Branch Development

27.03.2008

 

Both the construction and building materials industries, which are largely dependent on trends in the construction sector, were among Slovenia's most active industries in the post-World War II period as various constructions were being put in place in the period from 1945 to 1989 in different sectors, ranging from economy and administration to the residential buildings sector.

    

Throughout this entire period Slovenian construction companies played an important role in quality construction in Slovenia as well as in other republics of the former Yugoslavia, but were also renowned in other countries, particularly in the former German Democratic Republic, the former Soviet Union, Iraq, Libya, as well as in other developed countries (notably in the Federal Republic of Germany) and in developing countries. Of these, medium and large companies were predominant and, with the exception of the finishing construction works sector, small companies were not present. During this period more than 100,000 workers were employed in the construction sector, generating over 10 percent of Slovenia's gross domestic product (GDP).

    

The political, economic, system and territorial changes in the area of former Yugoslavia and former eastern socialist countries, the Gulf War and the decrease in the variety of investments in Slovenia triggered off a huge crisis in construction in 1990 and 1991, which eventually resulted in the downsizing of all companies, as well as in the collapse of some large construction companies; only the most prosperous companies in the building materials industry survived, since they had been concerned with development and technology in their respective companies long before the onset of the crisis. The structure of companies according to their size was gradually adjusted to the real construction business structure, in that period particularly based on the renovations and reconstructions of already existing buildings, for which small companies were far more appropriate.

    

This period saw the establishment of many small companies, which succeeded in finding market niches in the modified market situation. Both the number of employees in the construction sector as well as the share of GDP halved by 1994.

 

The recovery from the crisis in the construction and building materials industry began with the motorway construction programme in Slovenia in 1994 and 1995. The biggest share of business for large companies, otherwise capital- and personnel- impoverished, was generated from the construction of motorway sections, which enabled small-sized companies to become oriented towards other segments of the construction market. Over the following years investments in public administration, education and healthcare took place; the companies, however, gradually invested more in the increase of their capacities, and residential construction started to increase. Investments in other infrastructure projects became increasingly important (railway, energy) which in turn contributed to much more favourable conditions for the construction and building materials industry.

    

The second half of 2000 witnessed a renewed recession which was due explicitly to the decrease in state orders and the gradual limitation of the motorway construction programme, continuing also in 2001 and 2002. In the second half of 2002 and in 2003 the motorway programme again started to grow, while the construction of buildings slowly decreased.

    

From 2004 onward we have the great growth in construction sector due to releases of the housing saving schemes, increased motor way programme, energy and ecological investments, new investment cycle of  industry, bussiness and tourist facilities. In near future it will be the most important investments in railway sector. All these positive trends are mostly due to enter Slovenia in European Union in 2004 and in EURO ZONE in 2007.    

    

Slovenian construction companies continued working abroad throughout the 1991-2007 period, yet the exports volume was smaller, especially in the years 1998-2001, compared to the preceding years. The activities, particularly in developed countries (for instance in Germany), were somewhat reduced as the economic recession in these countries resulted in the restriction of conditions for the acquisition of work permits, while in some countries (particularly in Austria) it is practically impossible to acquire work permits. Since 1998, the Russian Federation has experienced an enormous decline due to crises in the economic and monetary sectors. This facts ended in 2000 and construction works in RF fro this time icreased to 45% of all works in 2007. The infrastructure restoration and construction processes in South-eastern European countries are now in progress. Slovenian construction companies from 2002 to 2007 worked in these countries especially in Croatia, Bosnia and Herzegovina, Serbia, Montenegro and FRY Macedonia.

    

The export market for the Slovenian building materials industry is truly limited due to the large share of logistical costs, yet the exports to the neighbouring countries (some lists also include slightly more distant countries) amount to 16 percent of total output (the percentage varies according to product groups).

    

However, there are large international companies' acquisitions of companies in this industry in addition to domestic takeovers, therefore manufacturing is being thoroughly restructured into a capital and technology intensive industry with a minor participation of labour force and with quality products.

 

Author: Borut Grzinic, Director of the Construction and Building Materials Association