Slovenia’s National Gallery, which reopened after a major refurbishment in advance of the 25th anniversary of independence this month, is in many ways a monument to the country’s centuries under Austrian rule, which set it apart from the rest of the Balkan region.

The elegant Narodni Dom Palace, built in the final decades of the Austrian empire, was the original home of the gallery. The New Wing was completed in 1993 - just two years after the entire collection was hastily moved into the basements to protect it from harm during Slovenia’s brief war of independence. Finally, the glass entrance hall was finished in 2001, during a period of rapid economic growth and prosperity as Slovenia sped towards EU membership.

It took several decades of planning and preparation before the gallery, which now houses the largest and most comprehensive collection of fine art in the country, was established, according to spokesperson Ziva Rogeli. “Throughout the decades the irrepressible desire of the Slovenes to have their own art institution was kept alive - a desire that was ultimately fulfilled in 1925,” Rogeli says.

The collection dates from the 1220s through to 2000, for most of which time Slovenia was under Austrian rule. Its centuries under the Habsburgs rather than - like most of the Balkans - the Ottoman empire, set Slovenia apart from the other territories that later became part of Yugoslavia in terms of economic development, education and the emergence of the middle class.

This legacy is still relevant today. In many ways, Slovenia is more Central European than Balkan, argues Lea Prijon, assistant professor at the School of Advanced Social Studies (FUDS) in Nova Gorica. “Even if the Slovenian political and economic system is more similar to those in Eastern countries, Slovenia’s cultural framework is based on Western Christian foundations and is therefore more culturally similar to Western Europe.”

Economically too, Slovenia’s primary links are with West European EU member states, particularly Austria, Germany, France and Italy. The port of Koper on Slovenia’s Adriatic coast has become an important maritime gateway to Central Europe, including parts of Germany. Transport links from the port are oriented towards CEE rather than its Balkan neighbours. As a result, the port already handles over three-quarters of Hungary’s container transshipments.

There are now plans to build a second railway line connecting the port to the inland hub of Divaca, at a cost of around €1.4bn, and foreign governments interested in co-financing include Austria, the Czech Republic, Hungary and the German states of Bavaria and Baden-Wurttemberg, according to local media reports.

By contrast, many of Slovenia’s links to fellow former Yugoslavian republics were severed when it became the first country to split from the federation. This happened relatively painlessly in a 10-day war in June-July 1991 that ended in a resounding victory for Slovenia with just 66 fatalities. Slovenia’s relatively ethnic homogeneity has also helped it to avoid the conflicts that devastated the rest of the region; over 83% of the population were Slovenes according to the 2002 census.

Balkan Switzerland

Slovenian was already the most prosperous of the Yugoslavian republics, and its GDP per capita leapt ahead of EU members Greece and Portugal shortly after independence. While the other republics were fighting during the 1990s, Slovenia was growing its economy, which expanded by an average of 3.8% a year between 1993 and 2003, the year before it became one of the first wave of EU entrants from the former Communist bloc.

Almost all development indicators - from GDP per capita to corruption perceptions to media freedom - put Slovenia among CEE or Western European countries, rather than its peers from the Balkans. “Only Croatia is catching up with Slovenia as the other countries of Southeast Europe are still lagging behind in their development, despite the reduced trend of Slovenian development between 2004 and 2008,” says Prijon.

Prosperity and peace earned Slovenia the nickname the “Switzerland of the Balkans” and gave the government space to think strategically, for example in developing the country’s brand - the ‘I feel Slovenia’ brand was launched in 2007 in an attempt to attract both tourists and investors.

“A strong brand gives the country and its products and services an additional strength. Just like other countries, Slovenia has to strengthen its position on the world map,” says ‘I feel Slovenia’ brand manager Polona Prešeren from the government communications office. The brand highlights the word ‘love’ within ‘Slovenia’, and its colour reflects the fact that Slovenia is one of the greenest countries in Europe with forests covering two-thirds of its territory, as well as its citizens’ passion for outdoor activities. “‘I feel Slovenia’ is an emotional brand, and this sets it apart from the brands of other countries,” Prešeren adds.

“Of course, the economic crisis was a test for our country and our brand. But, the way we see things today, it was worth putting so much effort into nation branding. We believe it helped Slovenia in building its image and profile internationally.”

But Slovenia is no straightforward mountain paradise. The extremely polarised political scene has stymied reform efforts, an issue that is likely to hamper future economic growth. “Every social, political, economic and cultural aspect of Slovenia is polarised. The whole structure of society is fractured, and this has been extremely detrimental towards finding a living compromise between different factions,” says Igor Guardiancich, assistant professor at the University of Southern Denmark.

There have recently been some changes, in particular the emergence of the Party for Modern Centre (SMC), whose leader Miro Cerar became prime minister in 2014, illustrating Slovenians’ weariness with the existing political situation. “At least the seeds of some improvement should have been planted, though this may be wishful thinking on my part,” says Guardiancich.

Until then, the polarised political scene held back reform, in particular privatisation, which is one of the most contentious issues in Slovenia - something the country has in common with other former Yugoslavian states. Guardiancich attributes this partly to Slovenia’s long history under foreign occupation. However, he adds that a bigger problem than the ownership structure is “the type of governance structures inherited from socialist Yugoslavia and the absolutely inefficient privatisation process”.

Substantial parts of the economy remain in state hands. An attempt to sell one of Slovenia’s largest and most profitable companies, telecoms incumbent Telekom Slovenije, flopped in 2014. Plans to sell the country’s largest bank, Nova Ljubljanska Banca (NLB) could also be held back by controversy over the appointment of new board members.

Both Guardiancich and Prijon warn that the lack of deep structural reforms could hold back Slovenia’s growth in future. “The unstable equilibrium endured for the first 15 years of sustained growth because Slovenia was catching up,” Guardiancich says, but notes that even before the crisis, growth started to slow and concerns were raised about the future. “Slovenian exports were slowly losing their competitiveness ... all the symptoms were piling up, rendering the economy more vulnerable in time.”

Meanwhile, Prijon points to the relatively low levels of FDI in Slovenia compared to CEE countries, and criticises the “non-transparent ownership transformations along with a non-liberal economic system dominated by strong centralisation ... which remain the key legacy of the Slovenian economic transition.” These factors reduce the potential of the Slovenian economy, she concludes.

Slovenia is still far ahead of other countries from the region; even Croatia, the only other ex-Yugoslavian EU member, is in no danger of catching it up any time soon. GDP growth has rebounded since the crisis, and despite a small dip this year, is set to revive to a healthy 2.3% in 2017 according to the European Commission. However, in the longer-term, Slovenia will have to pursue reforms, specifically privatisation, if it is to remain competitive.

This article is part of a series bne IntelliNews is running to mark the 25th anniversary of the split of Yugoslavia on June 25.