Swiss economy “suffocated” by complexity

The IMD says the Swiss economy needs reform Keystone

Doing business in Switzerland is more difficult, slower and complex "than anywhere else", a leading global economic survey has found.

In a damning assessment of the country’s ability to compete around the world, the Lausanne-based business school IMD, warned that Switzerland faces an uphill battle to reform.

“The economy is increasingly being suffocated by complex legislation, rules and practices that are blocking society’s ability to reform itself,” Stéphane Garelli, director of the World Competitiveness Report 2003, told swissinfo.

The annual survey – which ranks 59 leading economies – downgraded Switzerland to fifth place (from third place in 2002).

The alpine country has been overtaken by Denmark, Singapore and Hong Kong, although the rankings do not take account of the impact of the Sars epidemic.

Garelli said while Switzerland ranks highly for its well-educated workforce as well as its excellent social and economic infrastructure, the country has gone backwards because of its failure to innovate.

Attitude

“The fundamental issue for the competitiveness of Switzerland is less its high cost structure, which can be compensated for by excellent skills and infrastructure, than complexity, for which nothing can compensate,” he said.

“In Switzerland, everything is more difficult, slower and [more] complicated to implement than anywhere else,” he added.

“The future of Switzerland’s competitiveness will depend on greater simplicity, adaptability and resilience to events. But are these Swiss qualities?”

Switzerland was ranked 21st (out of 29) for the ability of its government to react swiftly to economic changes, and only 25th for the flexibility and adaptability of its population.

“Neither does the country shine for its openness of the national culture to foreign ideas (26th),” the report said.

No safety net

IMD ranked Switzerland 25th for its high cost of living but awarded it fourth place for having near-zero rates of consumer inflation.

Garelli also linked Switzerland’s slide in overall standings to difficulties confronting the country’s finance industry, which has traditionally acted as a buffer during times of crisis.

“For the first time, banks and financial institutions are in the lead in reducing operational costs and staff, thus amplifying the consequences of economic slowdown,” Garelli said.

Even Switzerland’s ability to manage itself out of a crisis has been called into question. “The image of managers continues to suffer and their credibility only ranks 17th,” the survey said.

“Swiss managers only rank 11th for their sense of social responsibility.”

Size matters

This year’s IMD report, which has been published since 1989, has for the first time sorted surveyed countries into two groups – those with populations below and above 20 million.

Garelli said there was little point comparing the competitiveness of heavily populated countries with smaller economies.

“In this context, size does matter,” he said.

Investors also measure smaller economies differently to larger ones. The former are usually assessed on their ability to produce products, whereas big countries are more likely to be judged on their success as a market place.

The world’s most competitive countries with populations of more than 20 million were the United States and Australia, while Finland, Singapore and Denmark led the group with less than 20 million.

swissinfo, Jacob Greber

Key facts

IMD World Competitiveness Yearbook 2003
Switzerland ranked fifth, down from third in 2002.
Finland, Singapore and Denmark lead countries with populations of less than 20 million.
United States, Australia and Canada most competitive among countries above 20 million.
Swiss downgrade blamed on complexity of the national economy.