Calm amid chaos for creative Swiss
Alpine country continues to punch above its weight as euro zone faces crisis. Reports by John Cremer
Surrounded by euro-zone countries wrestling with the effects of debt, deflation and possible default, Switzerland's economy stands out as a continuing success story. Underpinned by the virtues of adaptability, foresight and financial prudence, alongside strong export performance in sectors ranging from pharmaceuticals and food to high-precision instruments, the overall prospects look bright.
Even after a surprise decision by the central bank in January to do away with a long-standing cap on the strength of the Swiss franc, the currency remains a safe haven and export orders seem steady.
The country's expertise in banking, insurance, hospitality, logistics and engineering is widely recognised around the world. And, with a series of corporate and government-inspired initiatives focusing on new technologies and fast-growing markets in the Asia-Pacific region, two-way trade with Hong Kong and China is set to take another significant step forward.
"Diversification is the key," says Alberto Silini, head of consultancy for Switzerland Global Enterprise. "Quality, reliability and service - that is where the Swiss export economy is strong. However, since the abolition of the minimum exchange rate against the euro, price-sensitive and euro-dominated markets are no longer the most promising destinations for our export industries. Therefore, it is important to keep diversifying into new markets and attractive niches where the strong Swiss franc is less of a burden and high-class Swiss workmanship is increasingly able to find financially sound customers."
Acknowledging data provided in a January report by Credit Suisse, Silini notes that Asian markets have an obvious attraction. Not only are many achieving dynamic economic growth but a fast-growing and fairly free-spending middle class has the purchasing power and confidence to spend more.
This is spurring demand for upmarket consumer goods including high-quality Swiss watches, confectionery and processed foods, but also among companies specialising in such areas as medical technology, information and communications technology, clean technology, renewable energy and mechanical and electrical engineering.
"Another positive aspect for us in many Asian countries is that their currencies are expected to appreciate against the Swiss franc in the next 12 months by between 8 per cent and 11 per cent," Silini says. "This is also the case in China, which is still characterised by continued economic growth and a rapidly growing middle class that is happy to pay a little more, particularly in the field of wellness and beauty and, increasingly, for food and drink if the quality is right."
In essence, Swiss companies and officials are confident that their reputation for high levels of quality and service in all sectors will stand them in good stead in China. They will also be able to take advantage of a free-trade agreement with the mainland, which will benefit export industries and is likely to become increasingly important in the context of international commerce.
"In our view, Hong Kong in particular has a lot to offer as an innovation hub in the IT sector," Silini says. "There are great opportunities opening up, the infrastructure is superb, the employment market is functioning well, and Hong Kong can prosper thanks to its geographical location at the intersection point between China and the Asean countries."
A market study by Switzerland Global Enterprise has looked at how Swiss companies can profit from these factors and help Hong Kong to develop its role as one of the global market leaders in IT.
Such cooperation may also be extended in fast-advancing areas such as biotechnology, molecular biology and nanotechnology. Similar to Hong Kong, Switzerland has a population of about 7.8 million and has never been able to rely on wealth generated by mineral resources. As a consequence, it now has a highly skilled workforce and is ahead of the game in many fields of research and development, and in the drive to create a "knowledge economy".
For instance, the equivalent of every third computer mouse sold around the world is produced by Swiss company Logitech. The watch industry is a model of hi-tech precision engineering. And the electrical microengine used to power the Pathfinder robot exploring the surface of Mars was overseen by another Swiss firm, Maxon.
For the record, bilateral trade between Hong Kong and Switzerland grew by an annual average of 16.7 per cent from 2009 to 2013, amounting to a total value of Euro10.2 billion (HK$85.8 billion) in 2013, according to Hong Kong government statistics.