Foreign Companies in Switzerland - AmCham

1 ForeignCompanies inSwitzerlandThe ForgottenSectorJoint Study of the Swiss American Chamber of Commerce and The Boston Consulting GroupZurich, January 2006 Dear ReaderDid we not hear many times about the myth of Foreign companiesbeing in Switzerland just for tax saving reasons? Foreign companiesessentially being a free-rider in our economy but contributing marginally? What is the real contribution of Foreign Companies to the Swiss economy? Are they here for the long-term? In what way do we mutuallybenefit from each other? Why do Foreign Companies come? And why would they leave again?

2 With these questions in mind, we started a three year program to betterunderstand Foreign Companies in Switzerland . As you will read in this report, Foreign Companies are indeed vital forour economy: a strong contributor to Swiss GDP and an even strongercontributor to its growth!However, Foreign Companies do not have an own business associationand their interests are largely under-represented. Essentially a forgotten , in the next issues of this report due in 2007 and 2008, we will focus on further understanding Switzerland s competitive posi-tion in a European context as well as on developing specific proposalson how to further improve Switzerland s position in the race to win Foreign Companies and increase the value they bring in terms ofhighly-qualified jobs and economic hope you will enjoy the reading and would be very happy to receiveyour comments on either or NavilleCEO Swiss American Chamber of Commerce, ZurichDr.

3 Adrian WaltiVice President and Director, The Boston Consulting Group, Zurich 01 Executive Summary702 Switzerland and ForeignCompanies the Mutual Do Foreign Companies Come to Switzerland ? Does Switzerland Benefit from Foreign Companies ?3003 Foreign Companies IncreasingImportance to the Swiss the Swiss Companies Contribute Significantly 38to the Swiss Companies Drive Swiss GDP Growth4604 Switzerland s Attractivenessto Foreign Companies Raising the Bar55 Should Not Take Foreign Companies 56 Presence for Do Foreign Companies Rate Switzerland56as a Location? Switzerland s Appeal to Foreign Companies63 01 ExecutiveSummary IntroductionForeign Companies have become a substantial part of the Swisseconomy.

4 Today, they account for almost ten percent of theSwiss GDP. Since 1995, they account for more than 20 percentof Switzerland s GDP growth. While today Foreign companiesfind conditions favorable in Switzerland more than 1 000 com-panies moved to Switzerland within the past two years Switzerland cannot take this for granted. In order to remain an attractive destination for global Companies , Switzerland needs to understand their needs and ensure attractive conditions on a long-term basis. The Swiss-AmericanChamber of Commerce and The Boston Consulting Group surveyed more than 100 leading Foreign Companies in Switzer-land to pinpoint why Switzerland is the favorite location forforeign businesses and to identify areas in which changes couldbe made to secure and further increase Switzerland s attrac-tiveness.

5 This executive summary of our findings highlights the importanceof Foreign Companies to the Swiss economy, describes theirneeds, and suggests ideas for key initiatives to maintain and im-prove Switzerland s competitive edge over alternative locations inEurope. 11 GermanyUSAUKN etherla ndsFranceLuxembourgDenmarkIta lyAustriaBelgiumOthers EUOthers72 00056 00015 00013 00011 00010 0007 0006 0004 0004 0004 0008 000 Country oforigin210 000 TotalSwiss basedEmployees(Full-time equivalents)Table of Employees of ForeignCompanies in Switzerland ,2003, by Companies Country of Origin10 Switzerland and Foreign Companies the Mutual BenefitsWhy Do Foreign Companies Come to Switzerland ?

6 More than 6 500 Foreign Companies are currently operating in Switzerland , typically forone of the following three reasons: Switzerland is an attractive marketSwitzerland offers the advantages of a highly developed market with attractive pricelevels and above-average margins. Because of its multi-cultural characteristics, manycompanies find Switzerland to be an excellent test market for new products and offers unique skills and production capabilitiesSwitzerland offers a skilled work force and local suppliers for highly specialized indu-stries, such as biotechnology, pharmaceuticals, precision mechanics, and medicaltechnology.

7 Highly skilled workforces across all levels and a favorable work environmentare important, differentiating serves as a gateway to Europe Switzerland is one of the most attractive locations for European and global headquartersand logistic centers of operations. More than 1 000 regional and global headquarters offoreign Companies are located in Switzerland . A central European location with easyaccess, excellent infrastructure, responsive and transparent authorities and a favorabletax environment are among the most important Does Switzerland Benefit from Foreign Companies ?

8 Foreign Companies provide a large and growing contribution to the Swiss economy andsociety. The most visible and significant benefits come from the direct impacts of foreigncompanies: Employment within Switzerland Investments in Switzerland Taxes paid by Foreign Companies and their employees Positive impact on Switzerland s trade balanceForeign Companies also provide strong indirect benefits. For example, Foreign headquart-ers contribute to the growth of many local service suppliers, including professionalservices, IT services, construction and real estate management, security services, trans-portation, and travel and entertainment.

9 In addition, Foreign Companies bring multiple qualitative benefits to Swiss society, suchas leading edge technology, innovation, and an international environment and culture. Source: Statistics agencies, BCG analysis 13 Table of Foreign Companies Contributions to the Swiss GDPin 2003 with that of Swiss IndustrySectors and CantonsRetail/wholesalePublic administrati onBankingForeign companiesSer vices/r eal estateMachiner yHealth servic CHFS hareGDPGDPZ richBernWaadtForeign companiesAargauSt. GallenGenfLuzernBasel CHFS hare12 Source: BfS, SNB, BCG analysisForeign Companies IncreasingImportance to the Swiss GDPA significant share of the Swiss GDP is generated by Foreign Companies in Companies total contribution to the Swiss GDP was close to 10 percent in contribution to the growth of Swiss GDP has been an even more impressive 23percent of Swiss GDP growth between 1995 and Is the Contribution of Foreign Companies to the Swiss GDP?

10 The most important driver of Foreign Companies contributions to Swiss GDP is employ-ment and associated 2003, Foreign Companies employed 210 000 people (full-time equivalents) inSwitzerland, which is about 7 percent of total employment in Switzerland . (See Table )This represents more than the combined total of all employees of the eight largest Swisscompanies. German Companies employ the largest share with 72 000 employees inSwitzerland. This is not surprising, since Germany is Switzerland s largest neighbor andan important trade partner. What is more surprising, is that Companies are thesecond largest Foreign employers, representing about 56 000 employees in estimate that of the 210 000 employees of Foreign Companies in Switzerland , about50 percent are employed to serve the Swiss market.