Business lines up to serve the EU’s new customers

The Swiss publisher, Ringier, is eager to further expand its reach in the new EU swissinfo.ch

For Swiss firms undeterred by the risks, doing business in the European Union’s new member states has already proved profitable.

Publisher Ringier, bakers Hiestand, and the drugs giant Novartis are among hundreds of firms targeting the 74 million “customers” who will become EU citizens on May 1.

Swiss interest in former Soviet-block states such as Lithuania, Poland, Slovakia and Hungary has been boosted by local growth rates of as much as six per cent per year.

“Today, Swiss exports of goods into the former Eastern-block, excluding the former East Germany, account for almost five per cent of our total exports,” Stephan Meier, from Switzerland’s federal export promoter, Osec Business Network Switzerland, told swissinfo.

“That’s not insignificant,” he said.

Swiss investment in Central and Eastern Europe has surged since the collapse of communism in the early 1990s.

Poland now ranks as Switzerland’s 11th-most important export market in Europe, ahead of the Czech Republic (14th), and Hungary (17th).

Fuelling much of that trade is investment by firms such as Ringier, which publishes Switzerland’s mass-market “Blick”.

Turnover

The company last week said its 11 newspapers and 32 magazines in countries such as the Czech Republic, Slovakia and Hungary accounted for almost a quarter of its annual turnover in 2003, or around SFr227 million ($176 million).

Another oft-cited Swiss pioneer in the region is the baking company, Hiestand, which bought a bakery in Warsaw in 1989.

Hiestand now produces around SFr20 million worth of frozen goods in a factory it opened outside the Polish capital four years ago.

Similarly Rieter, which makes textile machines, has been servicing the Czech Republic’s clothing industry since 1994.

Alongside these smaller firms are “Swiss” multinationals such as ABB, Nestlé, and Novartis, all with major interests in the east.

Growth

Meier said the list is likely to keep growing. “The new [EU members] have a lot of ground to make up. And when you come from a low base, you can grow much faster – such as in China.”

Meier added that Swiss firms, limited by a stagnating domestic market, are often forced to invest abroad. “Even with the best of will we cannot grow that fast,” he said.

The new EU states are particularly attractive to Swiss firms because of their proximity. Flights between Zurich and capitals such as Prague and Warsaw are little more than one-and-a-half hours.

Expanding middle class

Add to that an expanding middle-class within the new EU countries, which is helping generate a fresh appetite for Western products.

Meier said that well educated and multilingual administrative secretaries working for a foreign firm in Budapest now have potentially more purchasing power than their equivalents in Berlin or Munich.

By joining the EU, new member states will be forced to remove many of the administrative and technical barriers that have made life difficult for European investors.

Swiss firms will gain the same level of access they currently enjoy within the EU.

However, some worry that competitors from Germany, France and other EU states will have an advantage over their non-EU Swiss rivals.

Advantage

In particular, business groups complain that EU firms have an advantage over Swiss companies because they can access EU development funds earmarked for the east.

Swiss firms have also been accused of moving too slowly, and have lost out to companies from Austria, Germany and France.

But Meier takes the view that opportunities offered by the EU’s enlargement outweigh the negatives for many firms.

He also points to the political benefits. Creating jobs in the new countries should go some way to stemming any potential flow of economic migrants to the west – an oft-cited argument by those opposed to EU enlargement.

“Our investments abroad help create jobs in those countries,” said Meier. “This will secure jobs in Switzerland and we needn’t be worried too much about being flooded by eastern job seekers.”

swissinfo, Jacob Greber in Zurich

In brief

Ringer, Hiestand, Novartis, Vetropack, Nestlé and Roche are among dozens of Swiss firms to have invested in countries joining the EU.

Supporters argue the arrival of 74 million new “consumers” within the EU’s boundaries creates new investment opportunities.

Swiss exports of goods to the new EU states now accounts for 5% of all exports.

Poland now ranks as Switzerland’s 11th-most important export market in Europe, ahead of the Czech Republic (14th), and Hungary (17th).

Ringier, which publishes the “Blick” newspaper in Switzerland, generated nearly a quarter of its 2003 turnover from investments in the east.