Geert Bekaert and Campbell R. Harvey's
Chronology of Economic, Political and Financial Events in Emerging Markets
Major Political and Economic Events
Adoption of two federal laws: Securities Market Act and Capital Market Act provided the necessary legal basis for the re-establishment and re-opening of the Slovenian capital market. ff
The Ljubljana Stock Exchange was officially established.ff
Banking crises (1990s).a2
The ratios of foreign exchange deposits that deposit money banks are required to hold abroad as covered against domestically held foreign exchange deposits were changed to 5-90%, depending on the maturity of deposits.a3(first entry)
Commercial banks were allowed to extend foreign exchange credits to resident juridical persons.a3
Restrictions on short-term bank borrowing abroad were changed.a3
A new Securities Market Act was adopted, which offered a legal basis for LJSE operations.ff
Restrictions on the transferability of tolar balances held by certain nonresidents were eliminated.a3
Short-term bank borrowing was restricted.a3
The introduction of the Insider Trading Laws.a4
The Law on Customs and Tariffs, covering more than 12,000 items with tariff rates ranging up to 24%, came into effect.a3
The maturity of loans borrowed abroad by residents subject to 40% interest-free deposit requirements was extended from 5 years to 7 years.a3
TLjubljana Stock Exchange was included in CESI (Central European Stock Index). ff
A 10% interest-free deposit requirement was introduced applicable to loans borrowed abroad by residents with maturities of more than 7 years.a3
Imposition of tax on capital gains deriving from trading in securities for domestic and foreign individuals. ff
(Controls on credit operations) Domestic banks were allowed to extend financial credits to nonresidents in accordance with their policy. Domestic companies, other than banks, may extend financial credits to companies they control.a3
(Controls on capital and money market instruments) Nonresidents are required to conduct their portfolio investments in the secondary market-traded securities and derivatives, through custody accounts established with licensed domestic banks.a3
Decree of the Bank of Slovenia. Custody accounts are obligatory for all foreign portfolio investments. Furthermore these custody accounts and - foreign currency reserves to the amount of funds on the account- should appear on the balance sheet of the Slovene bank maintaining such an account.ff
(Controls on credit operations) The interest-free deposit requirement for loans raised abroad to set up a company abroad or to increase the capital or to purchase a share in a foreign company was removed.a3
(Provisions specific to institutional investors) The BOS adopted a new prudential regulation demanding banks to gradually limit their daily foreign exchange exposure to 20% of their capital.a3
(Controls on credit operations) Domestic companies, other than banks, were granted permission to extend financial credits to affiliated companies.a3
Relaxation of limitations for foreign portfolio investors that were imposed by the Slovene central bank in February 1997. From this date on, the Bank allows foreign investors to buy Slovene securities without balancing foreign exchange position for the amount invested. Foreign investors have to undertake the obligation not to sell the securities for a period of 7 years. ff
(Controls on personal capital movements) The Constitution was amended as: nonresidents were granted permission to acquire the right to own real estate pursuant to provisions of a law or an international agreement, under the condition of reciporcity.a3
The BOS adopted an amendment to the regulation to allow banks to exempt from the balancing requirement the portfolio investment in shares acquired by nonresidents who undertake in the subsequent seven years not to sell, assign or otherwise dispose of these securities to third parties, except to other nonresidents who in turn make the same seven-year commitment.a3
LJSE was admitted as a full member to the International Association of Stock Exchanges - FIBV. ff
(Controls on credit operations) The Slovenian Export Corporation was granted permission to extend financial credits to nonresidents in accordance with its business strategy.a3
(Controls on credit operations) The interest-free deposit requirement for the loans raised abroad by the Slovenian Export Corporation no longer applied if the proceeds of the loan were used for credits extended to nonresidents.a3
(Provisions specific to institutional investors) The BOS shortened the period in which banks were required to limit their daily foreign exchange exposure to 20% of their capital, from July 1, 2002, to July 1, 2000.a3
The first trading day of LJSE. Shares of first two Investment Funds - Kompas sklad 1, Inc., Kompas sklad 2, Inc. were listed. ff
Trading of Lek, a pharmaceutical company, was suspended after its shares surged past the daily fluctuation limit of 30%.
The exchange abolished its rule that halted trading on an equity whose price moved 30% up or down.
Slovenian banks agreed to lower interest rates by one to one-and-half percentage points in July.
Slovenia's central bank tightened portfolio investment rules requiring foreign investors to wait seven years before selling Slovenian securities back to domestic investors.
(Provisions specific to commercial banks and other credit institutions) Banks were obliged to limit their daily foreign exchange exposure to 20% of their capital.a3
(Provisions specific to commercial banks and other credit institutions) Banks were obliged to limit their monthly foreign exchange exposure to 10% of their capital.a3
The first prosecution under the Insider Trading Laws.a4
The Bank of Slovenia cut the minimum period that foreign portfolio investors were required to hold shares to four years from seven year. Another law, aimed at liberalizing foreign portfolio investment rules, proposed to consider any foreign investment representing more than 10% of a company's share capital as direct investment.
(Provisions specific to commercial banks and other credit institutions) The method for calculating liquid asset requirements for banks has been changed.a3
(Provisions specific to commercial banks and other credit institutions) Banks were allowed to increase their net foreign indebtedness.a3
(Controls on capital and money market instruments) The new foreign exchange law introduced changes in the rules on issuing and selling securities. (Controls on credit operations) The deposit requirement for financial loans was eliminated. (Controls on direct investment) Foreign banks wre allowed to open branches in Slovenia. (Controls on personal capital movements) Individuals were allowed to contract loans with nonresidents. (Provisions specific to commercial banks and other credit institutions) The interest-free deposit requirement in relation to deposits of foreign banks was eliminated. Banks were allowed to raise short-term loans abroad and the interest-free deposit requirement for pure financial loans with maturities of up to 7 years was lifted.a3
Top managements at both drugmaker Lek and SKB Banka were suddenly reorganized.
(Controls on capital and money market instruments) The new foreign exchange law introduced changes in the rules on issuing and selling securities.a3
(Controls on direct investment) Outward direct investment must be reported to the MOF within 30 days, and inward direct investments are not possible in the field of military equipment and in the field of mandatory pension and health insurance financed by the budget. In other sectors, foreign investments are free, unless restricted by a special law. (Provisions specific to commercial banks and other credit institutions) Funds obtained through foreign exchange loans contracted with authorized domestic banks must be used only for import payments and for settlement of foreign obligaitons.a3
The government passed the Securities Market Act, ensuring a more regulated market. The Central Clearing Corporation closed issues of dematerialized shares of joint stock companies.
(Controls on capital and money market instruments) Residents offering shares abroad were obilged to acquire the prior approval of the MOF and the ASM. The issue of bonds by nonresidents requires the permission of the MOF.a3
(Controls on direct investment) Outward direct investments were permitted, but must be reported within 30 days to the MOF.a3
(Other controls imposed by securities laws) A new law on Securities Markets came into effect, lifting the limitations on foreign ownership of stock brokering companies.a3
New value-added taxes were introduced, increasing the tax burden for companies. Trading in investment funds was temporarily suspended, but it was resumed in August.
The holding period was reduced from four years to one year for a custodian account and the quarterly charge for the account was lowered from 2.5% to 0.7%.
(Controls on capital and money market instruments) Conditions on the purchase of money market investments by nonresidents are set by the BOS. Commercial banks must pay a premium on the balances of custody accounts of nonresidents held for one year or more. Residents may purchase abroad only shares traded on the stock exchanges of the FIBV. Banks, investment funds, and insurance companies were allowed to purchase securities abroad freely. Other residents may purchase securities issued by OECD member states, international finance institutions, securities with a minimum of an AA rating, or securities traded on stock exchanges of the FIBV. (Controls on credit operations) All controls on financial credits were eliminated.a3
(Provisions specific to commercial banks and other credit institutions) Controls on the accounts of banks held abroad were eliminated. Domestic authorized banks were allowed to extend credits in foreign exchange to other authorized banks and to residents.a3
The central bank announced that it would not relax rules for FDI further over the next three years.
A coalition shakeup created political turmoil.
Prime Minister Janez Drnovsek, who had been in power for eight years, lost a vote of confidence.
Andres Bajuk, nominated by the opposition coalition, won the third vote on May 3. But the cabinet he proposed was rejected on May 24.
The ruling coalition split after a vote on the new election law, but agreed to maintain the government until November.
The Bank of Slovenia reduced restrictions on foreign portfolio investment, reducing the quarterly fee of 0.5% to 0.4% for investors holding domestic securities less than one year.
The Liberal Democrats of Slovenia won parliamentary elections.
Prime Minister Janez Drnovsek returned to office, laying out three policy goals: joining the EU, joining NATO, and speeding up privatization.
Stock Exchange market segments A and B merged into a single Official market.ff
Slovenia closed additional chapters in its EU accession negotiations.
By June, the three largest banks were sold.
Bank of Slovenia lifted all restrictions on foreign portfolio investments in the Slovenian capital market. ff
Foreign ownership in Slovenian-listed companies grew 30% in 2001's last two months. 14 authorized investment companies were transformed in 2001.
New system of electronic information dissemination - SEOnet was launched. ff
020121 The Slovene National Assembly has begun debating the privatisation of banks a month after the IMF urged a speed-up of the financial sector reform process. Prime Minister Janez Drnovsek has said that the sell-offs are needed to cover the country's public debt. However, the opposition Social Democratic Party leader, Janez Jansa, has argued against privatisation unless the country's public interest is first debated. Slovenia has a reputation for taking a nationalistic approach in running its economy and for not welcoming foreign investment
020517 The Bank of Slovenia yesterday increased its annual inflation forecast for 2002 from 5.8% at year-end to 7%. The bank believes that inflation will be fuelled above its original expectations by what it describes as temporary pressures, notably the rises in indirect taxes, but also through the increase in the global oil price.
020711 Following a battle between trade unions and shopkeepers, the Economy Ministry has drafted amendments to Slovenian retail law that could restrict shopkeepers to a six-day working week. According to the ministry, the draft legislation represents a compromise between the two parties.
020814 The Central Bank is to investigate the request of KBC, the Belgian banking and insurance group, for the acquisition of a 34% qualifying share in Slovenia's largest bank, the Nova Ljubljanska Banka (NLB).
021023 Slovenia experienced record growth in foreign direct investment (FDI) during 2001, with the figures released by the Slovenian Central Bank indicating a 10.9% rise - the highest since 1997. Austria was the largest investor in Slovenia, followed by other European Union (EU) member states, contributing a significant portion of the US$3.2bn total invested in financial services, telecommunications, manufacturing and other industries.
021105 Swiss pharmaceutical giant Novartis has announced its intention to purchase a 57.28% share in the second-largest Slovenian pharmaceutical firm, Lek, instead of the planned 51%.
021121 The Slovenian central bank recently increased its inflation forecast by 0.4 percentage points due to 'unexpected fiscal measures' - an increase in supervised prices and a tax shock - thus raising concerns over the country's ability to decelerate the growth of prices, at least before the end of 2002. The bank had originally indicated that the 7.2% inflation rate in October this year should level out at 7.1% for the year-end, although it is continuing to follow a sliding foreign-exchange system and a restrictive interest rate policy.
021213 As expected, Finance Minister Anton Rop has been appointed prime minister, and will replace Janez Drnovsek, who has stepped down from the position in order to become president
021223 Janez Drnovsek has officially taken office as Slovenian president, replacing Milan Kucan, following the recent elections in the country.
030224 During 2002 Slovenia recorded the highest balance of payments surplus in the past eight years. According to preliminary data, the surplus topped 392.5m (US$421.4m), or 1.7% of the country's GDP, rising from 30.9m euro (US$33.18m). The trade balance deficit of around 260.7m euro (US$280m) depressed the figure somewhat, which was nevertheless boosted by the 591.6m euro (US$635.2m) surplus in services, amongst other factors.
030324 Slovenians took to the polls this weekend to vote in two binding referenda on membership of the EU (European Union) and NATO. Poll results showed that Slovenians had backed membership of NATO by a 66.1% majority, with an even higher number of voters (89.6%) in favour of EU membership.
030507 Ratings agency Fitch upgraded its long-term foreign currency rating on the Slovenian sovereign on 6 May. The rating moves upwards from A to A+, with the outlook on the rating improved from stable to positive. The upgrade is pinned on the improvement in the country's economic performance and its closeness to the markets of Austria and Southern Germany.
030818 Slovenia's trade deficit widened to 487.9m euro in the first six months of the year, despite the fact that economic growth has slowed. The deficit widened as imports increased by 5.4% against the same period last year, while exports managed only moderate growth of 2.4%.
031117 The Slovenian trade deficit widened during the first nine months of the year as imports rose by 5.6%, above import growth of 2.3%. The nine-month trade deficit stood at 648.2m euro (US$765.71m).
040121 The European Investment Bank (EIB) has awarded a loan of 75m euro (US$95m) to finance municipality and small-and-medium enterprise (SME) projects in Slovenia. The loan is being made to Nova Ljublianksa Banka (NLB), and is intended for a range of uses to include energy, infrastructure, urban renewal, industry and services, as well as a number of social and cultural areas.
040209 Slovene authorities are reporting a sharp uptick in inflation during January, with consumer prices reported to have risen 0.4% on the month from December. On an annualised basis, the rate of inflation stands at 4%. Month-on-month inflation accelerated from 0.1% in December, though year-on-year it has decelerated from 4.6%.
040224 The opinion-poll ratings of both Slovenia's main parties, the ruling centre-left Liberal Democracy of Slovenia (LDS) and the centre-right opposition Slovene Democratic Party (SDS), have fallen, according to the latest poll, published in the daily Dnevnik yesterday.
040308 Amendments to Slovenia's banking legislation have been adopted by the government, bringing it into line with European Union (EU) directives, reports BBC Monitoring. The amendments include determining the procedure for appointing supervisors to banks.
040323 The Ministry of Labour and Social Affairs is set to lower visa quotas for workers from non-European Union states, reports BBC Monitoring. A quota for 2004 is estimated to be in the region of 16,900, according to the Ministry, which admits this is a lower figure than in previous years.
040423 A government bill to augment the efficiency of financial market operations has been approved by parliament, reports Slovenska Tiskovna Agencija. The bill is part of a last-minute effort to pass the remaining legislation to bring Slovenia in line with European Union (EU) directives ahead of the start of its membership of the bloc on 1 May.
040514 Ratings agency Standard and Poor's (S&P) yesterday upgraded its long-term foreign currency ratings on the Slovene economy from 'A+' to 'AA-'. The rating comes with a stable outlook. S&P pinned its upgrade on the ability of the authorities to maintain a tight fiscal position, whilst at the same time keeping to inflation targets. The economy is open, diversified and has good flows of foreign exchange.
040618 Slovenia's Central Bank cut key interest rates yesterday, lowering the Lombard rate by 25 basis points to 5%, with the bank's 60-day deposit rate being slashed by the same amount to 4%. The Bank has ease its Lombard rate several times over the course of the year, coming down from 7.25% at the end of 2003.
Regulations on Foreign Investors

Restrictions: Repatriation of foreign and domestic securities is subject to approval of the Bank of Slovenia.

Taxation: 15% dividend tax. 30% corporate taxes on capital gains, and zero capital-gains tax on individuals.a6


Restrictions: All share trading must be conducted through LISE members based in Slovenia and through a custodian account opened at the authorized bank. Foreign portfolio investors who sold shares bought in the Slovenian capital market to the local market participants within 1 year (reduced from 7 years from Sep. 1, 1999) had incurred excessive 8-12% annual custody charges. Foreign investors can acquire 25% or higher share in the equity capital of the companies.

Taxation: No change for dividend tax. As of Jan. 1997, foreign individual investors are subject to a capital gain tax, which is not applicable if a security is held in a portfolio for more than 3 years. 25% corporate income tax, while the foreign legal entities do not pay the capital gains tax on share transactions in Slovenia.a7


The European Bank of Reconstruction and Development (EBRD) released a report in April 2000 berating Slovenia for a 'certain resistance' to foreign investment. Nevertheless, there are signs that the country's past introspective attitude toward foreign investment may be changing; a government scheme promoting FDI has been in place since 2000. The 2003 budget gave indication that the climate may be improving, envisaging growth in investments and exports.
he capital gains tax on share transactions in Slovenia.a7


The European Bank of Reconstruction and Development (EBRD) released a report in April 2000 berating Slovenia for a 'certain resistance' to foreign investment. Nevertheless, there are signs that the country's past introspective attitude toward foreign investment may be changing; a government scheme promoting FDI has been in place since 2000. The 2003 budget gave indication that the climate may be improving, envisaging growth in investments and exports.