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Swiss companies missing out on treasure trove

Companies like this one in Ukraine offer rewards for Swiss firms

(Keystone)

Swiss small and medium-sized enterprises (SMEs) are being urged to cash in on eastern Europe or risk being left behind by foreign competition.

The Swiss Organisation for Facilitating Investment (Sofi) says few Swiss SMEs are taking advantage of the high growth potential and low labour costs in the region.

Countries such as Germany, Austria, Italy and Greece are leading the way, cornering markets in eastern Europe, said the organisation's deputy managing director, Hans-Peter Achermann.

"The potential in eastern Europe is so great that Swiss firms cannot afford to ignore the possibilities in the region," he told swissinfo.

"Of course there are risks associated with investing in a foreign market. But we can offer them advice, help with research and business plans and also provide start-up loans.

"The trouble is that the Swiss are conservative by nature and adopt a wait and see approach," he added.

Time consuming

One Swiss company that has taken the plunge is Schätti metalworks near Zurich. In the past few weeks it has opened a factory in Bulgaria, producing metal parts for furniture and buildings.

Chief executive Jos Schätti says starting up in eastern Europe consumes a lot of management hours.

"The way to make things work is to get involved personally. You cannot delegate responsibility because there are too few human resources in these countries," he told swissinfo.

"Swiss SMEs are one fifth to one sixth the size of [companies in] other European countries and are often run by one person. They don't have the management capacity to oversee a start-up in these countries."

Schätti said it was factors such as the availability of qualified staff, transport infrastructure and economic growth prospects that influenced his decision to set up in Bulgaria.

Expected savings on labour costs played a minor part in his decision, he added.

Cultural differences

Schätti admits there are some hurdles to overcome, but he believes that countries such as Bulgaria offer excellent business potential for Swiss SMEs.

"The biggest problem is the cultural differences between Switzerland and eastern European countries. They do business in a different way and it involves four to five times as much negotiation," he said.

"When you are the first company there you have to teach people about business and that can cause frictions and cost a lot of time. But I believe Bulgaria and Romania will be the tiger economies of Europe in the coming years.

"Problems can arise if companies falter too early and don't go the distance. You have to be optimistic, believe that you can succeed and see the project through to the end."

The agency that supports start-ups points out other long-term benefits to setting up shop in eastern Europe.

"Many of these countries have recently joined the European Union or have applied for membership. It is a great advantage for Swiss businesses to operate inside EU states," said deputy managing director Achermann.

In 2005, Sofi assisted 300 Swiss companies to set up in developing countries, 80 of them in eastern Europe. It has an annual SFr3 million budget for loans and currently co-finances 20 projects in eastern Europe.

The agency, which was created by the government's State Secretariat for Economic Affairs (Seco) to help Swiss businesses start-up in developing countries, held a business networking conference in Zurich earlier this month.

swissinfo, Matthew Allen in Zurich

Key facts

Switzerland's 2004 trade figures with selected eastern Europe countries (source: Seco):
Czech Republic: exports SFr1148 million, imports SFr981 million.
Hungary: exports SFr882 million, imports SFr769 million.
Romania: exports SFr464 million, imports SFr155 million.
Bulgaria: exports SFr283 million, imports SFr65 million.
Ukraine: exports SFr229.7 million, imports SFr50 million.
Latvia: exports SFr123.4 million, imports SFr11.7 million.
Lithuania: exports SFr95 million, imports SFr46 million.
Estonia: exports SFr50.7 million, imports SFr 33.7 million.

end of infobox

In brief

The Swiss Organisation for Facilitating Investment (Sofi) was set up by Seco in 1997 to provide loans, advice and support for Swiss companies setting up in developing countries.

To date, the agency has helped some 400 Swiss companies set up in more than 60 countries in Africa, the Middle East, Latin America, Asia and central and eastern Europe.

In June the agency will host the Swiss Invest Forum 2006 in Zurich: Current Investment Hotspots in Emerging Regions.

end of infobox


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