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Swiss seek to entice Japanese firms

Japanese companies are being urged to set up European operations in Switzerland as a gateway to the European Union market.

A Swiss business delegation to Tokyo, headed by Economics Minister Doris Leuthard, is seeking to redress the trade imbalance between the two countries following the implementation of a free trade agreement last month.

Switzerland's low corporate tax regime, coupled with a high standard of living, has successfully attracted a number of United States and European conglomerates. But the message appears not to have fully hit home in Asia.

Corporate leaders from both countries, invited to a Swiss symposium in Tokyo on Tuesday, were reminded by Leuthard that Switzerland's export volumes and direct investments were significantly higher despite Japan's economy being much bigger.

Direct investments are payments made on infrastructure, production or buying shares in another company.

Closing the gap

"Swiss direct investments create about 65,000 jobs in Japan, while Japan's modest investment accounts for only 4,000 Swiss jobs," she said. "We do not have a balanced investment situation."

The raw statistics back up Leuthard's argument. Swiss direct foreign investments in Japan grew 2.9 per cent in 2007 to SFr13.7 billion ($13.3 billion), while such spending in the other direction fell SFr44 million to SFr932 million.

The gap was partly shortened by Japanese indirect investments, made via third parties such as a trust fund in Switzerland, that amounted to SFr7 billion. But the amount of cash Japanese firms were willing to spend in Switzerland remained disappointingly small.

In fact, more Swiss companies have direct operations in Japan (around 140) than the other way round (some 100).

A recent survey of 700 global firms by consultancy firm Ernst & Young found that Switzerland was the second most attractive country to set up foreign operations, behind Germany. But the Asian firms in the survey ranked Switzerland in seventh place and only the fifth best European location.

EU disadvantage?

The figures also revealed that Switzerland's tax appeal was less appreciated in Asia than among companies from elsewhere.

"Before Japanese companies decide on location, they consider the possibility of English speaking employees, low taxes, proximity to consumers, good distribution and low labour costs," Michiaki Watanabe, director general of the Swiss branch of the Japanese External Trade Organisation (Jetro), told swissinfo.ch.

"They also tend to select their European HQ location among EU countries in order to cover the EU market."

But the Swiss point out that Switzerland could provide a backdoor, tariff-free entry to the EU market thanks to its free trade agreements (FTAs) with the EU and, since September 1, with Japan.

Made in "Switzerland"

Ernst & Young explained at the Tokyo Swiss Symposium that Japanese goods, such as electrical items and car parts, could enjoy reduced duty if the goods are assembled or finished in Switzerland. To achieve this, however, the goods would need to pass as 60 per cent made in Switzerland.

Daniel Küng, chief executive of Business Network Switzerland (Osec), was keen to promote the benefits of the new treaty with Japan with an optimistic message in Tokyo.

"Accelerated by the many substantive benefits of the [FTA], Switzerland is rapidly becoming the top address in Europe for regional headquarters of Japanese companies," he said.

Matthew Allen, swissinfo.ch in Tokyo

Japanese firms in Switzerland

There are around 140 Swiss firms directly operating in Japan and some 100 Japanese firms on Swiss soil.

Some 566 firms are members of the Japanese chamber of commerce in Dusseldorf, 356 in Amsterdam and 316 in London, but only 46 in Geneva and 22 in Zurich, according to Japan's external trade organisation.

Among the biggest Japanese firms in Switzerland are Japan Tobacco International in Geneva and car manufacturer Nissan, that moved its European HQ from France to canton Vaud in 2006.

Hitachi Medical Corporation established its European base in canton Zug 12 years ago, Silicon chip manufacturer Elpida Memory is present in canton Geneva and Sekisui Chemical can be found in canton Lucerne.

Refrigeration specialist Mycom Intertec (part of Mayekawa Manufacturing) has been in canton Zug since 2004, outdoor clothing company Mont Bell opened its first European store at the foot of the Eiger mountain four years ago.

Sunstar, that produces a range of products from dental care to motorcycle parts, opened its world headquarters in canton Vaud last month.

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Swiss-Japanese trade

The Swiss-Japanese free trade agreement was signed in February and came into force on September 1. It was the first FTA Japan has signed outside of Asia.

Swiss exports to Japan increased 4.9% in 2008, totalling more than SFr7billion ($6.77 billion).

Japan is Switzerland's third-largest trading partner after the European Union and the United States.

The most important Swiss export products to Japan are machinery, technical instruments, chemicals, pharmaceuticals and consumer goods, especially watches.

Japanese goods to the tune of SFr4.1 billion – mainly precious metals, cars, electronic goods and machinery - made the return trip (up 18.2 per cent). However, figures do not take into account Japanese goods manufactured in Europe.

In the first three months of 2009, Swiss exports to Japan surprisingly rose 13.7% while Japanese imports fell by a quarter.

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