INTERNATIONAL BUSINESS: EU 2020 AGENDA: REVIEWING PERFORMANCE
International Business: EU 2020 Agenda: Reviewing Performance
Executive summary
It has been determined that the country faced the economic crisis due to several reasons from which some include relatively low competitiveness, low complexity in term of technology, structural weaknesses, and rigid environment of the business. For overcoming these weaknesses, European Union just not proposed some recommendation to the country, but also supported the country through financial help. The country to overcome its weaknesses restructured its policies and brought several reforms that were aligned with the European Union’s recommendations. These policies helped the country in gaining substantial growth, and it is expected that the country will continue to maintain its sustainable growth. However, it has been determined that the growth of the country is export driven that makes the country dependent upon the demand of other countries. Therefore, Slovenia needs to develop policies that can help the country in recovering the domestic demand of the country. Through the restructuring and implementation of new policies, the country gained impressive growth, and it seems that to reach the 2020 agenda is possible for the country. However, the country for more sustainable growth has to introduce more reforms. Restructuring and policing is a never-ending road for countries that prefer constant growth. Therefore, it has been determined that despite the immense growth, still there is a lot of work that is required to be done by the country.
The aim of this section is to determine the performance of Slovenia as compared to its European Union neighbor. For the attainment of this objective, four indicators have been selected that include employment, gross domestic products (GDP), and consumer price index (CPI), and retail sales (American Association of Individual Investors, 2016). These are the indicators that are most commonly used by private companies, government agencies, and non-profit organizations to measure the performance of any country. Gross domestic product (GDP) is selected to gauge the performance of the country because it is a comprehensive way of analyzing the well-being and health of the economy. It may be the best measure of the overall condition of the economy (Econ, 1999; Koba, 2011). However, according to some researches, Gross domestic product (GDP) alone is not a perfect measure for assessing prosperity and growth (Dobbs et al., 2015). Measuring performance through a single indicator may not be an appropriate decision. Therefore, three other measures have been used as well (Babbie, 2016). GDP communicates the wealth of the society by indicating that how fast the return is expected on capital and profit may grow. Increased production of domestic goods and services means the demand for these services and goods is increasing and to fulfill the demand, organizations enhancing their production level that reflects in GDP.
(World Bank, 2016a)
The above chart has been derived from the data of World Bank, and it is visible from the image that the condition of the country as compares to other EU neighbors is better (World Bank, 2016a). In comparison to other European Union neighbor countries, the economy of Slovenia is improving faster, and the nation is moving forward as the increased production of goods and services at domestic landscape communicates that income and spending are increasing. This single indicator communicates that the living standard of the citizen is improving relatively (Amadeo, 2015; Modi, 2014).
The second indicator used for assessing the performance of the country is consumer price index (CPI). Consumer price index (CPI) nearly affect all people and used in multiple ways. For example, it can be used as an economic indicator, as a mean of adjusting the value of the dollar, and as a deflator of the series of other economies (United States Department of Labor, 2016). In this paper, the consumer price index (CPI) has been used as an inflation indicator. It is considered that inflation has a negative impact on economic performance (Li, 2006). According to the narrow view of a central bank of the United States, maintaining stable and low rate of inflation is pivotal for promoting high output and employments. However, neither existing studies and nor economic theories support this justification (Ashraf, Gershman & Howitt, 2013).
(World Bank, 2016b)
Akerlof, William, & George (1996) and Fortin (1996) in their studies argued that to reduce the inflation at the level that it get close to zero worsen the performance of the economy because of the descending rigidity of nominal wage. In contrast, if the rate of inflation is too low, then it can result in real instability because of the nil minor bound on the rates of nominal interest. From the above image; it is clear that the inflation rate in Slovenia is lower as compared to the other EU neighboring countries, but it is not equal or near to zero. Therefore, the inflation rate of the country, which is neither too high nor too low communicates that the output performance of the country is improving as compared to other countries. Slovenia has potential to grow more as increased inflation through encouraging the level of output; productivity will encourage the economic growth (Umaru & Zubairu, 2012).
The third indicator of the country’s overall performance is employment rate. Employment is an important indicator of the growth of the economy because growth in a single sector of the country will automatically translate the benefit of the poor in term of employment. If the employment rate in any economy is improving its means that the sectoral productivity is improving (Hull, 2009).
(World Bank, 2016c)
Although the employment rate in Slovenia has decreased relative to 2011, but the country is again improving from 2013 until now. According to the report of the European Commission (2015), the unemployment rate in Slovenia in 2014 was below the average rate of European Union and fallen up to 9.8 percent. The rate is constantly decreasing and expected to decline further. The improved rate of employment as compared to other European Union countries except Austria clearly converses the overall good performance of the country. The employment rate of Austria is better than Slovenia, but according to the data, Austria is facing a constant decline in employment (Al-Habees & Abu Rumman, 2012).
The fourth and last indicator is used to gauge the country’s performance is the retail sale rate of the country. It is an important economic performance indicator and determined very closely by investors and economist. Retail sales communicate the exact amount that has been sold to consumers. Therefore, it is a measure that reflects the buying power of consumers and therefore, the good economic performance of the country. Increased in retail sales reflects the improved living standard of people in the country, which results from the good economic performance.
The online retail sales of the country are improving constantly from 2012 and in term of retail sales turnover, the country comes at number 8 amongst the European Union neighboring countries as shown in the image below (Ecommerce Europe, 2015):
(Ecommerce Europe, 2015)
The improved retail sales percentage is a good sign and reflects the good performance of the country. It is expected that the sales of the country will continue to grow (BMI Research, 2016).
The overall data converses that the performance of the country is better as compared to the other European Union neighboring countries as all indicators are showing the positive impact on the company. However, the country needs to improve its retail sales performance because in retail sector the performance of the country as compared to others is not encouraging.
Slovenia strategies and sustainable growth
For the long-term success of the country, it is essential that countries make some policies that can lead the country’s sustainable growth. Slovenia is involved with the cross border cooperation program adapted by the European Commission for Slovenia. The arrangement was done to ensure that the country is aligned with the strategy of the union for inclusive, smart, and sustainable growth. The value of the program is € 18.6 million. The aim of this program is to concentrate on the growth of the tourism sector, as it is the major competitive industry of Slovenia. In addition, the program will also support the non-governmental and governmental companies for the development of the common solution for social services and healthcare (European Commission, 2015; Republic Of Slovenia Ministry Of Economic Development And Technology, 2012). By being a fully-fledged member state of the European Union, the country is fully committed to the contribution to the strategy of the union for all three areas of growth in accordance with the national and European Union legislation. The country shows its commitment through presenting stability program and national reform program on an annual basis. The country signed another partnership agreement with the European Union for the mobilization of European Union investments and structural funds in favor of employment and growth of the country for the period of 2014-2020 (Welcome Europe, 2014).
Evaluation of government policies in growth area
It has been determined that the country faced the economic crisis because of its structural weaknesses, relatively low competitiveness, and low complexity in term of technology and rigid environment of the business. The rigid business environment includes inflexibility in the labor market, high burden of taxes on workers, and administrative barriers (CCI, 2013; Unites States of America Department of Commerce, 2010). The country’s structural weaknesses were the result of the Yugoslavia old system of organization self-management. However, for correcting the structural weaknesses, the country made urgent policies; Slovenia restructured and privatized corporations and banks. The country introduced new labor market and pension reforms and started fiscal consolidation (Ljubljana, 2012; OECD, 2014; Poljak & Lautar, 2010). The country enjoyed major progress in restructuring its banks through separating the liabilities and assets that were related to the Yugoslavia’s former socialist federal republic, and through the write off portfolio loans. These structural reforms benefited the country - that is visible from its improved GDP and other economic indicators - and helped in correcting the excessive imbalance of macroeconomic (European Commission, 2016a). Slovenia made huge progress that has been appreciated by several countries, but this is not the end of the road the country needs more reforms that can strengthen the country’s long-term growth (Jutro, 2015). The rigid business environment of the country has started evolving in recent years. The country took considerable measures to encourage foreign direct investments that just not contributed in improving its climate for investors but also improved the technological competitiveness of the country (IBP, 2012).
2.1 Government measures to improve growth
The country has adapted some measures and implementing them to correct the deficient, reach the objectives, safeguard spending, correct fiscal imbalance, and improve the compliance of taxes by the year of 2017. The further aim of these measures is to improve the business environment and key economic areas with the purpose of attracting FDI and reducing administrative burden. The government implemented numerous policy measures for improving the long-term sustainability of its banking industry. The country addressed the corporate sector vulnerabilities through some corporations’ financial and operational restructuring. Moreover, the country is constantly revising its legislative framework and restructuring of multiple mid, and small size companies is in the process. Slovenia sovereign has appointed new management boards and supervisory with respect to the ownership of the state (European Commission, 2016b).
Lessons to be learned from Slovenia about 2020 agenda
The country is making constant progress towards the 2020 agenda. It has been learned from the country that is rather sticking with old policies, countries must consider the root cause of the issues and then introduce policy measures that can derive the performance of the country, for addressing the structural issues, it is essential that prompt and strong policy actions are taken. Long-term growth just not demands stability in financial areas, but also requires the strengthening of the regulatory framework. It has been examined that for sustainable growth constant efforts are necessary. The structural changes that have been adapted to the country are already significant, but additional consolidation is required (IMF, 2012). Apart from the structural changes, it is pivotal to understand the role of globalization in driving the sustainable growth of countries (Inotia, 2007). Slovenia enhanced its growth sustainability through enhancing the rapid integration with the markets of the world. Global integration helped the country in improving its technological competitiveness – that was amongst the major causes of disturbing the country - through inwards foreign direct investment (OECD, 2015a). If the inward foreign direct investments are used appropriately that can help countries in overcoming several issues and enhancing competitiveness (Cutter, 1999; European Commission, 2016c). Sustainable policies have played and playing an impressive role in the inclusive and sustainable growth of the country that has a positive impact on the 2020 agenda, but it has been determined that the country needs more efforts. Information plays an important role in making suitable policies (OECD, 2015b). Slovenia recognized the importance of this factors and the country accedes for the adaption of the open access for the scientific information mandate that was aligned with the European Union’s recommendations (Government of the Republic of Slovenia, 2015; Tarazona Rua et al., 2015). The country was proposed with some recommendations by the European Union to overcome the crisis and improve the sustainable growth. It has been determined that the country is constantly taking and implementing new measures that are aligned with the recommendations. The examination of the country policies and its measures taught the lesson that for making the sustainable growth possible, concentration on a single area is not enough. For long-term success, countries need multiple reforms, constant evaluation of implemented policies, and restructuring efforts. Initiatives towards the sustainable performance of the country are never ending road. The existing efforts or policies of the country do not mean that the country is not significant in its policies. However, for continuing growth, it is essential that new reforms on a constant basis are introduced to deal with upcoming changes in business environment.
Conclusion
It has been determined the Slovenia in 2014, after the decline of more than 9 percent occurred in between 2008 to 2013, rebounded strongly. It is being expected that the GDP of the country will continue to grow. The issue is that the growth of the country is export driven, which means the country for its sustainability depends upon others (MacDowall, 2015; U.S Department of State, 2015). If other countries increase the production of their products or stop buying for Slovenia, then the country may have to face negative consequences. However, the domestic demand of the country has begun to recover, but the country needs to focus on this issue and needs to strengthen the domestic sales trend, as it will enhance the reliability (European Commission, 2016d). The country is giving it's all efforts to overcome the crisis and making its policies that are aligned with the European Union’s proposed recommendation to Slovenia. The country has improved to the greater extent that communicated that the goals of the country are realistic, but still there is a need to work on policies and introduce further reforms for future growth. The country has made multiple agreements with the European Union that provided the country with immense financial support; now there is need to implement these funds appropriately.
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