A strategy for Switzerland as a business location

The future of Switzerland's success story is at risk. The currency shock, the uncertain future of our bilateral agreements with Europe, the external pressure on the tax location, pending initiatives that challenge the private sector, and an unrestrained flood of regulation all threaten the strength of our country as a business location. For the economy to continue delivering Switzerland’s above-average prosperity, we need an economic strategy based on five pillars.

Recognized international ratings for competitiveness and innovation give Switzerland top grades as a location. We are proud of this Swiss success story, but Switzerland cannot afford to continue resting on its laurels in this rapidly changing global environment.

Monetary policy measures in Switzerland and Europe are currently rattling the Swiss economy, and all growth forecasts are being significantly downgraded. While the economic consequences will not be apparent to everyone for some months, it is already clear that the economy faces a harsh new reality.

A large number of Swiss companies have proven very resilient in recent years and used the temporary support provided by the SNB with the EUR/CHF exchange rate floor as an opportunity to do their homework. However, given the extremely challenging circumstances in which it finds itself, the Swiss economy can only maintain its successful course if the business-friendly framework conditions necessary are guaranteed. Even if, for instance, there are some positive developments concerning exchange rates, specific improvements in local business conditions are needed. This is the only way for us to maintain our leading position in the global marketplace and secure Swiss prosperity and jobs. We have to follow the example of the strong and successful economies, including those outside Europe. In the past, we were not just successful because of our virtues. Our achievements were also amplified by the relative weakness of other countries.

So it is up to Switzerland to improve its competitiveness and prepare for the changed situation. And there's no time to lose.

Unfortunately, there seems to be little appetite for change. Quite to the contrary. It still remains unclear, for example, how the initiative on mass immigration will be implemented. The resulting uncertainty is already causing lasting damage, even if it is barely visible at the moment. Local and foreign companies in our country will continue to hold back on investment decisions as long as nobody knows how access to European markets will be secured or how the relationship to the European Union will be placed on a sustainable footing.

The vote on inheritance tax due in the summer, if adopted, would have serious consequences for small and medium-sized businesses in particular. It is incomprehensible that the retroactive clause in the proposed legislation – which has already prompted a wave of changes in ownership – was not vehemently opposed by the more business-friendly political spectrum. This is a further example of growing legal uncertainty.

The Federal Council is also seeking to use the reform of stock corporation law to further restrict the entrepreneurial freedom of stock corporations through stricter regulations. This is both unnecessary and harmful. A similar situation exists regarding the Federal Financial Services Act, with which the Federal Council has proposed bureaucratic regulatory steps, particularly in the area of law, with a reversal of the burden of proof and a right to class action. This doesn't just conflict with the Swiss understanding of law; ultimately it's bad for clients. In both cases, the Federal Council and Parliament in particular should focus on the core areas of these bills.

Five strategic pillars to secure our prosperity

The situation is serious and more and more Swiss citizens are suddenly realizing. That is the bad news. The good news is that we have it in our power to take the right steps to keep our status as one of the world’s most competitive countries. I propose a strategy based on five pillars.

First, the Federal Council must have the courage and determination to actively tackle our economic policy. It must communicate clearly that it recognizes the issues and is determined to rapidly take a series of measures to reduce the burden on business, strengthen the economic framework for the long term, and secure jobs – all without putting an additional load on taxpayers. Time is of the essence. The invitation of the Federal Councilor responsible for economic affairs to a “round table dialog” with representatives of the Federal Council, business and the academic community, together with initial measures on part-time work, were important signals. However, further concrete measures are needed – for example, the rapid creation of pragmatic rules for the recording of working hours.

Second, a regulatory deterioration of our business environment should be avoided, and existing regulations should be systematically reviewed for adverse effects in order to tackle these where necessary. I think certain unreasonable demands in planned enforcement legislation and threats of criminal prosecution in various bills (FIDLEG, corporation law, FMIA), could be waived. All of these would limit business activity unnecessarily. Another important step is to provide one of the most important elements of a successful economy, the financial sector, with the predictability it needs to plan ahead. Switzerland already has an internationally recognized, effective and efficient regulatory regime for systematically important financial institutions. A few specific improvements are needed to provide adequate protection for the taxpayer. These should be worked out without time pressure, with the active participation of the institutions affected – and naturally in coordination with the international timetable. All this should be done while keeping an eye on Switzerland’s competitiveness as a financial and business center. Acting in haste would have the opposite effect and would ultimately harm the economy as a whole. Both elected officials and the general public must be aware of these side effects.

Third, we need to secure tax competitiveness for the long term, which includes rejecting not only the inheritance tax initiative referred to earlier, but also new taxes such as the planned capital gains tax. It is equally important to abolish stamp duty, which puts the financial center at a disadvantage to competing locations. Obviously, implementation of the third stage of corporate tax reform in a business-friendly manner is extremely important. At the same time, it is necessary to create the conditions needed for companies in Switzerland to issue bonds in which foreign investors are willing to invest, with the proceeds benefiting the domestic economy.

Fourth, access to global markets must be guaranteed. The initial focus here is naturally on securing lasting access to the European market, including maintaining the bilateral agreements with Europe. A long-term perspective is particularly important here for financial services. At the same time, we must not lose sight of the importance of efforts to open up markets with other important trading partners, including a free trade agreement with the USA.

Finally, care must be taken in all public activities to ensure that costs for Swiss companies are systematically kept down. The strength of the Swiss franc is leading to a cost challenge in industry, not a demand challenge. This is why programs to stimulate the economy are the wrong approach. In an open economy they tend to dissipate with comparatively little effect. Instead, targeted infrastructure investment, e.g. in tourism, should be made to improve competitiveness sustainably.

Working in the same direction

As I have said, our ambition must be to remain one of the most competitive and attractive business locations in the world. This makes it all the more urgent to have a clear strategy, which will only succeed if we don't just talk, but also act. And it requires a united front between politics and business.

Of course, the private sector must also play its part. It must be ready to do everything possible to maintain and strengthen jobs and the creation of value in Switzerland. In this respect, financial firms act as partners to manufacturing, services and other industries. As bankers, we are ready to play our part. We acknowledge our responsibility to society, and put our know-how and services at the disposal of the Swiss economy as a whole, including SMEs.

In the interest of Switzerland’s competitiveness as an international center, it is crucial that the Federal Council and Parliament put aside possible thoughts of the next election and instead take joint responsibility: They need to act quickly and be prepared to do so even without 100% consensus. They must develop an economic policy to strengthen the attractiveness of Switzerland as a business location – and implement it.


(The original version of this article was published first in German on Tages. Anzeiger, Der Bund; in Italian on Corriere del Ticino; in French on Le Temps.)