When a multinational decided to relocate, it can have a massive impact on the host city. It is something that Geneva is having to learn to cope with, as Procter and Gamble becomes the first of a number of companies to move to the city.
In what is the biggest ever relocation to Geneva, Procter and Gamble is moving over 1,000 staff to its new offices in the city. They will join the more than 300 who are already employed in Geneva. Most are coming from the P&G offices in Brussels, Frankfurt and London, which will now become research centres. The process began in the summer of 1999 and will be complete by the end of 2000.
Procter and Gamble did a study of all the European countries in which it operated before deciding to move to Geneva. Dublin may have been the most attractive base financially. But Geneva won because it offered more in terms of quality of life.
"Some of our people have had problems with the culture and the language, but the longer they live in Geneva, the more they come to appreciate it," says Terry Moore, who has been overseeing the relocation programme.
"Compared to other cities, there's little crime, pollution or traffic, and you're on the doorstep of some of the most beautiful areas in Europe. There may be some disadvantages, but you have to see Geneva as a whole package," he told Swiss Radio International.
The company's decision was encouraged by the Geneva authorities, who are eager to shed the city's staid image as a home for international organisations. In 1992, the city decided to try to attract high-tech companies to the city. That policy is beginning to bear fruit, with firms like Eastman Kodak, Sempra Energy and PSINet following P&G's example and relocating to the city.
The financial advantages are clear. In 2000, Procter and Gamble will pay an extra 110 million francs to its Geneva employees, which translates into 29 million francs for the cantonal coffers. That means better services for Geneva residents, more money spent in shops and cinemas, and more jobs for the local community. But the authorities do not want to attract just any company to the city.
"We don't just need the money", says Robert Kuster, the canton's Chief Economic Development Officer. "We need core competencies. We have a systematic policy of welcoming companies with a high implication of intelligence. We need scientific, computer, financial and management people - people who will stay."
The relocation has not been without its problems. The influx of over 1,000 families into a canton with a population of just 400,000 has inevitably caused a considerable strain on the housing market and the education system. But Procter and Gamble have tried to soften the impact.
"In order to minimise the stress on the market, we decided to spread the process of moving people here out over a period of about 18 months," Moore says. "We have 80 to 90 families who actually move to Geneva every month. One little-known fact about the Geneva real estate market is that, even though it's a relatively small city, there are about 1,500 rental properties available in any given month, so we're not taking up all the properties."
Nevertheless, expatriates tend to look to the higher end of the market and the house rental sector has been particularly badly affected. As a result, P&G has been liaising very closely with real estate agents. Being an international city, the housing market does tend to be very fluid, and 70 per cent of Procter and Gamble employees find a property on their first day of house-hunting, and only five per cent have no permanent accomodation when they arrive to take up their job.
The company has also had to work very closely with the local international schools. It has even given three million francs to increase capacity so that they can accomodate the new arrivals. P&G is at pains to point out it has not asked for special treatment, despite the pleadings of some of its employees.
"We don't want to poison our very good relationship with the city and cantonal authorities," Moore says.
That's backed up by Robert Kuster : "We have to manage the move very carefully, and Procter and Gamble have to be very careful about tackling these issues. Otherwise it could cause great anger among other multinational companies, and might even provoke calls for an end to Geneva's economic promotion policies - and that's just what we don't want."
News of P&G's relocation was greeted with rumours that Geneva had won as a result of granting the company special tax breaks. But the cantonal finance department says it's just a case of Swiss laws being more beneficial than in other countries.
"According to the tax rulings which apply in every Swiss canton, if a company buys and sells 80 per cent of its products and services outside Switzerland, it can then benefit from the auxiliary company ruling," Kuster told SRI. "That means that Switzerland considers that only 20 per cent of the profits is actually earned in Switzerland, so only 20 per cent of the profit are taxed. The cantonal government can grant additional tax relief, but that's also enshrined in the law."
"We asked the Swiss and Geneva governments what they could do, and their response was based on existing government policies, " Moore says. "I don't think we received any treatment than any other multinational company considering relocating to Geneva would not receive. "
However, there is a limit to the number of firms the city is prepared to accept, at least in the short term: "Geneva is a small region with a very limited size. Its capacity to welcome new companies and their employees is not unlimited. It will be difficult to welcome many more companies this year, apart from the ones we already know about."
by Roy Probert