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Switzerland Faces Fierce Competition for Multinational Companies
Zurich (ots) - One third of the Swiss GDP is at stake in the international competition around business locations. For Switzerland, five key measures are crucial to win the battle.
Multinational companies, accounting for 34% of the total GDP, are very important to the Swiss economy. The Swiss-American Chamber of Commerce and The Boston Consulting Group have published a study - the second of a three year program - that shows two trends, heading in opposite directions: The contribution of foreign Multinationals to the Swiss GDP grew significantly within the last ten years. But the contribution of Swiss Multinationals to Swiss GDP showed a negative trend. Due to global competition, they have been moving low-cost functions to more attractive and less expensive countries.
Therefore, Switzerland is under pressure from two sides: It must keep attracting foreign companies, but at the same time and through further improvement of its attractiveness as prime business location, it needs as well to motivate the Swiss Multinationals to keep their important operations in Switzerland. The trend of Swiss Multinationals to shift their higher-value-added positions such as R&D functions is especially worrying in this context. The following five measures will be crucial in Switzerland's battle in order to become the best place worldwide for international business: Taxes, simplification of immigration for skilled foreign labor, clear and consistent communication of the highly attractive business location Switzerland, improvement of critical infrastructure capabilities, as well as close collaboration and coordination between all the involved entities.
Multinational companies play a pivotal role in Switzerland's domestic economy, accounting for about a third of the total Swiss GDP: Of that, 10 percent is contributed by foreign Multinationals located in Switzerland, whereas 24 percent of GDP is derived from Swiss Multinationals with more than 25 percent of international revenues and more than 25 percent of total staff abroad. Their impact on the Swiss GDP though differs considerably. In the last couple of years Swiss multinationals moved parts of their functions away from Switzerland, due to global competition. This shift of functions has already resulted in a negative development of Swiss Multinational's contribution to the Swiss GDP. On the other hand, the contribution of foreign Multinationals to the Swiss GDP grew significantly, as shown by "Internationals Companies in Switzerland: The Forgotten Sector" (joint study by the Swiss-American Chamber of Commerce and The Boston Consulting Group, published in 2006).
This year's study is based on profound and intensive analytical research, a survey among more than 100 multinationally active companies and extensive interviews with the CEOs of these companies. By extending the focus to Swiss Multinationals takes the discussion regarding the optimal business location to a new and up to now not yet discussed level: It is not just about retaining the considerable contribution of foreign Multinationals to the domestic GDP and further attracting these companies. It is at least equally important to set the perfect stage for Swiss Multinationals for them to retain their key functions in Switzerland. This applies to higher-value-added positions in particular, because other countries are competing very hard to attract Swiss Multinationals at the same time as Switzerland is competing to attract foreign Multinationals.
In the battle for foreign Multinationals, Switzerland has large advantages. But competition is highly dynamic and has become even fiercer within the last years. Other countries can respond more quickly and more focused to this development as the structure of their political systems are far less complicated. If Switzerland wants to retain and extend its excellent position, many additional efforts will be necessary.
The study provides a reliable basis for a five-step plan to help Switzerland ensure long-term attractiveness for Multinational companies:
1. Taxes: at least holding up current tax situation in Switzerland; in certain fiscal issues, additional initiatives will be necessary to remain competitive.
2. Skilled and specialized labor: Strengthening of the education system, facilitating immigration process for highly qualified people (from non-EU countries as well) in order to let Switzerland become the leading know-how pool. A number of measures to achieve this goal are proposed in the study, including work permits secured by companies.
3. Keeping amenities and infrastructure on a par with the international state of the art, for example airline connections, IT infrastructure and international schooling.
4. National cooperation: Developing collaboration among cantons and providing a consistent Swiss interface, especially to foreign Multinationals.
5. Communication: Massive improvement in selling Switzerland as "The Best Place to Do Business", in addition to promoting Switzerland as a great place for Heidi Land tourism.
34% of the Swiss GDP is subject to the global race for business locations. It is in the hands of decision makers in parliament and government to put our largest economic sector at stake, or to take advantage of Switzerland's enormous potential and steadily drive the country towards sustained economic growth.
The study is available online on the websites of the authors.
ots Originaltext: Swiss-American Chamber of Commerce & The Boston