factors of
economic efficiency of the economy of Ukraine during the transition to
a market economy. As was shown, it is necessary to apply comprehensive
measures, those which take into consideration efficiency of utilization of
all key factors of production under the estimate of value of economic
efficiency of the economy.
Departing from the function of Cobb-Douglas with constant returns
to scale after the range of transformation there was obtained the formula
for four-factor productivity that set the dependence of the dynamics of
economic efficiency from four basic factors - dynamics of labour pro-
ductivity, fixed capital productivity, output-materials ratio and output-
innovations cost ratio.
The four-factor production function was econometrically tested to es-
timate the parameters of the developed equation using the data about
the official sector of the economy of Ukraine for 12 years of the transi-
tion process. The key results of that analysis showed the following:
The parameters of the production function that was built on chain in-
dexes denote the high validity of the model and closely related variables.
According to those the dynamics of real gdp in Ukraine at 95% is defined
by dynamics of four factors - working time, fixed asset formation, ma-
terial costs and entrepreneurial innovations. It is established that for all
the investigated period the average productivity of all factors practically
has not changed.
According to the parameters of a valid model of the production func-
tion constructed on the basis of basic indexes, the independent factors
included into it on 99% define the dynamics of the gdp of Ukraine.
In comparison with a function constructed on the basis of the chain
indexes, the given function specifies decrease of four-factor productiv-
ity, which contained the growth of gdp in Ukraine in the analyzed pe-
riod. The presence of diseconomies of scale is established, i. e. integration
of manufacturing negatively influences the efficiency of the economy of
Ukraine.
The estimate of parameters of the developed model of four-factor pro-
ductivity denotes that economic efficiency of the economy is for the most
part defined by labour utilization efficiency (working hours) while at the
same time the influences of other factors (investments, materials cost,
entrepreneurial innovations) on economic efficiency are also significant.
At the same time, the value of the received parameter of the elasticity
of output with respect to labour is considerably below in comparison
with the developed and the other transition economies, and even with
the ussr, which testifies that the economy of Ukraine is less developed.
Nevertheless high rates of economic growth and gain of labour pro-
ductivity did occur in Ukraine during 2000-2004, the value of economic
efficiency of the economy kept at quite a low level and even declined
(in 2003-2004). This may be explained by ineffective investments and
innovations as well as an increase of intensity of materials use in the
Ukrainian economy.
Thus, it is not enough for maintaining a growth of economic efficiency
of the economy only to have an increase of labour productivity. Cheap
energy carriers (gas, oil), with which Ukraine during all the period of
economic transformation was provided, did not promote modernization
of the national economy and active implementation of energy saving in-
novations. They only froze the inefficient structure of the economy and
technological backwardness of the country to which indicator it is pos-
sible to apply the highest in Europe consumption level of energy carriers
on the unit of the gdp. This indicator names 'Energy use per ppp gdp,
and in Ukraine it is higher even than in coldest and rich in minerals Rus-
sian Federation, and according with World Bank data it equals 0.57 kg
of oil equivalent per constant (2000) us dollar of the gdp at ppp. That
is 2.6 times higher than in Poland, 3 times higher than in Slovenia, 3.7
higher than in Great Britain and 6 times higher than in Hong Kong. As
a result, with carrying out of liberalization of import prices of energy
carriers and growth of the world prices for them recently, the country on
the threshold of 2005 and 2006 has closely collided with the danger of the
crisis of efficiency. Therefore the real actions on fixed capital renovation,
introduction of resources-saving technologies and effective innovations
are necessary to increase the economic efficiency of the Ukrainian econ-
omy.
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The InfluenCe of Previous Visitation
on Customer's Evaluation of
a Tourism Destination
Maja Konecnik
Mitja Ruzzier
The paper investigates the customer's perspective on a tourism destina-
tion brand through four proposed dimensions: awareness, image, qual-
ity and loyalty dimension. In addition to the brand's dimensions evalu-
ation, the influence of previous visitation on each proposed dimension
is presented. The evaluation of tourism destination brand Slovenia in
the minds of German respondents serves as an investigated example.
In addition to an evaluation for each investigated dimensions' variables
for destination Slovenia as perceived by German respondents, the study
confirms also the influence of previous visitation on brand evaluation.
In the investigated example, previous visitation is recognized as the im-
provement factor in Slovenia's evaluation in the minds of German re-
spondents.
Key Words: customer's evaluation, tourism destination, brand,
previous visitation, Slovenia
jEL ClassifiCation: M31, M39
Introduction
A significant amount of effort has been devoted to presenting the cus-
tomer's perspective on brand concept (Aaker 1991; Keller 1993). Those
analyses have not been oriented only toward evaluation of products (Yoo
et al. 2000; Faircloth et al. 2001), services (de Chernatony and Dall'Olmo
Riley 1999) and organizational brands (Dowling 2002), but also towards
evaluation of a destination brands (Cai 2002; Morgan and Pritchard
2002; Olins 2002; Konecnik 2004). The entry of many new destinations
into the market is forcing all destinations to compete in the battle to win
more tourists (Konecnik 2002). The role of smaller destinations is even
more emphasized because the vast majority of tourists (70%) visit just
Dr Maja Konecnik is Assistant Professor at the FaCulty of EConomiCs,
University of Ljubljana, Slovenia.
Dr Mitja Ruzzier is an Assistant LeCturer at the FaCulty of EConomiCs,
University of Ljubljana, Slovenia.
ten main countries (Morgan et al. 2002). To achieve their goals, desti-
nations are doing their best to remain competitive in the international
market (Baloglu and McCleary 1999; Gomezelj Omerzel 2006). Within
the last few years, attention has been oriented towards the development
of a destination brand, which should have a strong and unique position
in the mind of potential tourists.
Many empirical studies about tourism destination evaluation stress
the important role of previous visitation, which is treated as an improve-
ment (Fakeye and Crompton 1991; Milman and Pizam 1995; Baloglu and
McCleary 1999) or realistic (Hu and Ritchie 1993; Mackay and Fesen-
maier 1997) factor in destination evaluation. Regardless of its positive or
even negative effect on the tourist's evaluation of a destination, previ-
ous visitation was recognized as an important factor in the process of
tourists' evaluation of a destination brand.
The main purpose of this paper is to present the customer's perspec-
tive on destination brand evaluation and to confirm (or reject) the in-
fluence of previous visitation on the process of brand evaluation. The
evaluation of a tourism destination brand Slovenia in the minds of Ger-
man respondents will serve us as an investigated example.
Customer's Evaluation of a Tourism Destination
Customer's evaluation of a tourism destination phenomenon has at-
tracted enormous interest among tourism research lines. Within this
demand-side perspective on the tourism destination phenomenon, mos-
tly the concept of tourism destination image has been investigated (Hunt
1975; Crompton 1979; Gartner 1986; 1993; Echtner and Ritchie 1993;
Baloglu and McCleary 1999; Baloglu 2001; Brezovec 2001; Brezovec et
al. 2004; Gallarza et al. 2002; Pike 2002). Although the numerous em-
pirical studies have stressed the important role of the image concept
in destination brand evaluation, the marketing researchers argue that a
customer's perspective on the brand equity phenomenon should incor-
porate a more comprehensive measure for its evaluation (Faircloth et al.
2001; Yoo and Donthu 2001).
The so proposed customer's perspective on brand evaluation was in-
troduced through the concept of customer-based brand equity (Aaker
1991; Keller 1993; Yoo and Donthu 2001). As a relatively newly devel-
oped construct, the concept has attracted great interest in the last fif-
teen years (Barwise 1993; Vazquez et al. 2002). Till now, no consensus
has been reached as to which dimensions constitute the customer's per-
spective on brand. On the contrary, there is some evidence leading to
an adjustment of brand equity dimensions. These steps are evident in
analyses (Faircloth et al. 2001; Yoo and Donthu 2001) based on Aaker
(1991) and Keller's (1993) categorization. Combining both approaches of
the leading authors; we follow the line of researchers (Aaker 1991; Yoo
and Donthu 2001) who claim that the customer's evaluation of a brand
comprises awareness, image, quality and loyalty dimensions.
Similarly as in the previous group of authors, we argue that a cus-
tomer's (tourist's) perspective on the tourism destination phenomenon
consists of tourism destination awareness, tourism destination image
and quality dimensions, as well as tourist's loyalty toward the investi-
gated destination. Numerous studies have already proposed a spectrum
of variables which incorporates a dimension of the tourism destination
image concept (Gartner 1989; Echtner and Ritchie 1993; Gallarza et al.
2002). During our review we came to the conclusion that the previous
tourism destination image studies could possibly also include a quality
dimension (Konernik 2005a).
In contrast to numerous studies dealing with the tourism destina-
tion image concept (which also include a quality dimension), the other
two dimensions have been less intensively studied. Tourism destination
awareness has mostly been investigated within the topic of the desti-
nation selection process (Woodside and Sherrell 1977; Moutinho 1987).
These studies argue that awareness is a first and necessary step lead-
ing to destination visitation, but it is not a sufficient one (Milman and
Pizam 1995). Tourism destination loyalty has only attracted some in-
terest within the tourism destination brand. Oppermann (2000) shares
the same opinion in his seminal work on tourism destination loyalty, in
which he argues that the loyalty dimension should also not be neglected
for a tourism destination. Some previous studies about a tourism des-
tination have only partly incorporated the loyalty dimensions (Gitelson
and Crompton 1984; Fakeye and Crompton 1991; Bigne et al. 2001).
Hyphothesis
The previous visitation phenomenon has attracted significant attention
within tourism destination investigations. There are at least three content
areas for investigation. First, the topic has been extensively investigated
in connection with a tourism destination's image (Hunt 1975; Fakeye and
Crompton 1991; Hu and Ritchie 1993; Milman and Pizam 1995; Baloglu
and McCleary 1999; Baloglu 2001); second, it has been recognized as
an important dimension in the content of tourist information sources
(Gartner 1993); and, third, it represents one part of the whole destina-
tion choice process (Woodside and Sherrell 1977; Woodside and Lysonski
1989; Moutinho 1987; Um and Crompton 1990; Goodall 1993). However,
it is not surprising that expressions such as direct or previous experi-
ence (Baloglu 2001), internal information-search process (Gitelson and
Crompton 1983; Gartner and Bachri 1994) or significative stimuli (Um
and Crompton 1990) are treated as synonyms. Although the majority of
empirical studies treated previous visitation as an improvement factor
in the formation of a tourism destination image (Fakeye and Cromp-
ton 1991; Milman and Pizam 1995; Baloglu and McCleary 1999; Konec-
nik 2002; 2005b), some researchers have recognized it as a realistic factor
(Hu and Ritchie 1993; Mackay and Fesenmaier 1997) in image evalua-
tion. Image as a realistic factor could either improve the visitor's opinion
about a destination (in order the destination exceed his expectations) or
even negatively influence his/her opinion about the visited destination
(in case personal expectations regarding the visited destination were not
met). Without taking into consideration which group of authors we are
following, previous visitation has been recognized as an important factor
in a tourist's image-formation process. In addition, previous studies also
confirm its important role in the tourism destination awareness dimen-
sion and a tourist's interest in visiting a destination (Milman and Pizam
1995).
Hypothesis 1: Tourists' previous visitations significantly influence their
perceptions of the destination evaluation.
Hypothesis ia: Tourism destination awareness differs between tourists
who have visited an investigated destination compared to those who
have not.
Hypothesis ib: Tourism destination image differs between tourists
who have visited an investigated destination compared to those
who have not.
Hypothesis 1c: A tourist's perceived quality of destination differs be-
tween tourists who have visited an investigated destination com-
pared to those who have not.
Hypothesis id: Tourism destination loyalty differs between tourists
who have visited an investigated destination compared to those
who have not.
table 1 Number of international tourist arrivals and overnights of tourists
from abroad in 2003 for Slovenia
Country	Tourist arrivals	Market share (%)	Overnights oftourists	Market share (%)
Germany	229372	16.7	813241	19.5
Italy	288507	21.0	729181	17.5
Austria	201367	14.7	690827	16.5
Croatia	93639	6.8	264827	6.3
Netherlands	46764	3.4	195356	4.7
Switzerland	22514	1.6	62165	1.5
Other	490974	35.8	1419788	34.0
Total	1373137	100.0	4175385	100.0
Source: Statistical Office of the Republic of Slovenia, 2004.
Methodology
data gathering
Data were collected using the computer-assisted telephone interviewing
(cati) method, which was selected due to the method's possibility of
ensuring simple random samples (srs). Individuals aged older than 18
years were invited to participate in the study. These individuals represent
the potential tourist population of our analysed brand Slovenia. In 2003,
German tourists had around a 17% market share in foreign tourists' ar-
rivals and around a 20% market share in foreign overnight stays (table
1), which represented the most important group of tourists in Slovenia.
The research was conducted in June and July 2003. The telephone inter-
views were performed by a German professional research agency. A total
of 1437 people were contacted and the response rate was 42.9%. The final
sample consisted of 402 respondents.
the operationalisation of the variables
and the study instrument
The operationalisation of variables followed previous research find-
ings and suggestions for the development of scales (Churchill 1979).
To operationalise the awareness variables, the suggestions by Milman
and Pizam (1995) as well as Yoo and Donthu (2001) studies were em-
ployed. The tourism destination image, which also included the quality
dimension, has been the subject of many empirical studies in tourism
research. Therefore, the operationalisation of image and quality vari-
ables was achieved according to the suggestions of leading authors in
this area: Hunt (1975), Echtner and Ritchie (1993), Gartner (1986; 1989),
Baloglu and McCleary (1999), Gallarza et al. (2002). Finally, earlier re-
search findings about the brand loyalty dimension (Oliver 1996) and its
application to the tourism destination level (Fakeye and Crompton 1991;
Oppermann 2000; Bigne et al. 2001) were employed in operationalis-
ing the variables for tourism destination loyalty. Content analyses from
the qualitative research were an additional source used for this purpose.
First, we relied on findings from the in-depth interviews with poten-
tial tourists, which divided traditionally proposed image attribute-based
variables into variables presenting the image and the quality dimension.
Second, the results of the qualitative experience survey research among
destination managers and marketers were considered. Finally, scale re-
finement in line with experts' opinions represents an additional source
of information (Konecnik 2005a).
The study instrument includes questions about the four proposed
dimensions (awareness, image, perceived quality and loyalty) for the
tourism destination Slovenia as well questions describing the travel pro-
files of respondents and their socio-demographic characteristics. The
study instrument only employed closed questions. For each proposed di-
mension a set of variables was employed (five awareness, sixteen image,
ten quality and four loyalty variables for investigating each of the four
proposed dimensions). The variables are measured on a unipolar 5-point
Likert scale, whereby 1 = 'strongly disagree' and 5 = 'strongly agree'. All
scales included a neutral mean. Generally, all variables were measured in
positive directions. Only three variables (one for the awareness dimen-
sion, the second for image and the third for the quality dimension) had
a negative direction (Spector 1994). In further analysis, these variables
were properly reverse scored. Respondents had the possibility to choose
one of several answers offered.
data analysis
With the aim of presenting the Germans' perception about the proposed
dimension for Slovenia as a tourism destination, univariate statistics
(means and standard deviations) for each of the proposed variables of
dimensions will be presented. In this example, analyses will be done on
the whole sample of respondents. Further, all respondents will be sep-
arated into 2 conceptual groups, regarding the dividing criteria needed
for hypotheses testing. The first group of respondents represents those
Germans who had already visited Slovenia in the past (so called visitors),
while the second group of respondents represents those Germans, who
had not visited Slovenia in the past (so called non-visitors). For confir-
mation or rejection of the proposed hypotheses, the independent sam-
ple t-test procedure (Sharma 1996; Rovan and Turk 2001) will be used
to show significant differences for each investigated variable of four pro-
posed dimensions: awareness, image, perceived quality and loyalty. In
these analyses, because the significance value for the Levene test was high,
the equality of variances was assumed. We will present the mean for each
group of respondents, t-tests between the groups and the statistically sig-
nificance only for those variables where statistical significant differences
between the investigated groups will appear.
Results
sample characteristics
The final sample consists of 402 German respondents. We were able to
ensure simple random samples (srs) due to the way of interviewing
(cati method). Therefore, we suspect that the socio-demographic char-
acteristics of respondents (table 2) reflect the characteristics of the whole
population in the German markets. Most German respondents came
from the Nordrhein-Westfalen area (21%), followed by Bayern (17%)
and Baden-Württemberg (11%). The majority of them have finished sec-
ondary school (almost 30%), whereas the other educational classes are
almost equally represented. Somewhat less than 60% were employed,
with average incomes from €1500 to €2000 (17%). Most (75%) of them
were older than 35 years. Approximately 54% of the respondents were
female, and 46% were male.
The results of personal experiences with Slovenia indicate that the ma-
jority of Germans are aware of Slovenia as a tourism destination, because
almost 94% of them had already heard of Slovenia (n = 376). By contrast,
only 26% of respondents (n = 98) who had heard of Slovenia had visited
Slovenia in the past, which indicates that only one-quarter of German re-
spondents (24.3%) have personal experience with Slovenia as a tourism
destination. On average, they had visited Slovenia once (10%) or two
times (7.5%) in the period of the preceding two to five years (8.7%). Many
of these respondents (8.4%) visited Slovenia over ten years ago.
Because in our analysis we decided to employ only those German re-
spondents who had heard of Slovenia, the opinions of 376 Germans will
be used in our presentation of the proposed dimensions. At the same
time we will separate the German respondents who had heard of Slove-
nia into two groups: 1) those who had already visited Slovenia in the
table 2 Sociodemographic characteristics of German respondents
Sociodemographic characteristics	(1)	(2)
Area		
Schleswig-Holstein	3.2	3.2
Hamburg	2.0	5.2
Niedersachsen	10.7	15.9
Bremen	1.2	17.2
Nordrhein-Westfalen	20.9	38.1
Hessen	8.7	46.8
Rheinland-Pfalz	2.7	49.5
Baden-Württemberg	11.4	60.9
Bayern	16.9	77.9
Saarland	2.0	79.9
Berlin	3.5	83.3
Brandenburg	3.0	86.3
Mecklenburg-Vorpommern	0.7	87.3
Sachsen	5.0	92.0
Sachsen-Anhalt	3.5	95.5
Thueringen	4-5	100.0
Education		
Primary school (9 years)	25.9	25.9
Secondary school	29.9	55.7
Grammar school	21.6	77.4
University degree	22.1	99.5
No answer	0.5	100.0
Continued on the next page		
past (visitors) and 2) those respondents who had not visited Slovenia in
the past (non-visitors, see table 3). The demographic profile is presented
in an aggregated nature rather than by separating two proposed groups
of respondents, because no significant differences were found between
their sociodemographic characteristics. In addition, the correlation ma-
trix between variable previous visitation and other variables (education,
employment status, personal income, age, gender and geographic area)
was employed (table 4). The results imply that none of the correlations
between investigated variables was statistically significant, which indi-
Continued from the previous page
Sociodemographic characteristics	(1)	(2)
Employment status
Employed	58.5	58.5
Self-employed	5.7	64.2
Student/scholar	5.0	69.2
Retired	15.9	85.1
Housewife/Unemployed	13.9	99.0
No answer	1.0	100.0
Personal income
< €500	8.2	8.2
€500-1000	15.4	23.6
€1000-1500	15.7	39.3
€1500-2000	16.9	56.2
€2000-2500	8.2	64.4
€2500-3000	4.0	68.4
€3000-3500	1.2	69.7
€3500-4000	2.2	71.9
> ^€4000	2.7	74.6
Without personal income	10.0	84.6
No answer	15.4	100.0
Age
18-24 years	6.7	6.7
25-34 years	18.9	25.6
35-44 years	27.6	53.2
45-54 years	21.1	74.4
55-64 years	14.4	88.8
More than 65 years	10.7	99.5
No answer	0.5	100.0
Gender
Male	46.3	46.3
Female	53.7	100.0
Column headings as follows: (1) percentage, (2) cumulative percentage.
cates, that the only difference between the two groups is determined by
the variable of previous visitation.
table 3 Sample characteristics of German's respondents
Characteristic		Yes	No
Have heard of Slovenia as a tourism destination Have visited Slovenia as a tourism destination		376 98	26 278
Notes: n = 402.			
table 4 Correlation matrix between previous visitation and other variables			
Variable pv e es	pi	a g	ga
Pearson correlation 1 0.099 -0.031 Sig. (2-tailed) - 0.055 0.544	0.038 0.466	0.099 -0.048 0.055 0.358	0.021 0.685
Column headings as follows: pv - previous visitation, e - education, es - employment
status, pi - personal income, a - age, g - gender, ga - geographical area. Notes: n = 376.
analyses of dimensions (awareness, image, quality
and loyalty) and the influence of previous visitation
on dimensions' evaluation
German respondents stated they had heard of Slovenia as a tourism des-
tination (mean 4.51), which was the best evaluated awareness variable
among German respondents (table 5). A much lower level of Slovenia's
awareness in the mind of German respondents was recognized in other
four investigated awareness variables. Germans had agreed only to some
extent that they can recognize the name of Slovenia among other desti-
nations (mean 3.11) or imagining it in their mind (mean 3.03). On the
contrary, they have many problems in quick recalls of some of Slovenia's
characteristics (2.22) and especially in recalling the symbol or logo of
Slovenia as a tourism destination (mean 1.51).
table 5 Awareness variables for Slovenia as a tourism destination
for German respondents
Variable	m	sd
I have heard of Slovenia.	4.51	0.90
I can recognize the name of Slovenia among other destinations.	3.11	1.45
I have difficulty imagining Slovenia in my mind (r).	3.03	1.56
Some characteristics of Slovenia come quickly to mind.	2.22	1.38
I can recall the symbol or logo of Slovenia as a tourism destination.	1.51	1.10
Notes: m = mean, sd = standard deviation. Variable scale: from 1 disagree, 5 = strongly agree); n = 376.	to 5 (1	= strongly
Variable	(1)	(2)
	M	sd	M	sd	T-test	Sig.
Heard of Slovenia	4.73	0.67	4.42	0.96	2.95	0.003^
Name of Slovenia	3.93	1.23	2.82	1.41	6.90	0.000a
Characteristics of Slovenia	3.44	1.37	1.78	1.10	11.95	0.000a
Imagining Slovenia	3.80	1.49	2.77	1.51	5.85	0.000a
Symbol or logo of Slovenia	1.89	1.40	1.38	0.95	3.99	0.000a
Column headings as follows: (1) Germans who have visited Slovenia in the past (n = 98);
(2) Germans who have not visited Slovenia in the past (n = 278).
Notes: a significant at < 0.001,ß significant at < 0.01, m = mean, sd = standard deviation,
T-test = independent sample t-test (equal variances assumed). Variable scale: from 1 to 5
(1 = strongly disagree, 5 = strongly agree).
Previous visitation to Slovenia (table 6) has significantly improved the
awareness perception of Slovenia as a tourism destination in the mind
of German respondents. Statistically significant differences between re-
spondents who have visited Slovenia in the past compared to respon-
dents, who have not visited it, were found in all five awareness variables.
Except for the variable of hearing of Slovenia as a tourism destination,
all other investigated significant differences were confirmed at the level of
0.000, which indicates a strong influence of previous visitation on aware-
ness dimension, especially in those awareness variables which indicate a
higher level of brand awareness (Aaker 1991).
The results indicate that German respondents hold a relatively neu-
tral opinion about Slovenia's image as a tourism destination (table 7).
It is quite hard to say that Germans' perceptions about Slovenia's image
variables are positive because none of the investigated image variables
attracted a mean of at least 4 on the scale from 1 to 5. On average, they
mostly agreed that Slovenia's people are friendly (mean 3.99), Slovenia
has pleasant weather (mean 3.93) and beautiful nature (mean 3.91), and
especially beautiful mountains and lakes (mean 3.64). By contrast, they
had doubts about modern health resorts (mean 2.58) in Slovenia, its po-
litical stability (mean 2.69), Slovenia's good nightlife and entertainment
(mean 2.75) and partly also about its exciting atmosphere (mean 2.89).
Although the mean scores of the latter variables were below 3, we can
hardly talk of any negative perceptions in any of Slovenia's image vari-
ables with German respondents.
table 7 Image variables for Slovenia as a tourism destination
for German respondents
Variable	M	sd
Friendly people	3.99	0.80
Pleasant weather	3.93	0.81
Beautiful nature	3.91	0.99
Beautiful mountains and lakes	3.64	1.03
Relaxing atmosphere	3.59	0.89
Good opportunities for recreation activities	3.51	0.98
Interesting historical attractions	3.42	1.07
Poor opportunities for adventures (r)	3.40	1.17
Lovely towns and cities	3.39	1.02
Interesting cultural attractions	3.38	0.98
Good beaches	3.19	1.21
Good shopping facilities	2.98	0.99
Exciting atmosphere	2.89	0.93
Good nightlife and entertainment	2.75	1.10
Political stability	2.69	1.05
Modern health resorts	2.58	1.04
Notes: m = mean, sd = standard deviation. Variable scale: from 1 to 5 (1 = strongly
disagree, 5 = strongly agree).
Previous visitation to Slovenia (table 8) improved Germans' opinions
about its image variables. However, German respondents who have vis-
ited Slovenia in the past shared positive opinions about its beautiful na-
ture and friendly people. The mean score of both attributes was higher
than 4, which indicates that previous visitation has a strong influence on
Slovenia's image perception. Previous visitation has the biggest influence
on Germans' perceptions of Slovenia's beautiful nature, mountains and
lakes, good opportunities for recreation activities, as well as its political
stability.
Germans perceived Slovenia's quality dimension (table 9) quite badly,
especially due to their intrinsic quality variables. The results show that
more than half of the proposed intrinsic quality variables for Slovenia
were evaluated with a mean score below 3. The quality of infrastruc-
ture (mean 2.66) in Slovenia was the worst perceived variable in the
minds of German respondents, followed by Slovenia's level of personal
safety (mean 2.73) and its quality of accommodation (mean 2.82). Ger-
Variable (1)			(2)		
M	sd	M	sd	T-test	Sig.
Beautiful nature 4.31	0.78	3.74	1.02	4.88	0.000a
Beautiful mountains, lakes 3.95	0.93	3.52	1.04	3.49	0.001a
Lovely towns and cities 3.57	1.03	3.32	1.02	2.03	0.043y
Recreation activities 3.80	0.87	3.40	0.99	3.44	0.001a
Friendly people 4.14	0.69	3.93	0.82	2.14	0.033y
Political stability 3.06	1.09	2.56	1.00	3.94	0.000a
Relaxing atmosphere 3.76	0.90	3-53	0.87	2.18	0.0307
Column headings as follows: (1) Germans who have visited Slovenia in the past (n = 98); (2) Germans who have not visited Slovenia in the past (n = 278). Notes: a significant at < 0.001; y significant at < 0.05. m = mean, sd = standard deviation, T-test = independent sample t-test (equal variances assumed). Variable scale: from 1 to 5 (1 = strongly disagree, 5 = strongly agree).					
table 9 Quality variables for Slovenia for German respondents	as a	tourism destination			
Variable				M	sd
Low prices of tourism services				3.98	0.74
Appealing local food (cuisine)				3.78	0.83
Good value for money				3.73	0.79
Few problems with communication				3.29	1.18
Unpolluted environment				3.13	1.00
High level of cleanliness				2.99	0.83
Low quality of services (r)				2.86	1.04
High quality of accommodation				2.82	0.87
High level of personal safety				2.73	0.91
High quality of infrastructure				2.66	0.89
Notes: m = mean, sd = standard deviation. Variable scale: from 1 to 5 (1 = strongly
disagree, 5 = strongly agree).
mans have much higher opinions about Slovenia's local food, which rep-
resented the best evaluated intrinsic quality variable. By contrast, data
showed respondents' better opinions about Slovenia's extrinsic quality
variables. However, this is especially stressed in the evaluation of Slove-
nia's prices of tourism services.
table 10 Statistically significant differences in Slovenia's quality variables
due to previous visitation
Variable		(1)		(2)		
	m	sd	m	sd	T-test	Sig.
Cleanliness	3.15	0.84	2.93	0.82	2.21	0.0287
Personal safety	3.01	0.87	2.63	0.90	3.51	0.001a
Communication	3-13	1-13	2.76	0.99	2.94	0.003^
Column headings as follows: (1) Germans who have visited Slovenia in the past (n = 98);
(2) Germans who have not visited Slovenia in the past (n = 278).
Notes: a significant at < 0.001, ß significant at < 0.01, y significant at < 0.05. m = mean,
sd = standard deviation, T-test = independent sample t-test (equal variances assumed).
Variable scale: from 1 to 5 (1 = strongly disagree, 5 = strongly agree).
table 11 Loyalty variables for Slovenia as a tourism destination
for German respondents
Variable	m s d
I would like to visit Slovenia in the future.	3.21 1.33
I intend to recommend Slovenia to my friends.	2.86 1.34
Slovenia provides more benefits than other similar European	2.41 0.99
destinations.
Slovenia is one of the preferred destinations I want to visit.	2.30 1.14
Notes: m = mean, sd = standard deviation. Variable scale: from 1 to 5 (1 = strongly
disagree, 5 = strongly agree).
Previous visitation to Slovenia (table 10) improved Germans' percep-
tions about Slovenia's personal safety (statistically significant at the 0.001
level), their communication possibilities with Slovenians (statistically
significant at the 0.01 level) as well as Slovenia's level of cleanliness.
From all proposed loyalty variables, Germans (table 11) agreed only
with the statement that they would like to visit Slovenia in the future
(mean 3.21). Because this loyalty variable significantly differs from the
neutral mean (3), this could imply a possible future visit to Slovenia by
German respondents. Other three loyalty variables were evaluated with
a mean score less than 3.
Germans who have visited Slovenia in the past agreed significantly
more about their future visitation of Slovenia and its possible recom-
mendation to their friends and relatives than those Germans who have
never been to Slovenia (table 12). Both variables of so called attitudi-
nal loyalty measures were evaluated with a mean score higher than the
Variable	(1)			(2)		
	M	sd	M	sd	T-test	Sig.
Slovenia provides more benefits	2.58	1.02	2.34	0.98	1.97	0.0497
Visit Slovenia in the future	3.60	1.21	3.06	1.34	3.50	0.001a
Recommend Slovenia	3.28	1-33	2.68	1.30	3-71	0.000a
Column headings as follows: (1) Germans who have visited Slovenia in the past (n = 98);
(2) Germans who have not visited Slovenia in the past (n = 278).
Notes: a significant at < 0.001, y significant at < 0.05. m = mean, sd = standard deviation,
T-test = independent sample t-test (equal variances assumed). Variable scale: from 1 to 5
(1 = strongly disagree, 5 = strongly agree).
neutral mean (3). Further, significantly better evaluation about Slove-
nia's benefits in comparison to other similar European destinations was
recognized by those Germans who have visited Slovenia in the past.
Discussion and Conclusion
German respondents are aware of Slovenia as a tourism destination, al-
though they have still problems in their quick recall of some of Slovenia's
characteristics. Further, they hold mostly neutral or even slightly posi-
tive opinions about Slovenia's image. On average, they perceive Slovenia
as a country of friendly people and pleasant weather with beautiful na-
ture, especially due to its beautiful mountains and lakes. In addition, they
shared much worse opinions about Slovenia's quality dimension, espe-
cially about Slovenia's intrinsic quality variables: infrastructure, personal
safety and its accommodation. By contrast they evaluated Slovenia's ex-
trinsic quality variables more positively. All together, this perception can
also be presented in Germans' attitudinal loyalty dimension about Slove-
nia. The results here indicated only a slight attitudinal loyalty of Ger-
mans, mainly through their interest in visiting Slovenia in the future.
Consistent with previous research we found that previous visitation
(table 13) plays an important role in customer's evaluation of a tourism
destination. Regarding the results of Germans' evaluation of Slovenia as a
tourism destination, we can conclude that previous visitation to Slovenia
improved Germans' awareness of Slovenia as well as their loyalty attitude
to the investigated destination. Because we have confirmed the statisti-
cally significant differences in all investigated variables for awareness di-
table 13 The influence of previous visitation on the customer's evaluation
of a tourism destination
Hypo-	Number of variables (statistically	Results	
thesis	significant differences)		
H1	Previous visitation ^ Customer's evaluation of a tourism destination		Confirmed
H1a	Previous visitation ^ Awareness	5v	Confirmed
H1b	Previous visitation ^ Image	7v	Partly confirmed
H1c	Previous visitation ^ Perceived quality	3v	Partly confirmed
H1d	Previous visitation ^ Loyalty	3V	Confirmed
Total number of: awareness variables - 5, image variables - 16, quality variables - 10,
loyalty variables - 4.
mension, and in three out of four loyalty variables, we can confirm both
of the proposed sub hypotheses (H1a and H1d). Further, previous visita-
tion to Slovenia has also some influence on Germans' perception about
Slovenia's image (sub hypothesis H1b) and quality (sub hypothesis h1c)
dimension. Due to a previous visit, Germans have a better opinion about
the beauty of Slovenia's nature, its mountains and lakes, towns and cities
as well as its recreational activities. Previous visitation improved also the
Germans' perceptions about the political stability in Slovenia, its relax-
ing atmosphere and peoples' friendliness. In addition, due to previous
visitation, Germans evaluated better also three intrinsic quality variables
for destination Slovenia. Therefore we can conclude that there is also
some influence of Germans' previous visitation on Slovenia's image and
quality perception, which indicates, that we can partly confirm also the
sub hypotheses H1b and H1c. Combining the results of all four proposed
sub hypotheses, we came to the conclusion that hypothesis H1 can be
confirmed, which implies on the influence of previous visitation on cus-
tomer's evaluation of the tourism destination. However, due to the lim-
ited number of items (variables) confirmed for quality (three out of ten)
and image (seven out of sixteen) dimension, the results indicated that
previous visitation had an influence only on some quality and image pro-
posed variables. But we cannot generalize that previous visitation had an
influence in evaluation of our proposed image and quality dimension in
general.
The evaluation of quality dimension by Germans who had visited
Slovenia in the past, in comparison to those Germans who had not vis-
ited it in the past, was the most unexpected conclusion of our research
among German potential tourists. We had expected that previous vis-
itation would improve the opinion about Slovenia's quality dimension
more, especially due to the fact that the quality variables were evaluated
quite badly. This could be probably also explained by the sample char-
acteristics. Many of the German respondents had visited Slovenia over
ten year ago. According to our opinion, the major quality improvements
have been made during the last ten years, which could imply that the
real quality level has not been perceived by those respondents who had
visited Slovenia many years ago.
The comparison of those results with the results of previously made
research in 2001 about Slovenia's image as a tourism destination (Konec-
nik 2002; 2005b) indicates similarities in the conclusions. Our main con-
clusion - that previous visitation is an important factor in customer's
evaluation of a tourism destination - was also confirmed in this research.
The target group was tourism representatives (and not potential tourists
in general), and the questions included only the destination image and
quality dimension variables (awareness dimension was included as the
filter question at the beginning, while loyalty dimension was not inves-
tigated). Representatives who had visited Slovenia in the past, had in
common a better opinion about its image and quality dimension than
did the group of experts who had not visited Slovenia. In contrast to
the only slight improvement in Slovenia's quality evaluation among Ger-
mans' visitors in our research (statistically significant differences were
confirmed in three out of ten proposed quality variables), influence of
previous visitation on Slovenia's quality perception from the tourism
representatives' point of view was perceived as being much stronger. Rep-
resentatives who had visited Slovenia in the past, evaluated mostly all of
the investigated quality variables significantly better than those represen-
tatives who had never visited Slovenia till that time.
As far as previous visitation is treated as a realistic factor in destina-
tion evaluation (Hu and Ritchie 1993; Mackay and Fesenmaier 1997), the
results of both investigations should be considered in further marketing
strategies for destination Slovenia. Because previous visitation was con-
firmed as an improvement factor in Slovenia's evaluation, this could be
a sign that there exists a gap between what is offered and what is per-
ceived. Marketing campaigns could for example stress the issues regard-
ing Slovenia's political stability and personal safety, as two of the vari-
ables which have been significantly better evaluated by those Germans
who visited Slovenia in the past. Beside the consideration of different
perception among potential tourist groups familiar with Slovenia and
those not familiar with it, another important suggestion should be de-
rived from the characteristics of Slovenia's identity. The combination of
the characteristics stemming from the identity of Slovenia and results
of the presented researches should represent a good base for develop-
ing further marketing strategies on foreign markets. Because the quality
dimension was perceived relatively badly by the Germans' respondents,
further marketing strategies on German markets should stress also the
high quality level of Slovenia's tourism offer, which has improved con-
siderably during the last few years.
Although the presented paper provides a contribution at the theoret-
ical, empirical and also practical level, there are still many further re-
search opportunities. If we were able to enlarge the sample size of the
visitors, it would be reasonable to investigate not only the phenomenon
of previous visitation, but also the phenomenon of repeat visitation. In
this case it would be reasonable to investigate whether the perception
of the destination differs between tourists who have visited a country
several times and those tourists who have visited a country fewer times.
This differentiating criterion for visitor's separation should be made at
some relatively high number of previous visitations, because Fakeye and
Crompton in their study (1991) came to conclusion that the majority
of changes occur during the first visitation. Further, with an increasing
number of visits, tourists build up a more complete opinion about the
specific tourism destination, which can also influence their perception
of destination evaluation. In addition, it will be reasonable to repeat the
same study also on other main target markets for Slovenia as a tourism
destination, as Italy, Austria and Great Britain are. Armed with those re-
sults, as well as with the affirmation of Slovenia's identity, more efficient
marketing strategies on main target markets could be developed.
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Competitiveness of Slovenia
as a Tourist Destination
Doris Gomezelj Omerzel
In an increasingly saturated market the fundamental task for the desti-
nation management, is understanding how tourism destination com-
petitiveness can be enhanced and sustained. Competitiveness of a
tourist destination is an important factor that positively influences the
growth of the market share. Therefore tourism managers have to iden-
tify and explore competitive advantages and analyse the actual com-
petitive position. There exist different approaches that model the com-
petitiveness (Ritchie and Crouch 1993; Evans and Johnson 1995; Hassan
2000; Kozak 2001; De Keyser and Vanhove 1994; Dwyer, Livaic and Mel-
lor 2003). Among all we follow the framework (Dwyer, Livaic and Mel-
lor 2003), which was developed in a collaborative effort by researchers
in Korea and Australia and presented in Sydney in 2001, and conduct an
empirical analysis on Slovenia as a tourist destination. The aim of this
paper is to present the model of destination competitiveness. The paper
presents the results of a survey, based on indicators associated with the
model, to determine the competitiveness of Slovenia as a tourist desti-
nation.
Key Words: tourist destination, competitiveness, competitiveness
indicators, tourism stakeholders, added value
jel Classification: M31, M39
Introduction
We have entered the 21st century and realised that many new oppor-
tunities await us in the tourism industry. The advent of globalisation
has coincided with a boom in the tourism sector and this has presented
many new challenges. Free movement of capital and trade rules are the
real forces behind globalisation. In the context of tourism, globalisa-
tion means dramatic increases in the number of destinations and also in
distances among them. International tourism conditions have changed
drastically and it has become necessary to address these challenges in or-
der to remain competitive in the tourism market. Development of new
tourism products and destinations is one of the manifestations of the
tourism sector shift towards increased productivity (Fadeeva 2003).
Doris Gomezelj Omerzel is a Lecturer at the Faculty of Management
Koper, University of Primorska, Slovenia.
Competitiveness is a broad concept, which can be observed from dif-
ferent perspectives: through products, companies, branches of the econ-
omy or national economies, in the short run or the long run. The defi-
nitions offered in the literature provide both a micro and macro conno-
tation of competitiveness. From a macro perspective competitiveness is
a national concern and the ultimate goal is to improve the real income
of the community. From a micro perspective, it is seen as a firm level
phenomenon. In order to be competitive, any organisation must provide
products and services, which must satisfy the never ending desires of the
modern consumer. For such products and services, customers or clients
are willing to pay a fair return or price.
Let us extend the concept of comparative and competitive advan-
tage to international tourism. Comparative advantage seems to relate
to things like climate, beautiful scenery, attractive beaches, wildlife etc.
Comparative factors are close to primary tourism supply (natural, cul-
tural and social attractiveness). We can never reproduce them with the
same attractiveness. On the other hand, competitive advantage relates
to tourism infrastructure, the quality of management, the skills of the
workforce, government policy etc. (Ritchie and Crouch 1993). Competi-
tive factors refer to secondary tourism supply. They can be produced and
improved by the tourist firms or governmental policy. Both kinds of fac-
tors are co-dependent. Without secondary tourism supply the tourism
destination is not able to sell attractions, e. g. primary tourism supply on
a tourist market, and without primary supply the tourism infrastructure
is not useful.
To understand the competitiveness of tourist destinations, we should
consider both the basic elements of comparative advantage as well as the
more advanced elements that constitute competitive advantage. Where
comparative advantages constitute the resources available to a destina-
tion, competitive advantages mean a destination's ability to use these re-
sources effectively over the long-term. Destination with a wealth of re-
sources may sometimes not be as competitive as a destination with a
lack of resources. A destination that has a tourism vision, shares the vi-
sion among all the stakeholders, has management which develops an ap-
propriate marketing strategy and a government which supports tourism
industry with an efficient tourism policy, may be more competitive than
one that has never asked what role tourism is to play in its economy
(Crouch and Ritchie 1999). The most important is the ability of the
tourism sector to add value to its products. The primary attractiveness
can be a source for higher value added, but the value is only created
through performing activities. It can happen that the comparative ad-
vantage is lost due to the un-competitive secondary tourism supply. The
support of tourism stakeholders is essential for successful development
and sustainability of tourism and could help to improve destination
competitiveness. As a result, the tourism destination will receive many
benefits from enhanced tourism destination competitiveness.
Despite the extensive literature on competitiveness, no clear definition
or model for discussing tourism destination competitiveness has yet been
developed. There is a fundamental difference between the nature of the
tourism product and the more traditional goods and services. A model
of competitiveness that focuses specifically on the tourism sector is based
on the nature of the tourism offering product, which from a destination
perspective can be regarded as 'an amalgam of individual products and
experience opportunities that combine to form a total experience of the
area visited' (Murphy, Pritchard and Smith 2000). A destination compet-
itiveness appears to be linked to the destination's ability to deliver goods
and services that perform better than other destinations. A large number
of variables are linked to the notion of destination competitiveness. They
can be quantitative, such as visitor numbers, market share, tourist expen-
diture, employment, value added by the tourism industry, or qualitative
measured variables, such as richness of culture and heritage, quality of
tourism services, etc.
Poon (1993) suggested four key principles which destinations must fol-
low if they are to be competitive: put the environment first, make tourism
a leading sector, strengthen the distribution channels in the market place
and build a dynamic private sector. Go and Govers (1999), in a study of
conference site selection, measured a destination's competitive position
relative to other destinations along seven attributes - facilities, accessi-
bility, quality of service, overall affordability, location image, climate and
environment, and attractiveness. In any case, these attributes are based
specifically on the conventions sector of tourism. De Keyser and Van-
heove (1994) analysed the competitiveness of eight Caribbean islands
and they included transport system determinants in their model. The
model and its four determinants proposed by Porter (1990) were utilised
as a fundamental source for explaining the determinants of destination
competitiveness, proposed by Crouch and Ritchie (1999). According to
them, the primary elements of destination appeal are essential for des-
tination comparative advantage and can be key motivational factors for
tourists' visits. Physiography, culture and history, market ties, activities
and events are examples of those resources. Furthermore, Crouch and
Ritchie (1999) expanded the model on supporting factors and resources
as secondary effective sources of destination competitiveness, and par-
ticularly on destination policy, planning and development and on the
destination management.
All the above mentioned models served as a foundation for the de-
velopment of the so called Integrated model, which was used for our
research. From a perspective of our study, this model was the most rel-
evant. It brings together the main elements of destination competitive-
ness, it provides a realistic display of the linkages between the various el-
ements, the distinction between inherited and created resources seemed
to be useful, and the category Management - which was the important
issue of our research - included all relevant determinants that shape and
influence a destination is competitive strength.
Slovenian tourism competitiveness has been insufficiently analysed
and the results have not been used for an efficient economic tourism pol-
icy. The last study on the competitiveness of Slovenia as a tourist destina-
tion was done in 1998 by Sirše. The depth research was carried out (with
interviews and brainstorming) on Slovenian tourism strategy, develop-
ment, marketing, competitiveness and tourism policy. It has been shown
that Slovenian tourism was stronger in non produced attractiveness than
in its management's capability to add value. Services performed were the
weaker point of the Slovenian tourism product (Sirše and Mihalic 1999).
The aforementioned competitive study was the last study which fo-
cused on international competitiveness of Slovenian tourism. The others
analysed competitiveness sources of Slovenian tourism firms on the mi-
cro level (Mihalic and Dmitrovic 2000).
The aim of this paper is to present the results of a survey made in sum-
mer 2004 on the competitiveness of Slovenia as a tourist destination. The
article is constructed as follows: First, a model of destination competi-
tiveness is presented; second, a methodological framework is presented
and data collection is described. In the third part empirical results are
presented and the article concludes with a summary of key findings.
Model of Destination Competitiveness
The model seeks to capture the main elements of competitiveness high-
lighted in the general literature, while appreciating the special issues in-
volved in exploring the notion of destination competitiveness as empha-
sised by tourism researchers. The model was developed in a collaborative
effort by researchers in Korea and Australia (Dwyer, Livaic and Mellor
2003).
The model displayed in figure 1 brings together the main elements of
destination competitiveness as proposed by tourism researchers. The de-
terminants are classified under six main headings:
•	Inherited Resources
•	Created Resources
•	Supporting Factors and Resources
•	Destination Management
•	Situational Conditions
•	Demand Conditions
Taken together, Inherited, Created and Supporting Resources provide
various characteristics of a destination that make it attractive to visit.
This is why they are all placed in the same box. Inherited resources
can be classified as Natural and Cultural. The Natural Resources include
physiography, climate, flora and fauna etc. The culture and heritage, like
the destinations' history, customs, architectural features, and traditions
enhance the attractiveness of a tourism destination. Created Resources
include tourism infrastructure, special events, entertainment, shopping
and any available activities. The category Supporting factors and Re-
sources provides the foundations for a successful tourism industry. They
include general infrastructure, quality of services, hospitality, and acces-
sibility of destination.
Destination Management includes factors that enhance the attractive-
ness of the inherited and created resources and strengthen the quality of
the supporting factors.
The factors of Situational conditions can moderate modify or even
mitigate destination competitiveness. This can be a positive or unlikely
negative influence on the competitiveness. There would seem to be many
types of situational conditions that influence destination competitive-
ness. These are Destination location, micro and macro environment, the
strategies of destination firms and organisations, security and safety and
the political dimension.
If we want a demand to be effective, tourists must be aware of what a
destination has to offer. The awareness, perception and preferences are
three main elements of the tourism demand.
Methodology
sample and data collection
Following the model, a survey was conducted to determine the compet-
itiveness of Slovenia as a tourist destination. Underpinning the survey
instruments was a set of indicators of destination competitiveness. We
agree that indicators of destination competitiveness are many and var-
ied. There is no single or unique set of indicators that apply to all des-
tinations at all times (Dwyer, Livaic and Mellor 2003). Generally they
include objectively measured variables such as visitor numbers, market
share, employment, earnings, as well as subjectively measured variables
such as climate, richness of attractiveness, image, appeal, beauty etc.
The survey instrument was prepared. The questionnaire was tested on
11 tourism stakeholders. Some obscurities were discussed and some ques-
tions have been changed, but no essential corrections have been made.
Those 11 questionnaires have not been included in the further analysis.
The most common research method of tourism attractiveness is from
the visitors' perspectives. In our case this approach is limited due to the
short period of visiting time and the limited knowledge of domestic and
foreign visitors about a given destination, particularly about the destina-
tion management determinants. The use of tourism experts as tourism
stakeholders have some benefits and advantages. Their knowledge about
the entire portfolio of destination competitive resources can help to dis-
cover the tourist destination more appropriately.
The survey was performed from March to April 2004. The respon-
dents were selected from tourism stakeholders on the supply side, that is
tourism industry stakeholders, government officials, tourism school aca-
demics and postgraduate students on tourism courses. Further use of the
model would need to incorporate tourism consumer input and percep-
tion. Out of 291 questionnaires sent, 118 or 41% were returned.
The sample included 6.8% government officials, 12.8% tourist agency
managers, 26.4% hospitality sector managers, 6% tourism school aca-
demics, 15% tourism services managers, 12% postgraduate students on
tourism courses, 15% employers in local tourist organisations and 6%
the others. The majority of the participants were young - up to 40 years
of age (61.9%). The respondents' average length of residence in Slovenia
was 36 years (sd = 11.29). The results revealed that 2 (0.02%) of respon-
dents were residents for less than 20 years, 43 (36.4%) of them were resi-
dents for between 20 and 30 years, 18 (15.2%) of them for between 30 and
40 years and 55 (48.38%) of them for more than 40 years. Only four of
them were not born in Slovenia, only one of all respondents has lived in
Slovenia less than 13 years. The sample was not well balanced in terms
of gender (66.1% female, 33.9% male). The majority of the participants
had completed college or university (50.8%), so most of the respondents
were quite highly educated.
This result implies that the survey questionnaires were collected from
various tourism stakeholders who are currently involved in tourism-
related organisations, associations and business.
variables and measurement
The respondents were asked to indicate their own group of five most
competitive destinations and to rank them from the most to the least
competitive. The aim of this study was not to rank Slovenia against other
competitive destinations, but to indicate the weak points in Slovenia's
tourism industry. Further, the survey required respondents to give a rat-
ing (on a 5 point Likert scale, for each of the 85 competitiveness indi-
cators) for Slovenia compared to its major competitor destinations. The
options ranged from 1 (well below average) to 5 (well above average).
In order to obtain a clearer picture of the assessment made by respon-
dents to the various questions, we group them into each of the six cate-
gories of the Model of Destination Competitiveness.
Empirical Analyses
The data on competitiveness of Slovenia as a tourist destination were
acquired by using the questionnaire. Slovene tourist stakeholders were
asked to rate Slovenia's performance, on a 5-point Likert scale, on each
of 85 indicators, against a group of competitive destinations. In order
to obtain a clearer picture, we grouped them into each of the six cate-
gories of the Model of Destination Competitiveness (see figure 1): Inher-
ited Resources, Created Resources, Supporting Factors, Situational Con-
ditions, Management, and Demand. For each of these groupings, tables
were produced, where mean and standard deviation for each question
is displayed. The question with the smallest mean response within the
group is listed first; the remaining responses are listed in ascending or-
der. Finally, a paired sample test was used to check the hypothesis. The
spss standard package for personal computers was used in this regard.
inherited resources
Inherited resources are classified as Natural and Cultural/Heritage. The
natural resources of a destination signify the environmental framework
within which the visitor enjoys the destination (Dwyer and Kim 2003).
They are crucial for many forms of tourism and visitor satisfaction. The
culture and heritage of a destination, its history, traditions, artwork etc.,
provides a powerful attracting force for the prospective visitor (Murphy,
Pritchard and Smith 2000).
Compared to the competitive destinations, Slovenia is regarded as
above average in all attributes on this dimension (see table 1). The highest
rating was accorded to the unspoiled nature, flora and fauna, attractive-
ness of climate and traditional arts. The relatively high rating given to
Slovenia's natural resources is to be expected. It is well known that the
country has areas of attractive natural resources, the nature is still un-
spoiled and the climate is really favourable. The smallest standard devia-
tion in this group for the unspoiled nature with value 0.7 indicates quite
high agreement between respondents. The high ratings should not be a
cause for complacency. The maintenance of Slovenia's competitive ad-
vantage in this area requires constant environmental monitoring of the
impacts of tourism development.
The relatively high standard deviation in the responses for historic
sites, artistic and architectural features and heritage indicates that re-
spondents share different views about their perceptions of these at-
tributes. The means are lower too. This result is not unexpected, given
the relatively short history of Slovenia compared to the historically and
culturally rich competitors, such as Italy and Austria. It is unlikely that
these attributes can be improved through appropriate tourism policy.
table 1 Descriptive statistics: Inherited Resources
	Competitiveness indicators	M	sd
A7	Historic sites	3.21	0.90
a6	Artistic and architectural features	3.22	0.80
a8	Heritage	3.46	0.86
A9	National parks	3.58	0.98
A1	Cleanliness	3.66	0.76
A5	Traditional arts	3.73	0.79
A2	Attractiveness of climate for tourism	3.83	0.76
A4	Flora and fauna (e. g. animals, birds, forests)	4.00	0.79
A3	Unspoiled Nature	4.40	0.70
Notes: n = 118, m = mean, sd = standard deviation. Source: Own calculations.
In general, these destination attractions (inherited resources) have
been considered as tourism supply factors, which represent the driving
forces generating tourism demand (Uysal 1998) and also primary sources
or determinants of measuring destination attractiveness (Hu and Ritchie
1993).
The survey, conducted by the Slovenian tourism organisation (sto
2004; 2005) showed that the visitors , residents of Austria, Italy and Ger-
many, share the same opinion (well preserved nature, a great culture and
history, a great diversity in a small area). German visitors perceive Slove-
nia as a country of friendly people and pleasant weather with beautiful
nature, especially due to its splendid mountains and lakes (Konecnik and
Ruzzier 2006).
created resources
There are at least five types of created resources that influence destination
competitiveness: tourism infrastructure, special events, range of avail-
able activities, entertainment and shopping.
Mo, Howard and Havitz (1993) have argued that destination service
infrastructure is, after destination environment, the most important fac-
tor in a tourist's experience. The capacity of special events to generate
tourism expenditure is well documented. The set of activities possible
within a visit are undoubtedly important tourism attractors. These can
include recreation facilities, sports, facilities for special interest etc. The
category of entertainment can be found in many forms. The amount of
entertainment is less important than its quality or uniqueness.
Slovenia is rated most above average on attributes of health resorts,
visitor accessibility to natural areas, variety of cuisine, Casino, nature
based activities, accommodation (variety/quality) and food service fa-
cilities, but most below average in amusement/theme parks, community
support for special events and night life (see table 2). Variety of cuisine
had the smallest standard deviation in this group with the value of 0.74,
indicating agreement between respondents. The tourists from Austria,
Italy and gb gave a high rate (3.94 on the scale from 1 to 5) to the ex-
cellent food and wine, too (sto 2005). Less consistency between respon-
dents was found in the area of water based activities (standard deviation
of 0.94) and winter based activities (standard deviation of 0.94).
The survey results indicate much room for improvement in the area
of Created resources. Other attributes that may need attention are enter-
tainment and special events. The survey also implies that Slovenia could
develop greater community support for special events. Improvements
should be made in the efficiency and quality of local transportation. If
so, residents can benefit as well as tourists.
supporting factors
Supporting factors underpin destination competitiveness. They include
attributes such as general infrastructure, quality of service, accessibility
of destination, hospitality, etc.
A destination's general infrastructure includes road network, water
supply, financial services, telecommunications, health care facilities, etc.
Destinations have become reliant on the delivery of quality services. A
commitment to quality by every enterprise in a destination is necessary
to achieve and maintain competitiveness (Go and Govers 2000).
There exists a link between destination access and destination choice.
The accessibility of the destination is governed by many influences in-
cluding ease and quality of auto, air, train, bus, sea access, entry permits
and visa requirements, airport capacities etc. (McKercher 1998).
Hospitality relates to the resident and community attitudes towards
tourists and towards tourism industry. Resident support for tourism de-
velopment fosters a competitive destination.
Slovenia is rated as above average in hospitality of residents towards
tourists, communication and trust between tourists and residents, ac-
cessibility of destination, telecommunication system for tourists, quality
of tourism services and in financial institutions and currency exchange
facilities, but below average in animation, health/medical facilities to
table 2 Descriptive statistics: Created Resources
	Competitiveness indicators	m	sd
B32	Amusement/Theme parks	2.06	0.77
B28	Community support for special events	2.39	0.86
B29	Night life (e. g. bars, discos, dancing)	2.50	0.84
B23	Airport efficiency/quality	2.54	0.81
B30	Local tourism transportation efficiency/quality	2.55	0.84
B10	Water based activities (e. g. swimming, surfing, boating, fishing)	2.85	0.93
B26	Entertainment (e. g. theatre, galleries, cinemas)	2.88	0.81
B31	Diversity of shopping experience	3.00	0.80
B25	Special events/festivals	3.06	0.79
B24	Tourist guidance and information	3.08	0.86
B50	Existence of tourism programs for visitors	3.08	0.82
B11	Winter based activities (skiing, skating)	3.10	0.93
B15	Adventure activities (e. g. rafting, skydiving, bungee jumping),)	3.10	0.88
B14	Sport facilities (e. g. golf, tennis)	3.22	0.76
B20	Rural tourism	3.33	0.89
B13	Recreation facilities (e. g. parks, leisure facilities, horse riding)	3.33	0.78
B19	Congress tourism	3.34	0.84
B17	Food service facilities	3.38	0.82
B22	Accommodation (variety/quality)	3.40	0.80
B12	Nature based activities (e. g. bushwalking, bird watching)	3.44	0.85
B27	Casino	3.58	0.92
B16	Variety of cuisine	3.81	0.73
B18	Visitor accessibility to natural areas	3.92	0.85
B21	Health resorts, spa	4.27	0.74
Notes: n = 118, m = mean, sd = standard deviation. Source: Own calculations.
serve tourists, attitudes of customs/immigration officials, efficiency of
customs/immigration, visa requirements as an impediment to visitation
and destination links with major origin markets (see table 3).
Overall, the rating of these groups of attributes was considerably lower
than for the inherited resources and Created resources. Hospitality in
Slovenia was rated highly. Slovenia's residents were rated above average
in their friendliness to tourists and the ease of communications between
tourists and residents. Customs efficiency and attitude were rated above
table 3 Descriptive statistics: Supporting Factors
	Competitiveness indicators	m	sd
C35	Animation	2.59	0.79
C33	Health/medical facilities to serve tourists	2.77	0.88
C41	Attitudes of customs/immigration officials	2.89	0.85
C40	Efficiency of customs/immigration	2.91	0.86
C44	Visa requirements as an impediment to visitation	2.91	0.85
C43	Destination links with major origin markets (e. g. business, trade, sporting)	2.95	0.84
C34	Financial institutions and currency exchange facilities	3.19	0.77
C36	Quality of tourism services	3.25	0.74
C37	Telecommunication system for tourists	3.26	0.91
C38	Accessibility of destination	3.31	0.85
C40	Communication and trust between tourists and residents	3.34	0.84
C42	Hospitality of residents towards tourists	3-45	0.76
Notes: n = 118, m = mean, sd = standard deviation. Source: Own calculations.
average. Maybe there is no need to spend time on this. The situation on
state frontiers has probably changed since 1 May 2004, when Slovenia
became a member of the European Union (the survey was carried out in
April 2004). Room for improvement is indicated in animation. There is a
lack in tourism products and programs for entertainment and attractive
experiences. Of course there is nothing to do about Slovenia's location
compared to the major origin markets.
Tourists from Austria, Italy and gb gave the highest rate to the Slovenia
as a hospitable country (4.14 on the scale from 1 to 5).
destination management
Destination management has a potentially important influence on desti-
nation competitiveness. It includes activities such as destination market-
ing, planning and development, destination management organisations
and human resource development.
Destination management should focus on a systematic examination of
unique comparative advantages that provide a special long term appeal
of the destination (Hassan 2000). Tourism planning takes place on many
levels: destination, regional, national, international. Planning is carried
out by different organisations and agencies.
Compared to the group of competitive destinations, Slovenia is rated
table 4 Descriptive statistics: Destination Management
	Competitiveness indicators	M	sd
D77	Extent of foreign investment in destination tourism industry	2.15	0.90
D71	Government co-operation in development of tourism policy	2.33	0.89
D51	Public sector recognition of importance of sustainable tourism development	2.38	0.98
D69	Quality of research input to tourism policy, planning, development	2.38	0.79
d68	Destination has clear policies in social tourism (e. g. disabled, aged)	2.39	0.92
D73	Public sector commitment to tourism / hospitality education and training	2.40	0.82
D74	Private sector commitment to tourism / hospitality education and training	2.50	0.88
D78	Level of co-operation (e. g. Strategic alliances) between firms in destination	2.53	0.71
D76	Development of effective destination branding	2.59	0.87
D70	Tourism development integrated with overall industry development	2.60	0.77
D61	Existence of adequacy tourism education programs	2.61	0.78
Continued on the next page
above average in resident support for tourism development, appreciation
of service quality importance, tourism/ hospitality training responsive to
visitor needs and private sector recognition of sustainable tourism de-
velopment importance. The highest rating was accorded to the resident
support for tourism development. As also in the group of supporting
factors, the indicator hospitality of residents towards tourists was rated
the highest, there are indications that residents are aware of the tourism
development benefits.
Ap and Crompton (1993) profiled four levels of reactions by residents
to tourism activities. The first level is embracement, which describes
a euphoric stage where residents hold very positive attitudes toward
tourists and their impact. Tolerance is next and describes residents who
are positive on some impacts and negative on others. Adjustment, the
third level, is where residents have learned to cope with tourists. The last
stage describes a community where residents leave when tourists arrive.
According to Yoon, Gursoy and Chen (2000), who studied residents'
attitudes and support for tourism development, local residents are likely
Continued from the previous page
	Competitiveness indicators	M	sd
D67	Developing and promoting new tourism products	2.66	0.85
D64	Destination vision reflecting resident values	2.71	0.75
D65	Destination vision reflecting stakeholder values	2.72	0.78
D81	nto reputation	2.72	0.93
D75	Educational structure/profile of employees in tourism	2.72	0.73
D66	Destination vision reflecting community values	2.73	0.76
D80	Quality in performing tourism services	2.82	0.81
D63	Destination vision reflecting tourist values	2.83	0.80
D57	Entrepreneurial qualities of local tourism businesses	2.97	0.77
D60	Efficiency of tourism/hospitality firms	3.00	0.61
D52	Private sector recognition of sustainable tourism development importance	3.00	1.00
D62	Tourism/hospitality training responsive to visitor needs	3.02	0.75
D79	Appreciation of service quality importance	3.03	0.78
D72	Resident support for tourism development	3.16	0.74
Notes: n = 118, m = mean, sd = standard deviation. Source: Own calculations.
to participate in supporting tourism development as long as the per-
ceived benefits of tourism exceed the perceived cost of tourism.
The human resource function is critical to the performance of any
destination. Since competition between firms is determined by skills,
human resources are central factors in achieving or maintaining com-
petitiveness (Bueno 1999). Tourism stakeholders need to understand the
hrm practices that strengthen the knowledge-sustained competitive ad-
vantage. The rating for private and public sector commitment to tourism
education and training is quite below average. This indicates that the hu-
man resources development (hrd) in tourism operation and manage-
ment is not understood significantly enough.
Countries which depend on tourism economic earnings know too well
that popularity and continued sustainable growth of their destinations
is directly related to the quality of their tourism workforce. Efforts in
tourism education and training have to be undertaken by at least three
main stakeholders: government agencies, private and public schools, and
industry sector.
The perception is that Slovenia rates relatively low in many indicators
of the group Destination Management. The lowest ratings were given
table 5 Descriptive statistics: Situational Conditions
	Competitiveness indicators	m	sd
E56	Co-operation between public and private sector	2.35	0.84
E58	Access to venture capital	2.59	0.83
E59	Investment environment	2.63	0.80
E54	Use of e-commerce	2.86	0.72
E49	Manager capabilities	2.94	0.82
E53	Value for money in shopping items	3.06	0.68
E55	Use of it by firms	3.06	0.78
E48	Value for money in accommodation	3.39	0.84
E47	Value for money in destination tourism experiences	3.44	0.86
E46	Political stability	4.11	0.71
E45	Security/safety of visitors	4.16	0.76
Notes: n = 118, m = mean, sd = standard deviation. Source: Own calculations.
to the extent of foreign investment in the destination tourism industry,
government co-operation in development of tourism policy, public sec-
tor recognition of the importance of sustainable tourism development
and quality of research input to tourism policy, planning, development.
In this area there really is much room for improvements. In the field
of tourism, scientific research has always been important. Now, when
tourism consumers are changing their habits and preferences, this is even
more evident.
situational conditions
Situational conditions may enhance or reduce destination competitive-
ness. The performance of the tourism industry depends on the overall
structure of the industry and the positive environment in which it is sit-
uated.
A competitive destination depends both on the micro environment
and on the macro environment. On the micro level, competition among
firms creates an environment for excellence. On the macro level, tourism
is influenced by a range of global forces including economic restructur-
ing of economies, demographic changes, computerisation etc. The polit-
ical dimension is a key factor that contributes to the nature of the desti-
nation. Safety and security can be a critical determinant of the tourism
destination. The financial cost of the tourism experience is, however, im-
portant.
Slovenia is rated above average in security/safety of visitors, political
table 6 Descriptive statistics: Demand Conditions
	Competitiveness indicators	m	sd
F83	International awareness of destination	2.00	0.87
F85	International awareness of destination products	2.15	0.84
F84	'Fit' between destination products and tourist preferences	2.70	0.69
F82	Overall destination image	2.83	0.89
Notes: n = 118, m = mean, sd = standard deviation. Source: Own calculations.
stability, value for money in destination tourism experiences, value for
money in accommodation, use of it by firms and value for money in
shopping items, but below average in co-operation between public and
private sector, access to venture capital, investment environment, use of
e-commerce and manager capabilities (see table 5).
Slovenia is often perceived to be a safe country (sto 2004; 2005). The
low standard deviation for the political stability indicates a high level of
agreement in the rating of this indicator. In the case of bad performance
of tourism industry, Slovene tourism managers should no longer excuse
themselves by referring to the bad political situation or the neighbour-
hood of the Balkans.
demand conditions
Demand factors assume special importance in determining destination
competitiveness. The reason is that a destination may be competitive for
one group of tourists but not for another group. It depends on their mo-
tivation for travel. We can distinguish between domestic and foreign de-
mand. In many cases the domestic tourism drives the nature and struc-
ture of a nation's tourism industry. Foreign demand thrives more readily
when domestic demand is well established. The competitiveness com-
prises three main elements of tourism demand: awareness, perception
and preferences (Dwyer, Livaic and Mellor 2003).
Awareness can be generated by marketing activities, the image can in-
fluence perceptions and actual visitation will depend on perceived desti-
nation product offerings.
Slovenia is rated below average in all demand conditions indicators
(see table 6). Each of these items is important for generating high and
stable tourism flow in the future. The perceived 'fit' between desti-
nation tourism products and tourist preferences is very important in
giving visitor satisfaction. Destination marketing managers should be-
come alarmed because of the very low rating for international awareness.
Maybe they have already made a first move. At the Slovene tourism or-
ganisation (sto), they have set themselves the general task of enhancing
awareness of Slovenia on the main target markets (Pak and Hauko 2002).
hypothesis testing
As mentioned above, extensive research was undertaken by Sirše in the
late nineties. The research results were analysed in the case study pre-
sented at the 49th Congress of Aiest (1999) at Portorož. The study took
into account comparative and competitive advantages aspects. The over-
all objective of this study was to show the importance of tourism for
Slovenia and to evaluate the efficiency of the Slovenian Tourism policy.
Slovenia tourism experts, 25 in all, were asked to appreciate different fac-
tors influencing competitiveness of the country. They shared the opinion
that the management capability to add value to non-produced attractive-
ness is not satisfactory (Sirše and Mihalic 1999). Based on the key find-
ings of the mentioned research and based on research questions of this
case study, three hypotheses were proposed to determine the competi-
tiveness of Slovenia as a tourist destination. For this purpose five new
variables were defined:
1.	ir, as a mean score of the first group of survey questions - Inherited
Resources,
2.	cr, as a mean score of the second group of survey questions - Cre-
ated Resources,
3.	sf, as a mean score of the third group of survey questions - Sup-
ported Factors,
4.	sfr, as a mean score of the first, second and third group of survey
questions - Supporting Factors and Resources,
5.	mgt, as a mean score of the fourth group of survey questions -
Destination Management.
We verified the competitiveness of Slovenia as a tourist destination
following the hypotheses:
h1: Slovenia as a tourist destination is more competitive in the field
of Supporting Factors and Resources than in the field of destination
Management.
h2: Slovenia as a tourist destination is more competitive in the field
of Inherited Resources than in the field of Created Resources.
table 7 Results of paired sample t-test
Variable	m	sd	(1)	(2)	t	(3)
sfr-mgt	0.61	0.37	0.54	0.68	17.61	0.000
ir- cr	0.54	0.46	0.45	0.62	12.81	0.000
ir-sf	0.60	0.54	0.50	0.70	12.20	0.000
Column headings as follows: (1) lower 95% confidence interval of the difference;
(2) upper 95% confidence interval of the difference; (3) Sig. (2-tailed).
n = 118, m = mean, sd = standard deviation. Source: Own calculations.
H3: Slovenia as a tourist destination is more competitive in the field
of Inherited Resources than in the field of Supporting Factors.
For the purpose of obtaining these outputs, we set up three null hy-
potheses:
h 0: The average value of the variable sfr is equal to the average value
of the variable mgt.
H0: The average value of the variable ir is equal to the average value
of the variable cr.
H0: The average value of the variable ir is equal to the average value
of the variable sf.
For testing the null hypothesis that the average difference between a
pair of measurement is 0, we used a paired-samples t-test. The t test pro-
cedure also displays a confidence interval for the difference between the
population means of the two variables.
The results in table 7 indicate the statistically significant difference be-
tween variables in all three cases. We can therefore reject all placed null
hypotheses. The upper analysis corresponds to results of the study made
by Sirše and Mihalic in the 1999. Slovenian tourism competitiveness is
built mainly on the diversity and richness of its attractions. The sec-
ondary tourist supply is much less competitive. Unfortunately this pri-
mary attractiveness itself can be a source for higher value added, but the
value is only created through performing activities and successful man-
agement. Thus it can happen that the advantage, due to the attractions
is lost through the non-competitive secondary tourism supply (Mihalic
1999). Especially in the area of all kinds of resources, inherited and cre-
ated, Slovenia is an attractive destination. This means that Slovenia has
the opportunity to become a successful tourism destination, but for the
efficient prosperity of tourism industry, many improvements in the area
of destination management should be made.
Conclusions
In this article we analyse the competitiveness of Slovenia as a tourist des-
tination. Following the reference literature we establish six main groups
of variables: Inherited resources, Created resources, Supporting fac-
tors, Situational conditions, Management, and Demand. On the basis of
the obtained empirical results we can reveal areas where improvements
should be made to Slovenia as a tourist destination.
A majority of 85 factors were evaluated below 4 (on the scale from 1
to 5). This means that there are only a few attributes, for which Slovenia
was rated well above average. Despite the fact that the majority of our
respondents were people who can be treated as destination managers, the
destination management factors were evaluated the worst. This indicates
that there is no clear strategy for further development. This is clearly seen
from the low degree of co-operation between public and private sector,
between education institutions and tourism companies. It seems that the
government has no long-run solution for the co-operation between all
potentially involved stakeholders.
The development of the Slovenian tourism sector in recent years has
been based on the construction of physical infrastructure. The elements
like quality of services, educational programmes and development of hu-
man resources, stimulation of creativity and innovation and formation
of new interesting tourism products, were neglected. The development of
tourism destination management, which is one of most important fac-
tors for competitiveness, was unsuccessful. The main problem seemed
to be the danger, that because of the ineffectiveness in the phase of de-
velopment and marketing of tourism products, the destination is los-
ing the potential premium for the comparative advantages. This can be
the reason for the diminution of the added value. It is possible that the
tourism sector doesn't benefit enough from government support for the
planned development of the destination and that the marketing effort
doesn't work in the desired direction.
According to respondents, government co-operation in the develop-
ment of tourism policy is not satisfactory. However, ensuring an ap-
propriate and dynamic organisational structure to manage the destina-
tion tourism process is a vital element of destination competitiveness.
Government should be involved in the promotion, regulation, presenta-
tion, planning, monitoring, co-ordination and organisation of tourism
resources.
All kinds of management activities and actions can be considered as
destination competitive strategies that can allow Slovenia as a tourist des-
tination to enhance its competitiveness. Management should take care of
creating and integrating value in tourism products and resources so that
Slovenia as a tourist destination could achieve a better competitive mar-
ket position.
Tourism can present an important factor in the internationalisation
of the economy, as is evident from the discussion of Slovene small and
medium enterprises (Ruzzier 2005). The unfavourable environment for
foreign investment in the destination tourism industry represents an ob-
stacle in maintaining or increasing the competitiveness and for faster de-
velopment of Slovenian tourism. This is particularly important for the
segment of small and medium enterprises, which represent 98% of all
tourism business subjects. Ensuring a healthy investment climate is an
essential ingredient of longer-term competitiveness. Investment in new
products and services may also help to overcome seasonality constraints.
Every destination is comprised of many public and private sector ac-
tors. In practice, a strategic framework is required to outline their re-
spective roles as well as their opportunities. Both should play their roles
and achieve their specific goals and objectives. However, the cooperation
between public and private sector was rated quite low. It is increasingly
appreciated that a strong spirit of partnership and collaboration is re-
quired among all stakeholders to realize the potential of destination and
to maximize available resources. Slovenia is still in a transition period.
Privatization of tourism enterprises has just started. All these circum-
stances do not favor an ideal public-private partnership.
It is increasingly recognised and accepted that resources must be
maintained and managed in an appropriate way if we want to prevent
undue deterioration. This is why the low rating for public sector recog-
nition of importance of sustainable tourism development should cause
concern.
In the area of destination image, perception and awareness there is
room for improvements. The ratings for these factors did not exceed
3 (on the scale from 1 to 5). Particular emphasis must therefore be
placed on developing and promoting the particular image of the des-
tination to compete effectively in the international marketplace. There is
a gap between destination products and tourists' preferences. Changes in
lifestyles, values and behavior are key driving forces in shaping the future
direction of tourism marketing. Tourists are more knowledgeable, expe-
rienced, environmentally aware, independent and considerably better
informed.
The presented research represents only one single step in the analysis
of the competitiveness of Slovenia as a tourist destination. We have listed
some of the main dimensions and indicators only. The first aim of this
paper was to indicate the weak points of the Slovene tourism industry.
The results reveal where Slovenia is below and where it is above average,
comparing it with the competitive destinations.
There is a need to explore the relative importance of the different di-
mensions of competitiveness. Thus, for example, how important are the
natural resources compared to, say, residents' hospitality, how important
is the service quality compared to prices. Such researches must be pre-
pared for the specific destinations and specific visitor market segments.
More research needs to be undertaken on the importance of different
attributes of destination competitiveness. There is a need for more de-
tailed empirical studies of consumer preferences and the determinants
of travel decision.
The model allows destination competitiveness to be monitored over
time. This can provide a moving picture of destination competitiveness
at different points in time.
The model of competitiveness could be improved by seeking better to
quantitatively measure and evaluate the relative importance of various
factors determining the destination competitiveness.
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L Mic
^	Management International Conference
Advancing Business and Management
in Knowledge-based Society
7th International Conference
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University of Primorska
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University of Primorska
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Louisiana State University
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University of Primorska
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Managing Global Transitions
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Beech, M. H. 1982. The domestic realm in
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volume 4 • number 2 • summer 200ö ■ issn i581-63h
101 Globalization, Transition and the
Discourse of Management
Tonči Ante Kuzmanić
Suzana Sedmak
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Overcome the fdi Obstacles?
Mehmet Basar
Sebnem Tosunoglu
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Maja Konečnik
Mitja Ruzzier
167 Competitiveness of Slovenia
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Doris Gomezelj Omerzel
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