Switzerland has been judged as the most competitive economy on the planet for the eighth year in a row by World Economic Forum (WEF) researchers. However, the alpine country might find its pole position tested if it introduces strict immigration quotas, the annual report concludes.
Switzerland achieved its highest score of 5.8 out of 7 in the WEF Global Competitiveness Report 2016/2017. It achieved top marks in four of the 11 criteria: labour market efficiency, business sophistication, innovation and technological readiness.
Its weaknesses are perceived to be deepening deflation, low levels of women participating in the workforce and the amount of red tape holding back the creation of new companies.
“Switzerland arguably possesses one of the world’s most fertile innovation ecosystems,” the report states. It adds that Swiss companies have “an unmatched capacity to attract the best talent and large multinationals”.
It is in this area that WEF rings alarm bells for the future. Early next year Swiss legislators must decide how to implement a 2014 people’s initiative that calls for curbs on immigration. The political debate has already soured Swiss-European Union relations and could damage its competitiveness if not handled correctly, the report warns.
“If Switzerland adopts strict quotas then this could be very bad for its competitiveness,” one of the report’s authors, Thierry Geiger, told swissinfo.ch.
The political hot potato “may well have a bearing on [Switzerland’s] ability to attract and retain talent”, it states. WEF founder Klaus Schwab is also concerned about a global trend towards protectionism. “Declining openness in the global economy is harming competitiveness,” he said.
Michael Hengartner, the rector of the University of Zurich who is also the head of the umbrella organisation swissuniversities, said the immigration issue is harming Swiss scientific research.
The number of Swiss researchers involved in the Horizon 2020 European research programme had dropped by half since the 2014 initiative vote, he told the Schweiz am Sonntag newspaper.
“We are taking on ten times fewer leadership positions in European research programmes than before,” Hengartner added. “Good researchers are not coming to Switzerland because they can’t be guaranteed enough security for their project financing and don't know what the future holds.”
In addition, Swiss policy makers are grappling with the details of a new corporate tax code with the dual aim of ending harmful tax practices while retaining multinational firms in Switzerland.
“Some companies may already be thinking twice about locating to Switzerland. This is worrying when you think about long term investment prospects,” said Geiger.
But for the moment at least, Switzerland continues to attract high marks in economic competitiveness. Earlier this year, it climbed two places to second in the IMD business school’s annual survey.
“Switzerland’s consistency in performance is quite remarkable,” Geiger added. “The country’s capacity for innovation permeates different areas, such as education and the regulatory environment. Each pillar reinforces the other.” A recent Reuters ranking stated that Switzerland had the most top 100 innovative universities per capita.
In the WEF report, Switzerland holds top spot, ahead of Singapore and the United States. India was the biggest climber in the ranking of 138 countries, moving up 16 paces to rank 39.