Switzerland-Lao PDR Soci-Economic Development Consulation Seminar for Land-locked Settings

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SWITZERLAND

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SWITZERLAND

Some interlinked fundamentals of Switzerland socioeconomic development

First session

Political system Stability (political and economic) Monetary policy

Second session

Connectivity Education Environment protection

Third session

Investment Small and Medium Enterprises (SME) Banking Tourism

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SWITZERLAND: first session

Political system

Stability (political and economic)

Monetary policy

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SWITZERLAND: political system

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SWITZERLAND: political system;decentralisation

The political system is from its origin rooted in :

Power decentralisation (federalism) at two sub-levels:

provincial («canton»), having their own executive, legislative and judicialauthorities

district («commune») level

Principle: laws approved at the provincial and district levels must be incompliance with the Federal Constitution, which specifies competencies andresponsibilities at the central and decentralised levels

Taxes are in consequence levied and provide revenue for authorities at three levels : central (30%) , provincial (40 %) and district (30 %)

checks and balances

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SWITZERLAND: political system;Provinces

• Each province (“canton”) has its own constitution and enjoys a great deal of autonomy

• Districts and Provinces, have their own administrativeauthorities elected by the voting population. For somelocal issues they take autonomous decisions onsecurity, education, health and population registry.

• The directors of sectors at provincial level meet inrelevant provincial conferences to coordinate anddecide on issues

• The governments of all provinces are represented inthe Conference of Provincial Governments, whichdefends their interests with regard to the federalgovernment

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SWITZERLAND: political system; the National Assembly

• The National Assembly is made up of two chambers :

the National Council is consisting of 200 Parliamentariansrepresenting the Provinces in proportion to the size of theirpopulation.

the Council of States is consisting of two Parliamentarians for each Province, giving a total of 46

The make-up of the Assembly ensures that smaller Provinces are notdominated by larger ones, the two chambers having equal weight.

• Role of chambers includes approving national law, supervisinggovernment, proposing new laws, election of the Government

• The National Council speaker is the highest ranking person, above the president of the country

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SWITZERLAND: political system,people’s rights

Political system gives eligible voters decision-making and Constitution changing power

Any Swiss citizen and interest groups has the right to propose an initiative fornew legislation, when 100,000 signatures have been gathered in support , sothat the initiative can be put to a nation-wide vote, which occurred in 193opportunities since 1893

Any Swiss citizen and group opposed to a new law approved by the National Assembly has the right to propose a referendum , when 50,000 signatures within 100 days of the publication of the legislation have been gathered. Then, eligible voters can approve or reject the new law.

• Votes takes place on initiatives related to the federal and/or provincial and/ordistrict levels in average 3-4 times per year

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• Some key messages :

Importance given to Civil Society Organisations

Persistence of a government of coalitionincluding Ministers of the four biggest politicalparties

Pragmatism and consensus building are leadingprinciples

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SWITZERLAND: stability(political and economic)

• Political stability is rooted in :

the will of Provinces to unite politically, since Switzerlandcreation in 1291

neutrality since 1515, meaning no intervention in militarydisputes between other States

the consolidation of the territory completed in 1815

the Constitution adopted in 1848

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SWITZERLAND: stability(political and economic)

the security and peace, supporting the Organisationfor Security and Cooperation in Europe (OSCE)

Bilateral political (e.g. Schengen adopted in 2009enabling a borderless area) and economicagreements with the neighbouring European Union

citizen rights, multipartism and the rule of law are pillars of the political stability

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SWITZERLAND: political stability

A political system system based on thewillingness to reach pragmatically consensusthrough compromise

The checks and balances through the powersof the National Assembly, the populationrights with initiatives and referendum, as wellas the independence of the judicial power

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SWITZERLAND: economic stability

• Economy is based on highly skilled labor performing work on highadded-value goods (micro technology, biotechnology,pharmaceuticals) and services (banking, insurance, tourism,congresses etc. ), enjoying a high level of salaries.

• Nearly 70% of the workforce is employed by decentralized SMEs,benefitting of the vocational training system

• At 3% the unemployment rate remains low, compared to Europeancountries (ranging from 4% (Austria) up to 24 % (Spain), whereasGermany has 5.5 %, UK 8.2 % and France 10 %.

• Broadly shared concern that economic activity should have as little impact as possible on the environment

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• Swiss Transnational companies, covering adiversity of goods and services, rooted in thecountry are securing economic strength +stability – e.g. ABB, Holcim, Novartis, Swiss-Re,Zürich and… Nestlé (world no 1 for food,278,000 employees, 97% outside Switzerland)

• Working culture promoting Public-PrivatePartnership jointly involved in regulationdrafting and implementation

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• The Social security system (some 33 % of budget expenditures) is consisting of the:

national retirement pension fund

accident insurance at the workplace

invalidity insurance

income compensation allowances in case of maternity

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unemployment insurance

family allowances

compulsory health insurance

• The Social security system, as well as a high-quality free educational system, both contributeto social stability, which is an importantfoundation of the economic stability

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• Limited and targeted State intervention onstrategic issues (e.g. agriculture subsidies)

• Some 3% of GNI is spent on Research & Development (R&D) related to industrial goods and services. R&D is paving the way towards innovation, technology development and consequently remain highly competitive + ensure tomorrow’s job creation contributing to stability

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SWITZERLAND: monetary policy

Switzerland is perceived as a safe haven due to its :

political stability

Economic strength and stability

Tradition of neutrality

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In addition:

political consensus building

Education system

Social security system

are three pillars contributing to ensure social peace

Consequently, the Swiss Franc (CHF) is strong ,constitutes a reserve currency in high demand,which the monetary policy has to manage

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• Monetary policy of Switzerland relies on three pillars:

the price stability, important condition for decision-making by consumers and producers, as well as efficientallocations of labor and capital.

medium-term inflation forecast considering the supply ofmoney, loans, economic growth, exchange rates andcommodities prices

Setting of a target range, extending over 1 % in the Swissfranc money market, for the three-month Swiss francLibor aiming to keep it in the middle of the range

National Banks purchase of Euros to stabilize theexchange rate CHF/Euro

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On top of regular instruments - open market operations,bank reserve requirement, interest rate, re-lending andre-discount - the Swiss National Banks uses:

foreign exchange spot and forward transactions

foreign exchange swaps

purchase or sale of securities in Swiss francs

Selling of derivatives, deriving their value from theperformance of an underlying entity such as an asset,index, or interest rate on receivables, securities, preciousmetals and currency pairs.

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SWITZERLAND: second session

Connectivity

Education

Environment protection

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SWITZERLAND: connectivity

• From landlocked to landlinked

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SWITZERLAND : connectivity

• The Alps: natural barrier between Northern and SouthernEurope made an asset by building bridges, railways, roadsand tunnels

Famous example: Gotthard pass with a 19km railway tunnelbuilt 100 years ago+a 16.9 km road tunnel built in 1980 (3rdworld longest) coping with an average of 20’000 vehicles/day

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SWITZERLAND: connectivity

Efforts to promote fee-based transport of goods and cars by railways tunnels instead of road tunnels to protect the environment

and income from heavy goods vehicles by introducing a tax based on weight, km and fume

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SWITZERLAND: connectivity, key importance of the railways

Rail 2000 is a large-scale program of the public railways company aimed at improving its network

In 2004 phase I investment of nearly US $ 6 billions was completed to modernize the equipment and intensify trains frequency

Phase II is being implemented involving additional investments of minimum US $ 4 billions.

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SWITZERLAND: public education

• Switzerland relies on a decentralized publicly-fundededucation system (some 11% of national budgetexpenditures) dealing with challenges in the face ofchanges in society and the world and is coordinate withthe job market

• Primary and secondary schools free for all are managed at provincial level.

• Provincial heads of education make up the Swiss Conference of Education, which coordinates education policy at the national level.

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SWITZERLAND: education;vocational training

• 67 % of 16-21 year-old opt for vocational trainingfor some 300 apprenticeship categories, whichcombines practice in a company and with 1-2days/week of theory at school during 3-4 years

• Some 100 higher technical schools are regulatedby the central government and enable studentsto get Higher Diploma Degree for some 150professions at middle-level management

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SWITZERLAND: education

• Vocational training can be pursued at Universityof Applied Sciences, applying higher vocationaleducation, including practical job-experience anddelivers Bachelor level graduation

• Higher vocational education trains students in abroad variety of sectors: agriculture, architecture,art, construction, design forestry, health,psychology tourism, particularly hotel etc.

• The overall vocational training system is largelyfunded by the private sector

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SWITZERLAND: higher education

• 16 % of Swiss youthgraduate at tertiary level in:

• Two Federal Institutes of Technology regulated by the central government

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• 8 Universities includingare regulated by their provinces

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SWITZERLAND: education

• At universities and institutes of technology,women and men are approximately equallyrepresented

• 93 % of the 1.5 million students in the entire Swiss educational system attend public schools

• some 7 % or 100’000 students from Switzerland and 100 different countries attend the 240 schools of the Swiss Federation of Private Schools .

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SWITZERLAND:environment protectionand its 4 natural regions

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SWITZERLAND:environment protectionand associated landscapes

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SWITZERLAND:environment of forests, lakes…

• 32 % of Swiss terrritory is covered by forests(71% public, 29% privately owned), equallydistributed among regions (Alps 27%,Lowlands 25%, Jura 41 % and Pre-Alps 35%)

• Switzerland has more than 1’500 lakes, 16 ofthem > 10km2, which with rivers cover morethan 5% of the territory, representing 6 % ofEuropean fresh water

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SWITZERLAND:environment of rivers

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SWITZERLAND:environment protection

• Switzerland ranks second worldwide on the Environmental Performance Index , which is due to the following factors :

Policies relying on:

binding legislation + voluntary measures adopted by the citizens … and 50’000 employees enforcing legislation and

implementing policies

the land use planning, determining land use and in rural areas, giving priority to agriculture over residential use, which tends to grow quickly

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• A whole range of general policies relate to :Disaster Risk Reduction/subsidized landscape

preservation also relying on agriculture

Promotion of the use of clean energy sources

Water quality : groundwater, rivers and lakes

Air protection from pollution

Biodiversity protection

Forest protection

Recycling and managing waste

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Disaster Risk Reduction/Landscape protection

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Clean energy sources

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SWITZERLAND:environment protectionhydropower

• Thanks to its mountainous topography and highlevels of annual rainfall, Switzerland has idealconditions for use of hydropower

• Some 580 hydropower plants account for 58% ofthe electricity generated, approximately 50% ofwhich comes from run-of-river plants and the50% from storage/reservoirs power plants.

• Hydropower market being worth aroundUS $ 1.8 billion (basis = 0.05 US $ per KwH), thissource of energy will play an increasing role

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SWITZERLAND:clean energy transportation

• Subsidized solar-powered transportation

Under R&D are :

cars, existing prototypes, currently developed

boats prototypes used for inland and ocean transportation

microlight aircraft Solar Impulse circumnavigated the earth in 2013

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SWITZERLAND: bioefuels for the future

• Use of traditional fuels remains by far the most important, but cars are obliged to use high quality filters to limit emissions and the Ministry of Environment sets standards and enforces controls

• Besides, bioefuels start to be increasingly used:

• Gas used as a fuel by buses and lorries, reducing by 20% their carbon emissions

• Biogas, produced by fermenting vegetable and timber waste, emitting no more CO2 than that fixed by the plants when growing, is used in Switzerland for public transport and to produce heating and electricity

• Biodiesel and bioethanol use is only incipient

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SWITZERLAND:recycling

Separation of different types of waste for recycling –glass 96 %, paper 70 % - allows to produce 10 % of electric power

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SWITZERLAND: third session

Investment

Small and Medium Enterprises (SME)

Banking

Tourism

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SWITZERLAND: investment

Switzerland Global Enterprise is a public sector institution (previously known as OSEC), which:

informs potential foreign investors about the strengths of Switzerland as a business location.

supports the Provinces to attract foreign companies by conducting market and trend analyses and coordinating the activities of all bodies involved in promoting Switzerland as a business location.

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Foreign Direct Investment (FDI) in Switzerland reached an all time high of 671551.30 CHF million in 2012

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The Swiss Business Hubs are Global Enterprise’s representatives abroad

providing information about target market and help establish contacts. Swiss FDI abroad amount to nearly 44’000 US $ million in 2012

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SWITZERLAND: Small and Medium Enterprises

• Approximately 9 % of GDP is contributed by SME

• 99 % of enterprises are small/medium-size (SME):

employing < 250 workers, nearly 70 % of the work force

still in the hands of founding families

are organized in Associations/Federations

• SME are employing highly qualified labor to remain competitive ensuring :

the supply of high added-value products (e.g. microtechnology, biotechology)…

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SWITZERLAND: Small and Medium Enterprises

…and services (e.g. finance, insurance, tourism), which is now employing the higher number of workers

the compliance with environmentally friendly energy and transport policies

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SWITZERLAND: SME figures

Size of enterprises Enterprises Employed persons

by full-time

equivalents

Number % Number %

Micro enterprises

(up to <10)514'736 92.3 1'308'303 30.8

Small enterprises (10

to <50)34'940 6.3 865'204 20.3

Medium enterprises

(50 to <249)6'897 1.2 807'816 19.0

SME (up to 249) 556'573 99.8 2'981'323 70.1

Large enterprises

(250 and over)1'256 0.2 1'271'539 29.9

Total 557'829 100 4'252'862 100

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SWITZERLAND: SME policy, e-government

• Services for SME start-ups - www.startbiz.ch – also of theMinistry of Economy is also offered on-line to register themwith social insurance, the Commercial Register, VAT andaccident insurance, saving a time assessed at 50%

Roof photovoltaic systems supportedby “SME start-ups”

• Electronic business transactions is facilitated by an electronic proof of identity providing a legally valid digital signature for business transactions .

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SWITZERLAND: SME policy

The central Government has tailored an SME policy, relying on related regulation, standards and subsidies contributing to ensure competivity :

e-government to ease SME administrative burden

business financing facilitation

the market access improvement

The needed training and education

resources earmarking for Research & Development, key to foster innovation

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SWITZERLAND: SME policy, ease the administrative burden

• Measures adopted include :

Exchange of information and coordination between Ministries is ensured to reduce regulatory costs

New regulations ex-ante impact assessment on SME is carried out by the Ministry of Economy, with a special emphasis the regulatory costs and identify the potential for cost reduction.

A public-private SME Forum meeting 6 times a year discussesnew regulations related to SME various branches of industry;70 % of its recommendations to ease the administrativeburden on SME were implemented

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SWITZERLAND: SME policy, e-government

• SME web portal - www.kmu. admin.ch - of theMinistry of Economy offers for existingenterprises on-line services to:

generate salary statements,

order debt collection reports

inform about a business partners and recent issues

apply for an entry in the commercial register

register a trademark

access criminal records, etc.

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SWITZERLAND: SME policy, financing

• SME financing needs are supported by a range of publicand/or private supportive institutions and measures such as:

The Government supports SME to access capital by providingguarantees of up to US $ 500,000, bearing 65% of the risk of loss

Ministry of Economy public-private “SME capital market” workinggroup, which keeps track of developments in lending to SME

The Swiss Society for Hotel Credit is a public-private financedcooperative which helps hotels, draw up feasibility studies,business plans, as well as fund infrastructure investments

The private Invest supports start-ups in search of capital. It offersyoung entrepreneurs a platform to present their business ideas toa wide audience of business angels and venture capital firms.

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SWITZERLAND: SME policy, export financing

• Service support in securing export

• The public sector Swiss Export risk insurance (SERV) givesSME security when conducting business abroad inpolitically and/or economically risky countries

• For SME having reached their guarantee and credit limitwith their bank, SERV provides a guarantee to cover apossible debt default, , which enables the SME to get therequired capital from the bank, hence gives the SME theliquidity to take on new business and expand.

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SWITZERLAND: SME policy, market access

• Switzerland global Enterprise depending on the Ministry of Economy has a public mandate to:

help SME promoting trade and investments

support SME to access new markets through market analyses and its global network of experts

support foreign SMEs in selected partner countries by opening up new business opportunities in Switzerland , which strengthens cooperation and trade between Switzerland and partner countries

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SWITZERLAND: SME policy, Research&Development (R&D)

• Public Federal institutes of technology anduniversities of applied science have the latestfindings and SME, in the frame ofPublic-Private Partnerships, can entrust them withR&D they can not afford to do

• the State Secretariat for Education, research andinnovation is providing optimal conditions forresearch and ensures funding

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SWITZERLAND: SME policy, Research&Development (R&D)

As SME makes up just 16% of total annual R&D expenditure, Public research institutions offer SME:

the possibility to acquire the rights to use their findings

Advice, analyses, assessments and reports

The latest equipment and infrastructure, made available, when there is mutual interest

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SWITZERLAND: SME policy, innovation

• The Commission for Technology and Innovation is theGovernment’s instrument for innovation promotion.It banks on the fact that perceived opportunities to start an SME arehigher than the average for innovation-driven economies(Switzerland is ranking 4th)

helps SME develop their ideas and develop them in a way that they become marketable products

Provides funding and advice, thereby channeling scientific research when innovation is stalling or market potential is untapped.

offers to SME “start-up” founders coaching to facilitate fundraising and develop a market entry strategy. The best companies are awarded the Start-up Label giving access to venture capital

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SWITZERLAND: SME policy, innovation

encourages the transfer of knowledge and technology between universities and industry, through a national thematic network bringing SMEs and public research institutions together to exchange

co-funds SME R&D projects and funds new technologiesin the areas of life sciences, engineering, micro and nanotechnologies

Nanotubes

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SWITZERLAND: banking diversity

• The financial sector employs 6 % of theworkforce and exerts a major influence onemployment in the overall Swiss economy

• There is a diversity of more than 300 banks ofdifferent types: commercial, cooperative,private banking, provincial etc. ) includingforeign ones

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SWITZERLAND: banking, facts and figures

• UBS (largest bank) and Credit Suisse (ranking second) are two Transnational banks:

having a share of domestic deposits and loans of some 30%;

are among the most influent in the global financial market, including controversial offshore funds

Have assets some six times higher than Switzerland GDP

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• Private banking relies on a tradition starting backin the 17th century facing increasinglycompetition from major banks and they assumeunlimited liability, if they go bankrupt, they losetheir entire fortune

• Provincial Banks are owned by the Provinces, at least as majority stakeholder and they: provide financial services, including low-interest

loans, to their home Province

are linked nationally in a Provincial Banks Group

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• Cooperative banks, based on the “Raiffeisenmodel”, third biggest bank in Switzerland, witha network of nearly 1’100 decentralized branches at rural level: is operating independently;

its 1.8 million members takes part in decision making and bearing joint responsibility for their branch

is offering financial services to SME and the agriculture

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PostFinance bank is a public limited company, theSwiss fifth biggest bank and a leading retail financialinstitutions for cash transactions, offering dailyfinancial: payments, savings, pensions, as well asinvesting in real estate and securities.

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SWITZERLAND: policy convergence the example of clean technology

Clean technology provides a synthetic example of

convergence between environmental, economic,investment, SMEs, banking – and social policies

Swiss economy is based on the production by SMEs andTransnationals of high added-value goods, an excellentbackdrop for a growing Cleantech

In consequence, Switzerland became pioneer in clean technologyinvestment:

Private Bank Sarasin paved the way since 1989

in the early 2000 Sustainable Asset specialized funds, started to spread

leading the country to progressively become a financial global hub of a wide range of cleantech investing in public and private companies

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SWITZERLAND

Public sector friendly government regulation and stimuluspackage targeted towards cleantech are aiming at energyefficiency, and renewable energy, presently for Switzerlanda 1.6 trillion US $ business, expected to double until 2020.

Current workforce in cleantech is near to 5% of employment, many in SMEs, often sub-contracted by Swiss multinationals

The Swiss Minenergie is an advanced rating system forgreen (environment friendly) building, delivering a qualitylabel for low energy consumption buildings, fosteringinvestment accordingly

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SWITZERLAND: tourism

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SWITZERLAND: tourism, facts and figures

Nearly US $ 16 billion of earnings ranking 19th worldwide, but 27th with 8.4. million foreign visitors

6% of GDP

Fourth source of export revenue, after production of watches,ranking 3rd

Employer of 4.4 % of the workforce in 30’000 businesses, share being higher in mountains than in cities

Among the five most competitive travel and tourism sector in the world

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SWITZERLAND: tourism in mountains

• Mountains are a key stimulus for summer and winter tourism

• Business-related infrastructures encompasseshotels, holidays apartments, restaurants, spas, congress halls, mountain trains, cable railways, cable cars, ski-lifts, car parks and other infrastructure connected to winter sports

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SWITZERLAND: tourism

• As Swiss labor and input costs are higher thanforeign competitors tourists from strongcurrency BRICS are increasingly targeted

• Swiss tourists represent some 40 % of hotelguests

• The Swiss Hotel Association is committed toensure hospitality education at all levels,intercultural and multilingual skills, consulting,audit/certification, provide information etc.

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SWITZERLAND: tourism policy

Policy objective: use natural landscape potential to create jobs andincrease their value addedTourism policy is based on 4 pillars:

1) Strategic issue management to identify and seize opportunities atan early stage and discuss issues as member of the World TourismOrganization

2) Embed tourism policy in economic policy, as tourism relies on:

(i) price stability;(ii) a fiscal policy with low taxes (iii) a business-friendly legal framework (iv) opening up of the Swiss labor market to foreign workers

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SWITZERLAND: tourism policy

3) increase tourism attractiveness through:

(i) knowledge transferred into laws(ii) Combine services in holiday packages

(iii) capacity of hotel industry to cope with the expectations of a price-conscious increasingly demanding customers

4) rely on a National tourism office ensuring coordination in sectorial policies such as land planning, agriculture, industrial development.

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SWITZERLAND: tourism marketing

• http://www.myswitzerland.comis a multilingual private website informing on tourism and supportedby public funds

…key marketing point beingmoutainous landscapesand cities

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http://www.myswitzerland.com/

SWITZERLAND: marketing

“Presence Switzerland”:

is the Ministry of Foreign Affairs’ institution in charge of promoting the knowledge about and the image of Switzerland abroad

supports Switzerland’s interests

implements its task of communication abroad incooperation and coordination with otherMinistries concerned and the involvement of theprivate sector

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SWITZERLAND

THANK YOU

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Government & Nonprofit

Switzerland-Lao PDR Soci-Economic Development Consulation Seminar for Land-locked Settings