THE ECONOMIC TRANSITION OF SLOVENIA IN THE PROCESS OF GLOBALIZATION GOSPODARSKA TRANZICIJA SLOVENIJE V PROCESU GLOBALIZACIJE Lučka Lorber Maribor, industrial zone Tezno (photography Lučka Lorber). Maribor, industrijska cona Tezno (fotografija Lučka Lorber). Abstract UDC: 911.3:338.4(497.4) 338.4(497.4):339.9 COBISS: 1.01 The Economic Transition of Slovenia in the Process of Globalization KEY WORDS: globalization, postindustrial period, tertiarization, quaternization, deindustrialization, restructuring of industry, work force. With the integration of knowledge and technology, a restructuring of the world economy occurred, particularly in industrial activity. This meant the beginning of the third industrial revolution and the process of globalization in the postindustrial period. The transition of the economic system of Slovenia toward a market economy dictates structural changes in industry. Izvlječek UDK: 911.3:338.4(497.4) 338.4(497.4):339.9 COBISS: 1.01 Gospodarska tranzicija Slovenije v procesu globalizacije KLJUCNE BESEDE: globalizacija, postindustrijsko obdobje, terciarizacija, kvartarizacija, deindustrializacija, prestrukturiranje industrije, delovne sila. Z integracijo znanja in tehnologije je pri{lo do prestrukturiranje svetovnega gospodarstva, zlasti industrijske dejavnosti. Nastopil je čas tretje industrijske revolucije in proces globalizacije v postindustrijskem obdobju. Prehajanje ekonomskega sistema Slovenije v tržno gospodarstvo, narekuje strukturne spremembe tudi v industriji. The editorialship received this paper for publishing in Avgust 28th 1999. Prispevek je prispel v uredni{tvo 28.8.1999. Address - Naslov: Lučka Lorber, Ph. D. Oddelek za geografijo Pedago{ka fakulteta Univerza v Mariboru Koro{ka cesta 160 2000 Maribor Slovenija Phone - telefon: +386 (0)62 229 644020 Fax - faks: +386 (0)62 213 541 E-mail - el. po{ta: lucka.lorber@uni-mb.si Contents - Vsebina 1. Introduction 137 2. Trends in the development of the world economy 137 2.1. The tertiarization of the world economy 140 3. Transition in the post-socialist countries 142 4. Economic restructuring of Slovenia compared with other countries 147 5. Slovenia's integration in the European Union 148 6. The period of Slovenia's transition toward the market economy (1991-1999) 150 6.1. Structural changes in the industry of Maribor 150 7. Conclusion 154 8. Bibliography 155 9. Endnotes 156 10. Summary in Slovene- Povzetek 157 1. Introduction Human activity has brought the society to its present level of development and has determined relationships between people and between people and the environment. In the 19th and 20th centuries, the Industrial Revolution caused the greatest and most rapid development of civilization, fundamentally changing the relationships in society and in the environment. The first period of industrialization meant the exploitation of raw materials, energy, and man, as well as the powerful degradation of the environment. The rapid industrialization process triggered the deagrarianization of the rural environment, the urban development of cities, the mobility of the work force and goods, destroyed the old values, and changed the way of life. Technological progress improved living conditions and changed the demographic picture and population structure, the pattern of settlements, the infrastructure network, economic growth, and social standards. The integration of science and technology and the introduction of the highest technology in production resulted in the restructuring of the world economy, and especially of industrial activity in developed environments. The deindustrialization process is a consequence of the technological advancement and economic development of the developed economies. The changes influenced the structure of industry, and industrial production increased in spite of the reduction of the number of employees in the secondary sector. At the same time, the process of the tertiarization and quaternarization of the population in the structure of the basic occupational groups occurred. The industrialization process follows different development cycles, depending on the natural and social conditions in individual environments. On the threshold of the new millennium, this process is assuming a global character, although in some environments the industrialization process has still not developed. Society is passing into a postindustrial period characterized by an open worldwide economic market. Inclusion in the common economic market demands the restructuring of the entire economy in both developed and developing countries. In the postindustrial period, the global processes shaping the international economic market are deepening even more the differences between developed and undeveloped regions of the world. With the aid of science, information, and capital, the most developed countries dominate. Economic and social differences in particular are deepening, a fact also reflected in the demographic indicators. Following the collapse of the Berlin Wall, changes occurred in the social systems of the post-socialist countries that introduced a market economy and experienced economic renewal. In the 1990's, Slovenia decided in favour of a market economy that demanded integration in the world market and especially in the European integration processes. Slovenia is still a country in transition that is struggling with the problems of forming its own national economy and integrating itself in the world market, as well as with the problems of restructuring old industrial branches and putting depressed industrial zones back on their feet. Between 1991 and 1999, there was a period of processes restructuring industry in Slovenia that changed sociogeographical structures and also changed or rather transformed the physiognomy of the landscape. 2. Trends in the development of the world economy With the advent of the worldwide economic market, industrial geographers are becoming increasingly occupied with industrialization as a living process affecting the physiognomy, function, and transformation of the environment. The complex research approach defines the industry as a phenomenon and a factor in geographical space.1 With the development of communication and infrastructure networks following World War II came the phenomenon of the globalization of the international market of goods, services, and capital. Observing the movements of the world's exchange of goods shows us the development of financial market that affects the processes of globalization.2 Globalization of the world economy resulted in a deepen- ing of differences between the developed and developing countries. Based on its monitoring of the data, the International Monetary Fund has classified the countries of the world into three basic groups3: 1. Developed countries (28): • G7 (France, Germany, Italy, Great Britain, Canada, Japan, and the USA), • EU (Austria, Belgium, Denmark, Finland, Greece, Ireland, Luxembourg, The Netherlands, Portugal, Spain, and Sweden), • Newly industrialized Asian economies (Hong Kong, South Korea, Singapore, and Taiwan), • Other countries (Australia, Iceland, Israel, New Zealand, Norway, and Switzerland). 2. Developing countries (127): • Africa (50), • Asia (26), • Near East and Europe (17), • Western Hemisphere (34). 3. Countries in transition (28): • Central and Eastern Europe (18), • Russia, • Trans-Caucasian and Middle-Asian countries (9). The deepening of the differences between the developed and developing countries leads the greater part of the world to backwardness and social instability reflected in major economic and demographic indicators. With the development of knowledge and through information networks, developed countries devote great attention to the restructuring of their work force, enable linkage between capital and the environment, and ensure the ecological protection of the environment. They are the driving forces of the economic development, its regional distribution, and long term trends influencing as a consequence the reshaping and development of the environment. In 1996, the developed countries created 56.6% of the world's GDP and accounted for 78.6% of the world's export of goods and services (G7 countries: 45.4% GDP and 48% export). The developing countries created 39.2% GDP and 17.3% of the export. The contribution of the countries in transition in both segments was 4.2%.4 The newly industrialized Asian economies contributed 3.4% to the GDP and 10.2% to the world's export (Hong Kong 3.4%, South Korea 2.4%, Singapore 2.4%, and Taiwan 2.0%). Figure 1: Classification of countries according to their development. Slika 1: Razdelitev držav po razvitosti. TABLE 1: PROPORTION OF GDP AND EXPORTS FOR INDIVIDUAL GROUPS OF COUNTRIES ON THE WORLD SCALE (ECONOMIC SURVEY OF EUROPE, 1998). PREGLEDNICA 1: DELEŽI BND IN IZVOZA POSAMEZNIH SKUPIN DRŽAV V SVETOVNEM MERILU. 1996 1997 Number % of world % of world % of world % of world % of world of countries Population GDP exports GDP exports Developed countries 28 15.7 56.6 78.6 55.3 77.1 Developing countries 127 77.3 39.2 17.3 39.9 18.6 Countries in transition 28 7.0 4.2 4.2 4.8 4.2 140 120 100 80 60 40 20 Developed countries Razvite države Number of countries Število držav Proportion of GDP Delež BND roportion of exports Delež izvoza Developing countries Države v razvoju Countries in transition Države v tranziciji Figure 2: Proportion of GDP and exports for individual groups of countries on the world scale in 1996 (International Monetary Fund, 1997). Slika 2: Deleži BND in izvoza posameznih skupin držav v svetovnem merilu leta 1996. Exports Delež izvoza Population Delež preb. GDP Delež BND I Developed countries Razvite države ] Developing countries Države v razvoju □ Transitioning countries Države v tranziciji 0% 20% 40% 60% 80% 100% Figure 3: Comparison of the proportions of GDP and exports relative to the populations of developed countries, developing countries, and countries in transition in 1997 (Economic Survey of Europe, 1998). Slika 3: Primerjava deleža BND in izvoza glede na število prebivalcev razvitih držav, držav v razvoju in držav v tranziciji v letu 1997. 2.1. The tertiarization of the world economy The globalization of the world economy resulted in the rapid growth of industrial production in the developing countries. The comparative advantages of the developing countries were cheap labour and the proximity of natural resources. The developed world, whose principle was free trade, was faced with competition from cheaper products. The old industrial centers of the developed world suddenly experienced a crisis that was first reflected in the stagnation of labour-intensive branches of industry and then in their obvious decline. The developed world responded with accelerated investment in R&D.5 As a result, new products, materials, and technologies developed swiftly. For the first time, knowledge and production were united intensively. Approximately 90% of all patents are registered every year in the industrially most developed countries (with 15% of the world's population), and only 10% in the rest of the world (with 85% of world population). The introduction of scientific achievements into production was reflected in the rapid growth of added value per unit of production. Due to the achievements of science, the new industrial production increasingly required new information and financial services, and the existing stereotype of industry changed. The industrial giants, once the pride and driving force of development, were confronted with major difficulties. In the most developed countries, this process began at the end of the 1950's and became a problem in the 1960's. Labour-intensive branches of industry could not compete with the rapidly growing »footloose« industry in creating added value. The classical location factors of industry distribution began to lose their importance. In the developed countries, the structure of economic production changed. The processes of deindus-trialization and tertiarization meant the movement of employees from secondary into tertiary and quaternary activities, a fundamental characteristic of the postindustrial period. The fall in the proportion of industrial workers can be compared with the dramatic fall of the number of employees in the primary economic sector after the Industrial Revolution. The process of industrial- Figure 4: The proportion of industrial workers compared with the number of all employees in the industrial countries (International Monetary Fund, 1997). Slika 4: Delež zaposlenih v industriji kot delež vseh zaposlenih v industrijskih državah. 80 % Service sector Usluge 70 60 50 40 30 1960 1965 1970 1975 1980 1985 1990 1994 Figure 5: The proportion of service sector employees in the number of all employees in the industrial countries (International Monetary Fund, 1997). Slika 5: Delež zaposlenih v storitvenih dejavnostih kot delež vseh zaposlenih v industrijskih državah. ization is not everywhere the same but depends on the level of socioeconomic development of the individual society. The proportion of the industrial population is still growing in developing countries where the economy is in the industrialization phase. In the developed countries, the growth of the GDP is high in industry and the service activities. The proportion of industrial workers is currently falling, while the proportion of employees in the tertiary and the quaternary sectors is increasing rapidly. Actual deindustrialization appeared when industry began laying off the work force due to rising productivity. High economic growth and a low level of unemployment are typical of the developed societies since the excess work force finds employment in the rapidly growing tertiary and quaternary sectors. The number of industrial workers fell from 28% in 1970 to about 18% in 1994. The deindustrialization process began in the mid 1960's in the USA. In the 1970's, it followed in the countries of the European Union, where the proportion of industrial workers fell from 30% to 20% by 1994. In the years to come, the proportion of industrial workers is expected to fall to 14%. In the USA, development is different from that typical of the developed Western European economies. The absolute number of the industrial workers has not diminished, while in the EU countries it has fallen distinctly (about 25%). The developed Asian6 countries have followed the laws of economic development, first realizing the industrialization process and then deindustrialization only after 1989.7 The deindustrialization process is not a negative phenomenon of the collapse of the industrial sector or the economy in general as it is often described. On the contrary, deindustrialization is a natural consequence of economic development in advanced economies and is linked with a rising standard of living. Of course, this does not mean that deindustrialization brings no problems. The service sector cannot employ the surplus work force in such a short time because the general economic growth is not large enough and also due to the institutional rigidity of the labour market, legislative obstacles, or low investment in service activities. In the last decade, economic development in the developed countries has been cyclical and uneven. In particular time periods, individual countries had different levels of economic growth. After 1989, a process of negative deindustrialization was triggered in the countries in transition, resulting in a large proportion of unemployed labour that lost jobs in industry and has no possibility of finding employment in the tertiary sector.8 Unfortunately, the majority of developing countries do not enjoy the advantages of globalization. They see their future in a gradual improvement of the standard of living and in slow changes. Thus, the differences between the developed and developing countries are deepening not only in the relative but also in the absolute sense. The developing countries need radical political, social, and economic changes. 3. Transition in the post-socialist countries The shift in the economic systems of the countries in transition toward the market economy means global changes and a new quality in the overall social relations. The transition process has affected most intensely the post-socialist countries, the new independent countries, and the unstable stagnant economies of former (Asian) socialist countries. Under the influence of the »Velvet Revolution« in 1989-1990, the totalitarian socialist regimes in Europe collapsed. The Communist regimes in the small socialist countries of Eastern Europe either relinquished power or had to share it with the opposition, and the political changes brought the reformation of the economic system. However, changes not only occurred in the small national economies but the process also involved the whole Eastern European bloc led by the Soviet Union with its central planning and economic management. With the collapse of the socialist social order and the disintegration of the Eastern bloc, the newly created and restored countries faced challenges that were unpredictable in many aspects. After the change of regimes, the societies of the former socialist countries decided in favour of a pluralistic democratic social order and market economy. However, the transfer of the development model of the Western European democracies is encountering great obstacles. Economic renewal, becoming accustomed to the rules of the market economy, the integration of the ex-socialist countries into the European division of labour, and the decentralization of power is greatly slowing the process of economic restructuring in the countries in transition. The interest of world capital and foreign investors in investing has increased in those countries in transition that offer greater advantages than investments in Africa and some Asian and Latin American countries. The majority of the former socialist countries have populations with appropriate levels of education and therefore a work force that can be retrained for the demands of the modern economy. These countries have a relatively good infrastructure and can be included in transportation networks and linked with the transportation logistic nodes. The newly established countries in transition have the beginners' problems of recognizing themselves as independent countries. They must develop their own competitive advantages.9 M. Porter's theory on the evolution of global competitiveness points out that in the case of the least developed economies it is based primarily on structure of costs. This means that in the case of technologically undemanding product and service lines sold in low price classes, the factors determining competitiveness are the substantially lower wages, social contributions, government expenses, and neglect of the environment. Inversely, the competitiveness of technologically demanding programs with high added value is based primarily on the high level of technological and innovative capacity of companies, the economy, and the society. Investments of world capital and the interest of foreign investors are different in individual countries. Direct investment of foreign private capital in the countries in transition is increasing in the countries that have successfully created attractive conditions for foreign investors. The influx of foreign capital should also make it possible for the countries in transition to invest in the revitalization of industry and the modernization of technological production. Foreign investors are prepared to invest capital first in countries that have adopted appropriate legislation to provide protection for private capital, regulate the tax policy, and ensure optimal conditions for the development of the market economy. TABLE 2: DIRECT FOREIGN INVESTMENTS IN COUNTRIES IN TRANSITION (INTERNATIONAL MONETARY FUND, 1997; ECONOMIC SURVEY OF EUROPE, 1999). PREGLEDNICA 2: NEPOSREDNA TUJA VLAGANJA V DR@AVE V TRANZICIJI. 1990 1991 1992 1993 1994 1995 1996 1997 1998 Croatia 16 95 102 88 529 346 854 Czech Republic 132 513 1004 654 869 2562 1428 1300 1617 Hungary 311 1459 1471 2339 1146 4453 1983 2085 1917 Poland 10 117 284 580 542 1134 2768 3077 6326 Slovakia 18 82 100 134 170 157 206 161 401 Slovenia 4 65 111 113 128 176 185 321 165 Hungary was the first country in transition to adopt the appropriate legislation, and in the beginning period its proportion of the direct investments was therefore the largest. It was followed by the Czech Republic, whose advantage was that it had quite radically broken with its previous regime and had a strongly developed industry with a skilled work force. Considering their size, the proportion of investments in the Russian Federation and in Poland is relatively small. The Russian Federation is problematic because its political instability and difficult social situation represent a factor of high risk for foreign investment. The highest growth of foreign investments in the recent period has been recorded in Poland, a consequence of its orderly legislation and political stability. The proportion of direct foreign investment is lower in other countries in transition, including Slovenia. Figure 6: Direct foreign investments in countries in transition (International Monetary Fund, 1997; Economic Survey of Europe, 1999). Slika 6: Neposredna tuja vlaganja v države vtranziciji. For the first time since the war, the adoption of legislation on foreign investments in the Republic of Slovenia has brought legal regulation that favours a trend of systematic and long-term promotion of the influx of foreign investment into Slovenia. The transition process in post-socialist countries that Slovenia is experiencing has three key features: democratization, privatization, and marketization. The process of political democratization means the transition from a one-party to a multiparty democratic system. The newer literature, which links economic and political issues, studies the influence of the political system on economic issues, especially the influence of the state on the market economy.10 It must be considered that the development of an economy depends primarily on economic laws that are not always in harmony with government policy. It is particularly more difficult for coalition governments (such as in Slovenia) to make important decisions and to provide legislative support for transition programs. In the majority of the countries in transition, the question of comprehensive privatization is also open. Questions of ideology and political interests hinder the process. Some countries are very liberal in executing the process of privatization (Hungary, Czech Republic), while others are very cautious or ineffective (Bulgaria, Russia, Serbia). The newly independent and autonomous countries of Slovenia, Croatia, Estonia, Lithuania, Latvia, Slovakia, and Macedonia face other unsolved problems as well. A process of reforming their national economies is proceeding that demands the building of a defined and stable legal order. The newly created countries are aware of the importance of their openness and internationalization. Until 1990, their economies were of an import substitutive nature linked with the Yugoslav market and the Eastern European market. Common to all these countries is the fact that they lost their market overnight, so to speak, without the possibility of gradual transition and adaptation. Efforts to achieve an export-oriented economy and make it a part of the world market are evident everywhere and are included in national development programs. Entering the world market also brings a demand for the international comparability of the efficiency of business companies. Among the more successful countries in transition are the CEFTA countries, the Baltic countries, and Croatia. Their success is based on carrying out fundamental social and economic reforms. The goal of these countries is to become members of the European Union and NATO as equal partners. Figure 7: Real GDP in CEFTA countries and Croatia in 1980, 1984-1998 (index, 1989 = 100; economic survey of Europe, 1998, 1999). Slika 7: Realni BNP držav CEFTE in Hrvaške 1980, 1984-1998 (indexi, 1989 = 100). TABLE 3: REAL GDP IN CEFTA COUNTRIES AND CROATIA IN 1980, 1984-1998 (INDEX, 1989 = 100; ECONOMIC SURVEY OF EUROPE, 1998,1999). PREGLEDNICA 3: REALNI BNP DRŽAV CEFTE IN HRVAŠKE 1980,1984-1998 (INDEXI, 1989 = 100). 1980 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 Croatia 99.0 99.7 99.8 102.6 102.5 101.6 100.0 92.9 73.3 74.4 59.6 63.0 67.3 71.4 76.0 79.1 Czech Republic 91.3 93.2 93.7 95.7 100.0 98.8 87.4 84.5 85.0 87.3 92.9 96.5 97.5 94.8 Hungary 86.3 94.4 94.1 95.5 99.4 99.3 100.0 96.5 85.0 82.4 81.9 84.3 85.5 86.6 90.4 95.4 Poland 91.1 87.1 90.3 94.1 95.9 99.8 100.0 88.4 82.2 84.3 87.6 92.1 98.6 104.6 111.8 116.6 Slovakia 91.0 94.8 97.1 99.0 100.0 97.5 83.3 77.9 75.1 78.7 84.2 89.7 95.6 100.0 Slovenia 98.9 99.9 100.9 104.1 103.5 100.5 100.0 91.9 83.7 79.1 81.4 85.7 89.3 92.0 95.5 99.5 TABLE 4: INDUSTRIAL PRODUCTION OF CEFTA COUNTRIES AND CROATIA IN 1980, 1984-1998. (INDEX, 1989 = 100; INTERNATIONAL MONETARY FUND, 1997; ECONOMIC SURVEY OF EUROPE, 1997, 1998, 1999). PREGLEDNICA 4: INDUSTRIJSKA PROIZVODNJA DRŽAV CEFTE IN HRVAŠKE 1980, 1984-1998. (INDEXI, 1989 = 100). 1980 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 Croatia 88.7 93.1 95.1 99.4 102.0 100.6 100.0 88.7 63.4 54.2 50.9 49.6 49.8 51.3 54.8 56.8 Czech Republic 81.5 89.0 92.0 94.5 96.5 98.5 100.0 96.5 73.0 67.2 63.6 65.0 70.6 72.0 75.3 76.5 Hungary 92.9 101.4 102.1 104.0 106.4 105.3 100.0 90.7 74.1 66.9 69.6 76.2 79.7 82.4 91.5 103.0 Poland 86.3 84.4 88.5 92.3 95.5 100.5 100.0 75.8 66.8 69.4 73.8 82.8 90.8 98.3 109.0 114.1 Slovakia 76.7 87.4 91.6 95.2 98.8 100.8 100.0 96.0 77.4 70.3 67.6 70.9 76.8 78.7 80.8 84.4 Slovenia 90.3 99.7 101.0 102.7 101.6 98.9 100.0 98.5 78.4 68.1 66.1 70.4 71.8 72.5 73.2 75.9 A comparison between the GDP and industrial production shows that the Czech Republic, Slovakia, and Poland recorded the smallest fluctuations in industrial production. The Czech Republic stopped the decline in production through greater domestic consumption, and Poland through rapidly growing export. The strong decline in production in Croatia can be attributed to the war, in Hungary to smaller domestic consumption, and in Slovenia to the loss of the southern markets. After 1994, Slovenia managed to stop the further decline of industrial production by increasing its export to the markets of European Union countries and by increasing its domestic consumption. - Croatia Hrvaška - Czech Republic Češka - Hungary Madžarska - Poland Poljska - Slovakia Slovaška - Slovenia Slovenija cocococococococn^cncncncncncncn cncncncncncncncn^cncncncncncncn Year / Leto Figure 8: Industrial production of CEFTA countries and Croatia in 1980, 1984-1998. (index, 1989 = 100; International Monetary Fund, 1997; Economic Survey of Europe, 1997, 1998, 1999). Slika 8: Industrijska proizvodnja držav CEFTE in Hrvaške 1980, 1984-1998. (indexi, 1989 = 100). From a comparison of data on the movement of the GDP and the growth of industrial production, we can conclude that the tertiarization of economy is highest in Slovenia and the Czech Republic and lowest in Poland, where the growths of the GDP and industrial production are almost proportional. TABLE 5: TOTAL EMPLOYEES IN CEFTA COUNTRIES AND CROATIA IN 1980, 1984-1998 (INDEX, 1989 = 100; ECONOMIC SURVEY OF EUROPE, 1998, 1999). PREGLEDNICA 5: VSI ZAPOSLENI V DRŽAVAH CEFTE IN HRVAŠKE, 1980, 1984-1998. 1980 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 Croatia 87.4 93.8 95.8 98.6 100.6 100.4 100.0 97.1 89.2 79.3 76.6 76.8 73.9 74.5 71.9 69.9 Czech Republic 95.3 95.7 97.5 98.5 98.9 99.4 100.0 99.1 93.6 91.2 89.7 90.4 92.8 93.4 92.4 91.2 Hungary 104.2 102.2 102.0 102.1 101.4 100.6 100.0 96.9 87.7 79.5 75.6 73.9 72.6 72.6 72.7 75.1 Poland 102.0 100.0 100.8 101.1 100.8 100.1 100.0 95.8 90.1 86.3 84.3 95.1 86.7 88.3 89.7 91.2 Slovakia 91.3 95.5 96.8 98.4 99.4 100.2 100.0 98.2 85.9 86.8 84.6 83.7 85.7 87.7 87.3 87.5 Slovenia 84.0 87.6 88.9 90.4 101.9 101.3 100.0 96.1 88.7 83.8 81.3 79.3 79.1 78.7 78.6 78.9 After 1989, the social changes in all the countries in transition caused a reduction in industrial production and massive layoffs, mainly among the industrial work force. The reduction in the number of industrial employees was also greatly influenced by the greater productivity in industrial production. In the last year, rising employment has been recorded in Hungary and Poland. In Poland in particular, the opening of new workplaces was the result of the intensive influx of foreign capital in 1998. TABLE 6: INFLATION LEVELS IN CEFTA COUNTRIES AND CROATIA FROM 1994 TO 1998 (ECONOMIC SURVEY OF EUROPE, 1998, 1999). PREGLEDNICA 6: GIBANJE INFLACIJE V DRŽAVAH CEFTE IN HRVAŠKE OD 1994 DO 1998. 1994 1995 1996 1997 1998 Croatia -3.0 3.7 3.5 4.0 5.6 Czech Republic 10.3 7.9 8.7 9.9 6.7 Hungary 21.3 28.5 20.0 18.4 10.4 Poland 29.4 22.0 18.7 13.2 8.5 Slovakia 11.8 7.4 5.5 6.5 5.5 Slovenia 18.3 9.0 9.0 8.8 6.6 105,0 100,0 95,0 90,0 85,0 80,0 75,0 70,0 Year / Leto Figure 9: Total employees in CEFTA countries and Croatia in 1980, 1984-1998 (index, 1989 = 100; economic survey of Europe, 1998, 1999). Slika 9: Vsi zaposleni vdržavah CEFTE in Hrvaške, 1980, 1984-1998. Croatia Hrva{ka Czech Republic Ce{ka Hungary Madžarska Poland Poljska Slovakia Slova{ka Slovenia Slovenija Figure 10: Inflation levels in CEFTA countries and Croatia from 1994 to 1998 (Economic Survey of Europe, 1998, 1999). Slika 10: Gibanje inflacije vdržavah CEFTE in Hrvaške od 1994 do 1998. In the 1980's, Slovenia was characterized by high inflation and a stagnating economy, which translated in the 1990's into an obvious decline in economic growth. The downward trend in economic growth stopped after 1992, and a revival in industrial production began after 1993. The positive economic trends, assisted by the consistent monetary policies of the Bank of Slovenia, influenced the lowering of inflation. 4. Economic restructuring of Slovenia compared with other countries The differences between the countries in transition and the developed countries are great and will increase in the future. On the threshold of the new postindustrial period, the restructuring process, especially integration in new world currents, is unfolding in the former socialist countries with greater difficulty and more slowly than in the formerly needy countries of Asia and Latin America. This proves that the processes of privatization and transition to a society based on the market economy are taking place too slowly in the countries in transition and that the socialist mentality is changing with much greater difficulty and much more slowly than anticipated. Dynamic development and economically successful drawing near to the average level of development of the developed countries are conditions for entering the competitive struggle in the world market. The penetration of Slovene exports is a prerequisite for Slovenia's integration in the economic currents. The small developed countries are strongly aware of the fact that their territorial size is not the decisive factor in their development. Of the ten most developed countries in the world, measured by GDP per inhabitant, only Japan and the USA rank among the seven greatest economic powers; all the others are smaller yet all are major exporters (Switzerland, Finland, Norway, Denmark, Sweden, Luxembourg, Iceland, and Liechtenstein). Similar examples can also be found among the Pacific countries, which are certainly not highly developed according to the dynamics of growth but belong at the world top according to the penetration of their exports. 5000 4500 4000 3500 3000