switzerland analysis

Country Analysis :Switzerland

Anil kumar SinghArushi

Divya JainMamta SinghNeelesh Pal

Sushant Sharma

LAND and LABOUR

SOME STATISTICS

• Total area :41277 sq km• Climate : Temperate ,but varies• Terrain :mostly mountains, central plateau of hill plains,

large lake• Languages :german,french,italian• Religion : Christianity• Natural resources: hydropower, timber, salt• Arable land:9.91%• Permanent crops :0.58%• Population :7753600• Irrigated land :250 sq km• Foreigners :21.7 %• Life expectancy:84.2 (F),79.4(M)• Education (‘000s):1506.8

LAND LAWS AND PRACTICES

CONTRACTSSpecific term contractsIndefinite duration contracts

PERMIT REQUIREMENTSPermanent business establishmentsResidences

Switzerland “ Land of tenents”

Harmonious relations of employer and employeeWork hours:45/weekPaid vacations:4 weeksMinimum age for employment:15 yrsFreedom for worker associationRight to representation in firmUnemployment: 2.6%

SOURCES : Websites of ILO, Swiss federal statistical office ,CIA world fact book,

International trade union confederation .

LABOR LAW AND PRACTICES

EDUCATION IN SWITZERLAND

Introduction

Publically-funded educationLargely decentralized education systemResponsibility of education lies with 26 cantonsCantons financed about 87% of public educational

expenditures.Education expenditure is about 5.8% of GDP.

Swiss Educational System

Swiss Educational System - Statistics

Statistics:Tertiary Education

Education Level Total Men Women National Origin

Swiss Foreign

Universities 112309 57181 55128 87103 25206

Humanities and Social Sciences

41685 15028 26657 33909 7776

Economics 14233 9920 4313 9989 4244

Law 13247 6314 6933 11328 1919

Exact and Natural Sciences 18714 12043 6671 13238 5476

Medicine/ Pharmacy 10706 4193 6513 9157 1549

Engineering 10940 8163 2777 7238 3702

Interdisciplinary and others 2784 1520 1264 2244 540

International Comparison

According to the study carried out by OECD:Swiss 15 year olds were above average in all the

areas tested Nevertheless, for no subject area was Switzerland

among the very best.greatest number of students completing Secondary

II education.Swiss universities enjoy a high reputation and

attract far more foreign students

The Swiss health care system


Statistics

Total population: 7,455,000

Gross national income per capita (PPP international $): 40,840

Life expectancy at birth m/f (years): 79/84

Healthy life expectancy at birth m/f (years, 2003): 71/75

Probability of dying under five (per 1 000 live births): 5

Probability of dying between 15 and 60 years m/f (per 1 000 population): 80/47

Total expenditure on health per capita (Intl $, 2006): 4,312

Total expenditure on health as % of GDP (2006): 11.3

Figures are for 2008. Source: World Health Statistics 2008


Comparative Statistics - Total Health Expenditures Per Capita


Finances Switzerland’s health care system is largely financed through

compulsory health insurance premiums Compulsory health insurance can be purchased from a limited

number of insurance companies, both public and private, which are registered with the Federal Office for Social Insurance.

These insurance companies are not allowed to make profits from their compulsory health insurance activities and the Federal Office to whom they must submit accounts monitors their activities.

The services not covered by compulsory health insurance can be funded by supplementary health insurance


Comparative Statistics - Total Health Expenditures Per Capita


Comparative Analysis - Switzerland V/s United States

Switzerland Healthcare Policies

United States Healthcare Policies

By Law, Swiss are required to purchase basic health insurance

Employers purchase health insurance for their employees

In Switzerland, federal regulators determine what services a health insurance company must cover.

Health care facilities are largely owned and operated by the private sector.

Swiss have quality, universal coverage, while spending 40 per cent less than Americans, a savings of $1 trillion

Nearly 50 million people in the US have no health insurance at all

Swiss Policies in context of US

The US system of dual sovereignty (federalism) is foremost, which prevents central control in all areas not specifically delegated by the Constitution. The lack of central control allows real diversity and the potential for the free market to flourish

No federal health care system would work in the US because of its unique constitutional system and complex collection of partially-sovereign states. Notably, the federal government has no jurisdiction to force citizens to purchase insurance by threat of penalty

Moreover, the Swiss are a homogenous and distinct people whose health and health care system cannot reasonably be compared to the diversity we would find in America. Thus a ‘One size fits all’ wouldn’t cater to the diversity in the US.

Swiss Policies in context of India

The income distribution in India is vastly divergent than what we have in Switzerland.

The Indian healthcare system is still ailing with poor infrastructure and obsolete healthcare facilities. To resurrect that, a tremendous investment need to be made into these sectors, this would rather burden the central government.

Recommendations: Better approach would be to need to decentralize the Indian health

system. Local bodies and Panchayat, rather than the central government, should have control over government hospitals and primary healthcare centres.

Public private partnerships is required to strengthen the Indian healthcare system

CORPORATE GOVERNANCE IN SWITZERLAND

Corporate Governance in Switzerland

Corporate governance encompasses the full range of principles directed towards shareholders’ interest seeking a good balance between direction and control and transparency at the top company level while maintaining decision-making capacity and efficiency.

“Swiss Code of Best Practice for Corporate Governance”

Intended for public limited companiesPurpose- to set out guidelines and

recommendationsEach company should retain the possibility

of putting its own ideas on structuring and organization into practice.

Role of Corporate Governance

The Rights of Shareholders and Key Ownership Function

The Equitable Treatment of ShareholdersThe Role of Stakeholders in Corporate

GovernanceDisclosure and TransparencyThe Responsibilities of the Board

The Rights of Shareholders and Key Ownership Function

Shareholders should have the final decision the General Shareholders’ Meeting is used as a

forum for communication and facilitate their participation

the meeting should enable shareholders to make relevant and concise comments on the agenda items

Arrangements should be made to ensure that shareholders’ rights to information and inspection are met

In the General Shareholders’ Meeting the will of the majority should be clearly and fairly expressed

The Role of Stakeholders in Corporate Governance

Respect for legal rightsRedress for violation of rightsPerformance-enhancing mechanisms for

stakeholder participationAccess to relevant information

Disclosure and Transparency

Disclosure of material informationIndependent auditMajor share ownershipDisclosures relating to directors, key

executives and their remuneration

The Responsibilities of the Board

Responsible for the strategic direction of the company or the group.

Should lay down the powers and responsibilities of the persons in charge of managing the business

Should determine the procedures appropriate to perform its function.

Dealing with conflicts of interest and advance information

Should provide for Internal control system dealing with risk and compliance

Should form committees to perform defined tasks

Committees of the Board of Directors

Audit Committee should form an independent judgement of the quality

of the external auditors, the internal control system and the annual financial statements.

Compensation Committee should see to the defining of a remuneration policy,

primarily at top company level.

Switzerland - Taxation

Switzerland Residence and Liability for Taxation

Switzerland Residence and Liability for Taxation

He has Swiss employment ;He carries on a business in Switzerland; orHe lives in Switzerland for not less 180 days.

Federal taxes Cantonal taxes Municipal taxes

Individual income taxes

Individual income and net wealth taxes

Individual income and net wealth taxes

Corporate income taxes

Corporate income and net worth taxes

Corporate income and net worth taxes

Real estate capital gains taxes Real estate capital gains taxes

Real estate taxes Real estate taxes

Real estate transfer taxes Real estate transfer taxes

Inheritance and gift taxes Inheritance and gift taxes

Withholding tax on passive income

Value added tax andCustoms duties

Motor vehicle taxes Trade taxes

Stamp duties Military and civil service exemption tax

Tobacco taxBeer taxSpirits tax

Overview of the Swiss taxation system Switzerland is a confederation of 26 cantons with about 3000 municipalities. Taxes are levied not only by the Federation but also at the cantonal and municipal level.

Switzerland The 'Fiscal Deal'

The 'fiscal deal' or 'lump sum assessment' method

This method couples a residence permit with the tax deal, involves a negotiation with the canton in which residence is planned.

An applicant for the 'fiscal deal' must have• a certified net wealth of not less than SFr2m. • The individual concerned must not involve himself in any

lucrative economic activity in Switzerland. • must be willing to spend at least 180 days a year in the

country.

FORMS OF TAX PRIVELIGED OPERATIONS

Holding Company

Domiciliary Company

Auxiliary Company Service Company

Swiss Insurance Sector

General Overview

Switzerland has a long-established and well-developed insurance industry

Is one of the leading insurance centers in the world. The sector is very important both within Switzerland and

internationally.

General Overview

Switzerland is an established insurance center, well served by large and sophisticated insurers.

As at August 31, 2006, there were 214 insurers― 23 Swiss life insurers, 4 foreign life insurers, 78 Swiss non-life insurers, 40 foreign non-life insurers, 69 reinsurers. highest per capita expenditures for insurance in the world—about

SwF 7,000 (excluding social security contributions). IMF-2007

General Overview

The Swiss insurance sector is regulated mainly at the federal level The Swiss insurance industry is also perceived as one of the safest in

the world, and has an enviable history: not once has any Swiss insurance company ever failed.

The country regularly achieves top rankings in fundamentals such as an efficient legal system, long-term stability, protection of free competition and property ownership.

Moreover, government institutions work efficiently and are dedicated to minimizing red tape. This is certainly also true for insurance regulation, which works both very effectively and competently.

Swiss Insurance Market

More than 70 percent of the global premiums sourced from abroad.

Swiss Re became the largest reinsurer in the world, with an estimated 25 percent of global life and 14 percent of global non-life reinsurance premiums

Total assets held by direct insurers amounted to SwF 450.3 billion as at end Of 2005

Why one should Invest In Switzerland?

Swiss annuities and life insurance are unique. Not only are they a very safe form of investment, they also offer extremely strong asset protection,

Depending on the individual situation of the investor, investments in Swiss annuities and life insurance may also offer tax advantages.

SAFEST and Most Stable

Swiss life insurance companies are required to maintain a security fund which covers all their obligations plus an additional safety margin.

If a Swiss insurer were ever to go bankrupt investments of policyholders are still safe .

Only 1.1 percent job cuts during global crisis(15.4 percent in banking sector)

Asset Protection

For American Citizens For wealthy citizens from other Countries. Those with Acute need to legally protect their assets from

lawsuits and unjustified claims or asset seizure

REGULATION

FOPISIASICAFOPHSwiss Actuarial Association Swiss Insurance Brokers Association

REGULATION

Switzerland's new 'super regulator,' the Financial Market Supervisory Authority (FINMA) commenced operations on January 1, 2009.

The effect of the Act is to merge three bodies – the Federal Office of Private Insurance (FOPI), the Swiss Federal Banking Commission (SFBC) and the Anti-Money Laundering Control Authority – into a single supervisory authority.

ISSUES Money laundering and Funding to Terrorist Organizations

Conclusion

Attractive market for investors… Not so Attractive if you are an insurance company ,should

rather go to a country like Kazakhstan (90% untapped market)

The Swiss Stock Exchange(SWX), based in Zurich is the first stock exchange in the world to incorporate a fully automated trading, clearing and settlement system in 1995

The Swiss Stock Exchange(SWX) is controlled by an association of banks which number 55. Each of these banks have equal voting rights in the matter of decision making concerning the management and regulation of the Swiss Stock Exchange.

The Swiss Stock Exchange(SWX) is the joint owners of the Eurex, the world's largest futures and derivatives exchange along with their German partners Deutsche Börse

The Swiss Stock Exchange(SWX) has a blue-chip index as its stock market index. It is called the Swiss Market Index (SMI) and comprises of a maximum of thirty largest and at the same time most liquid, large and mid-cap SPI stocks.

The Federal Act on Stock Exchanges and Securities Trading (SESTA) entered into force in 1997/98. With the introduction of SESTA, the Commission for Regulatory Issues of the SWX became the Swiss Takeover Board. The task of supervising the stock exchanges was assigned to the Swiss Federal Banking Commission. The new law also confirmed, and in certain respects expanded, the self-regulatory powers granted to the SWX under the earlier cantonal rules.

PERFORMANCE

COMPARISON

Current Market Capitalization is 863931.8(MCHF) as on 30/06/2009

A change Of 11.2 % in Q1,2009.A net gain of 89,720(MCHF) in three months.

Current P/E ratio is 16.17Stock market capitalization/GDP- 255% Second only to Hong Kong, Compared to India which is 72%

PEG ratio for Switzerland in 2008 was 8.15BRIC countries still attractive if we compare

PEG ratioUS least Attractive with a PE ratio of 11.

ConclusionA reasonably attractive marketFrom an investor’s point of view BRIC

companies still better options.Better than US market.From a company’s point of view …a very

good option because ..norms are not tough…and large IPO’s could be easily subscribed.

CURRENCY REGULATION

SCENARIO AFTER MELTDOWN

Hardly any effect in 2007First half 2008 - Slow down in economic activity butuncertainty in financial marketNo effect on exports , investment,labour market

Second half 2008 Exports sharply effected, investment moderatedunemployment increased by 0.3%,GDP growth came to1.6% from 3.3% in 2007

Year 2009 Gaining momentum

REGULATORY BODY

Swiss National Bank Federal department of finance, FinancialStability Board, FINMA regulates the currency with Financialstability boardStatistics Currency of Switzerland: Swiss franc(CHF). Interest rate: 0.29% Exchange rate: 1.04 CHF per USD Capital account: -0.9 CHF bn Forex reserves: 82044 CHF mio Gold holdings: 29190.2 mn CHF Current account balance: 13.2CHF bn 3- month libor rate for CHF: 0.29

REGULATION

• By Control of open market operations• By maintaining liquidity for banks• Liquidity-shortage financing facility• Repo transactions as principal monetary policy• Foreign exchange swaps • Liquidity supply • Main features of the Regulation-minimum

reserves

SOURCES: websites of Swiss national bank, FINMA, Swiss federal statiscal office, CIA world fact book etc.

INTELLECTUAL PROPERTY RIGHTSIN SWITZERLAND

Reasons for assigning IPR in Switzerland

To maintain peace and order.To assign decision rights. To reward investment. To favour the diffusion of information.

IPR Laws in Switzerland

• Copyrights: Regulates rights to protect works i.e. literature, music, pictures etc which have an unique character.

• Patents and Designs: Protective rights granted by federal government for technical intervention which includes products and processes.

• Trademarks: Protective signs which are used to distinguish the products or services of one businesses from others.

Counterfeiting and Piracy

Source of the Counterfeit goods by Country

Intervention by Groups of Goods

Amendments of Copyrights Act effective July 2008

On-demand right now for performers, producers and broadcasters as well.

Improved protection for performing artists.Technical measures and rights information

newly protectedTechnological measures will be monitoredPrivate use of works.New copyright exceptions and limitations

COMPETITION LAWS IN SWITZERLAND

Competition Act in Switzerland

Based on art. 12 of the Swiss Cartel Act, civil actions can be restraint of competition from entering or competing in a market may request:

removal or cessation of the restraint;damages and reparations;remittance of the illicitly earned profits.

Legal requirements for bringing an action for damages

A person impeded by an unlawful restraint of competition

from entering or competing in a market may request:

Unlawful horizontal or vertical agreements which significantly affect competition in the market for certain goods or services and are not justified on grounds of economic efficiency or lead to the suppression of effective competition, (art. 5 Swiss Cartel Act) or

Abuse of a dominant position (art. 7 Swiss Cartel Act)

Cases of breach in past few years

Technology in Switzerland

Science and Technology in Switzerland play an important role in economy as very few natural resources are available in the country

Swiss National Science Foundation, mandated by the Federal government, is the most important institute promoting scientific research.

Research fields in Switzerland

BiotechnologyNanotechnologyMicro technologyComputer scienceClimate researchRenewable energies

In Switzerland, 45% of the active population is occupied in the S&T area

Human resources in Science and Technology

Research and Development Personnel

In Switzerland, for every 1000 employees, 12 work in R&D and 6 as researchers.

International comparison of R&D personnel and researchers(Per thousand jobs)

Research and development expenditure•Switzerland is extremely active in all R&D sectors and compares well with most European Union (EU) and OCDE countries.•Switzerland is among countries which proportionally spend the most for R&D (2.9% of GDP).

With 107 patents per million inhabitants, Switzerland is, after Japan, the most active OCDE country in this area.

Patent Families

Technology Balance of Payments

Distribution of R&D-intensive industry coverage according to economic sector and country,

international comparison

Administrative Barriers in Doing Business

Administrative barriers arise in particular from the information requirements imposed upon market parties by the enforcement of regulations. When such requirements are particularly burdensome or obstructive or otherwise hamper operators or shippers in business activities they are called administrativeSwitzerland is traditionally considered a safe haven for foreign investors, because it has maintained political neutrality, an elaborate banking system with a high degree of bank secrecy, and it has maintained its currency's value through the instabilities of surrounding Europe's wars and crises


Economy Rankings - Ease of Doing Business : Rank#21 out of 183 economies

Switzerland - Compared to global good practice economy as well as selected economies


Summary of Indicators


Economic Indicators

Switzerland Germany United Kingdom

Ease of Doing Business

21 25 5

Starting a Business 71 84 16

Construction permits 35 18 16

Registering Property 15 57 23

Employing Workers 16 158 35

Getting Credit 15 15 2

Protecting Investors 165 93 10

Paying Taxes 21 71 16

Trading across borders

39 14 16

Enforcing Contracts 29 7 23

Closing a Business 38 35 9


Company Financing Tax BarriersThe Swiss federal government, the Federal Council, recently

announced a range of corporate tax reforms designed to increase Switzerland's attractiveness and prospects for growth as a business location.

The main elements of the reforms include – Abolition of issue tax on equity and debt capital and the elimination

of tax barriers to company financing At the cantonal level, it should be made possible for the cantons to

waive capital tax Abolition of the status of domiciliary companiesImplicationsThe range of reforms contemplated would enhance capital formation

and entrepreneurial activity, have a positive impact on growth and strengthen Switzerland's position in international tax competition in the face of similar measures taken by other countries


Financial Sectors GDP is forecast to contract by 3.6% in 2009, with a further contraction of

0.6% in 2010. Unemployment is set to rise, and investment spending and net exports will be particularly weak. Industrial production will decline heavily

Technical standards The Swiss Standards Association (SNV) publicize industrial standards,

compliance with which may be specified by Swiss customers. Increasingly suppliers are required to deliver in accordance with ISO 9000 service development series.

Tariff preferences to LDCs Switzerland uses its scheme of tariff preferences to grant ample market

access for industrial and agricultural products from LDC countries

Taxation Corporate tax-rate at in Switzerland are very low. It is through this that it

attracts many investors rather than investor friendly incentives. Besides, The Agreement for the Avoidance of Double Taxation between the

Swiss Confederation and the Republic of India with respect to income taxes, which came into force on 29th December 1994 form one of India’s key features of its Bilateral agreements with Switzerland.Thus,many Indian investors can avail this opportunity for venturing into business in Switzerland.


Barriers for the disabled- People with disabilities in Switzerland are better represented in the

workforce than in other countries but still face more obstacles than the general population

On an international level, the country has not signed up to the UN Convention on the Rights of Disabled Persons. The Swiss government has said that adhering to the convention is "desirable", but that it wants to find out how it fits in with the legal system first

Mobility issues such as Public Transport form a major hurdle for the disabled.


Websites/References http://www.switzerland.com www.snb.ch www.finma.ch/e www.bloomberg.com www.cia.gov World Health Statistics 2008 EIU- Economic intelligence unit publication World Bank- world development report IMF- Report on foreign exchange restrictions Doing Business 2010: A co-publication of The World Bank and the

International Finance Corporation.

THANK YOU