Slovenia's Next Test Is Economic

AFTER successfully holding off federal forces in its bid for sovereignty, Slovenia faces a financial crisis that could threaten the tiny Alpine republic's economic independence.Though Slovenia's gradual secession from the Yugoslav federation appears to have been grudgingly accepted by federal officials in Belgrade, the republic of 2 million is in desperate need of Western capital, credits, and foreign recognition if it is to survive. So far, no country has recognized the breakaway republic, which declared its independence June 25, making it ineligible to attract loans available from international financial institutions such as the World Bank. Worse, turmoil in Yugoslavia has spooked Western banks and investors, who are wary of sinking money into a volatile region. And there is little indication of stability any time soon. Slovenia, Yugoslavia's most prosperous republic, has managed to hold its own during the multiethnic nation's latest woes. While Yugoslav industrial production slumped by 19 percent in the first quarter of this year, Slovenia's fell by only 11 percent. As Yugoslav exports plummeted by 8.5 percent, Slovenia's have remained stable. Slovenia's parliament yesterday voted 109 to 11 to accept a peace plan intended to avert civil war, Reuters reported. But fighting between Yugoslav Army troops and Slovene defense forces has already ruined the republic's vital tourist industry and damaged airports, roads, and telecommunications facilities. Economics played a significant role in Slovenia's decision to secede from Yugoslavia. The Slovenes say they are tired of bankrolling more economically depressed regions to the south. Though Slovenes make up only 8 percent of Yugoslavia's population, they account for about 20 percent of the federation's gross domestic product and nearly a third of its hard currency exports.

Resolve is firmer The fighting with Yugoslav troops has only strengthened Slovenians' resolve to go it alone and to pursue dreams of becoming as prosperous as their Austrian and Italian neighbors. As federal and Slovene negotiators debate about who will control Slovene borders, and especially who gets to keep substantial customs revenues, even former doubters are becoming convinced that Slovenia must move quickly to secure its economic independence. "Now there really is no way back," says Joze Mencinger, who served as Slovenia's deputy premier responsible for economics until his resignation in May. Mr. Mencinger had favored a slower decoupling from Yugoslavia and was more skeptical than other members of the center-right government about an independent Slovenia's economic viability. He predicts a difficult transition for the republic as it continues to redraw its economy along free-market lines. The republic's fragile economic situation has been further complicated by recent fighting. Slovenia's Adria Airways says it lost $100 million in disrupted flights and from damage to its fleet when Yugoslav air force fighters rocketed Ljubljana's airport. Officials in Ljubljana also claim the fighting caused more than $2.7 billion in damages. The figure is widely considered to be inflated for use as a bargaining chip in future talks over carving up Yugoslavia's debts and assets. While some form of new economic confederation will likely emerge between Yugoslavia's republics, Slovenia will be in the best position to manage a slow recovery. Slovene companies are strong in textiles, household appliances, electronics, telecommunications, wood processing, and leather. Gorenje electrical appliances have sold well in Europe for years, and a sleek telephone designed and manufactured by Ljubljana's Iskra conglomerate has been imitated worldwide. In per capita gross national product, Slovenia ranks higher than two European Community members - Greece and Portugal. But many companies are not up to Western standards. Scores of Slovenian companies set up under Yugoslavia's self-management system are facing bankruptcy. Unemployment, which stood at 5.7 percent at the end of last year, is on the rise.

Slovenia has advantages Nevertheless, Slovenia will start independence with advantages, enhanced by its location and a long tradition of international trade. The Slovene Economics Ministry says the republic attracted the highest share of the nation's direct investments, about 22 percent of 3,550 foreign investments in 1990. Slovenia also has solid markets in the West. Nearly 60 percent of its exports are to the European Community. Says Tone Krasovec, president of the Slovene Federation for Development and Finance: "We don't expect to measure success in Western terms until the current crisis is over. But we'll make it, because our instincts are good and we've learned to be flexible."