OECD tells Swiss to speed up reforms

The OECD says many sectors need to be opened up to competition Keystone

The Organisation for Economic Cooperation and Development (OECD) has once again taken Switzerland to task for not implementing faster structural reforms.

It said Switzerland needed to become more competitive and boost growth if the country was to maintain high living standards.

The OECD said that increasing growth was the main policy challenge facing the nation.

In its economic study of Switzerland published on Friday, the Paris-based organisation commented that the protracted period of “meagre productivity growth” was a cause for concern.

It said the severity of the downturn since 2001 had highlighted the urgent need for a faster and more ambitious approach.

The OECD spoke of “serious shortcomings” in product markets, which were reflected, among other things, in higher prices compared with other countries.

It also said that strict implementation of the revised cartel law was vital.

The chief economist of the Swiss State Secretariat for Economic Affairs (Seco), Aymo Brunetti, said that the government agreed completely with the findings, in particular concerning the country’s slow long-term growth rate over the last 20 years.

“This is the major problem for Swiss economic policy. There is no competition in the internal sector is one of the major issues that has to be tackled in order to get to more economic growth,” he told swissinfo.

Faster reforms

Among the sectors singled out as needing immediate reform were electricity, natural gas, telecommunications and postal services.

Competition also needed to be stepped up in areas least exposed to foreign competition, such as the health service.

The study’s authors once again cited agricultural policy as an area where state intervention impeded the market, resulting in food prices “far above” international prices.

OECD Secretariat estimates have suggested that ambitious reforms in these sectors could increase gross domestic product (GDP) growth by eight per cent over a ten-year period.

Brunetti stressed that the Swiss government was not able to introduce reforms without popular backing.

“In Switzerland you always have to get reforms through potential popular votes, so it’s not just the government that can realise these reforms,” he explained.

Older workers and women

The study also touched on the thorny issue of women and older workers in the Swiss labour force.

A clear shift towards a more competitive environment should be accompanied by measures to boost the numbers of older workers and women in the workforce, it argued.

The OECD, which promotes good governance in key economic areas, added that the education system was failing to deliver good results despite a sizeable budget, and was in need of an overhaul.

The organisation also noted that the funding for state pensions was not guaranteed beyond 2015.

In its assessment, the OECD considered that the most urgent task in the short term was to support the projected economic upturn and minimise deflation risks.

It therefore argued against any fiscal tightening, suggesting that the Swiss National Bank keep interest rates at record lows.

“Clear message”

Seco’s Brunetti said the OECD had been polite but had given a “clear message” in its assessment of the Swiss economy.

“The government is due to present its plans for economic policy reforms for the next four years,” Brunetti explained. “And many of the elements that have been mentioned in the OECD report will be included in this respect.”

swissinfo, Robert Brookes

Key facts

The 200-page survey has a special chapter devoted to ‘Product, market competition and economic performance’.
An OECD committee reviewed the economic situation and policies of Switzerland in November 2003.
That draft was approved in December.
The OECD’s previous survey of Switzerland was published in May 2002.

In brief

The OECD said Switzerland needed to become more competitive and carry out “aggressive” structural reforms.

It argued that unsatisfactory economic growth was largely attributable to the “timid pace” of reforms over many years.

The study said that boosting growth was the main policy challenge facing Switzerland.

It told Switzerland that slow growth was not an inevitable fate.

It recommended determined action combining ambitious structural reforms and the pursuit of a stable macroeconomic policy for Switzerland to maintain a standard of living that was among the highest in the OECD.