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A GLOBAL / COUNTRY STUDY AND REPORT ON “Switzerland and Business Opportunities for Gujarat’s / India’s businesses” Submitted to Gujarat Technological University IN PARTIAL FULFILLMENT OF THE REQUIREMENT OF THE AWARD FOR THE DEGREE OF MASTER OF BUSINESS ASMINISTRATION UNDER THE GUIDANCE OF Dr. Sarika Srivastava Assistant Professor Submitted by Global Institute of Management(794), Gandhinagar MBA PROGRAMME Affiliated to Gujarat Technological University Ahmedabad Batch: 2010-12 PART – I: ECONOMIC OVERVIEW OF SWITZERLAND INTRODUCTION Switzerland was founded more than 700 years ago. It is also known as "Confoederatio Helvetica", therefore the abbreviation CH. "Confoederatio" stands for "confederation", "Helvetica" derives from the Latin word "Helvetier", the name of the people who lived in the area which became later Switzerland. The federal constitution defines Switzerland as a federal state composed of 26 cantons (until 1976: 25 cantons) with far reaching autonomy. The people living in Switzerland are friendly and hospitable though somewhat reserved at times. They share an independent spirit and a respect for tradition. Switzerland is probably really the "safest place on the planet", considering both technical safety standards and security aspects (low rate of criminality, cautiousness of the population). DEMOGRAPHIC PROFILE OF SWITZERLAND The population is mostly urban: 74% of the population lives in urban areas; in 1930 the urban population was only 36%. About half of the urban population lives in the agglomerations of the five major cities of Zurich, Basel, Geneva, Bern and Lausanne. Ageing society: During the course of the 20th century, the proportion of elderly people increased, while that of young people (under age 20) and people of working age (aged 20 – 64) declined. The ageing of the population will continue. The proportion of persons aged 65 and over is expected to rise from 17% (2009) to 28% in 2060. Foreign population: Foreigners account for 22% of the permanent resident population. More than half of the residents without a Swiss passport (52%) have been living in Switzerland for more than 15 years or were born here. Changing living patterns: Increasingly fewer people live in a family household with children. In 1970, it was 65%; today it is 48%. More and more people live as couples without children (1970: 18%; 2009: 27%). DEMOGRAPHIC PROFILE TABLE NO. 1 Population:7,639,961 Ethnic Groups: German 65%, French 18%, Italian 10%, Romansch 1%, other 6% Age Structure: 0-14 years: 15.2%,15-64 years: 67.8%,65 years and over: 17% Median Age: Total 41.7 Years, Males 40.6 Years, Females 42.8 Years Birth Rate: 9.53 births/1,000 , Country comparison to the world: 202 Death Rate: 8.72 deaths/1,000 population (July 2011 est.) Urbanization Ratio:- Urban population: 74%, Rate of urbanization: 0.5% Sex Ratio:- At birth: 1.054 male(s)/female Total Fertility: 1.46 children born/woman Nationality: Swiss Religion: Roman Catholic 41.8%, Protestant 35.3%, Muslim 4.3%, Orthodox 1.8%, other Christian 0.4%, other 1%, unspecified 4.3%, none 11.1% Language: German, French, Italian, and Romansch are all national and official languages. Literacy Rate: Total population: 99% Male: 99%,Female: 99% SOURCE: https://www.cia.gov/library/publications/the-world-factbook/geos/sz.html ECONOMIC OVERVIEW OF THE COUNTRY Switzerland is a peaceful, prosperous, and modern market economy with low unemployment, a highly skilled labor force, and a per capita GDP among the highest in the world. Switzerland's economy benefits from a highly developed service sector, led by financial services, and a manufacturing industry that specializes in high-technology, knowledge-based production. The government has renegotiated its double taxation agreements with numerous countries, including the US, to incorporate the OECD standard, and it is working with Germany and the UK to resolve outstanding issues, particularly the possibility of imposing taxes on bank deposits held by foreigners. ECONOMIC FORECASTS FOR SWITZERLAND TABLE NO. 2 Real Year on year change in % (at previous year prices) 2009 2010 2011 2012 GDP, Real -1.9 2.7 1.9 2.0 Consumer Spending 1.4 1.7 1.3 1.5 Public Spending 3.3 0.8 1.8 1.2 Capital spending on machinery and equip. -10.8 10.9 4.4 3.5 Construction investment 3.0 3.5 3.5 1.5 Exports (Goods & Ser.) -8.6 8.4 3.5 5.0 Imports (Goods & Ser.) -5.5 7.3 3.5 4.5 Unemployment Rate (%) 3.7 3.9 3.0 2.6 Inflation Rate -0.5 0.7 0.3 1.0 SOURCE: Credit Suisse Economic Research, State Secretariat for Economic Affairs, Swiss Federal Statistical Office Switzerland Stock Market SWITZERLAND STOCK MARKET Switzerland's main stock market GRAPH NO. 1 index, the SMI declined 880 points or 13.46 percent during the last 12 months. From 1988 until 2011 the SMI market value averaged 5021.55 points reaching an historical high of 9531.46 points in June of 2007 and a record low of 1287.60 points in January of 1991. Source: http://www.tradingeconomics.com/switzerland/stock- market Switzerland GDP Growth Rate Historically, from 1980 until 2011, Switzerland's average quarterly GDP Growth was 0.40 percent reaching an historical high of 2.10 percent in June of SWITZERLAND GDP GROWTH RATE 1989 and a record low of -1.10 GRAPH NO. 2 percent in December of 2008. Switzerland's economy has low unemployment, a highly skilled labor force, and a per capita GDP among the highest in the world. Its policy of long-term monetary security and bank secrecy has made Switzerland a safe haven for investors, creating an economy that is increasingly dependent on a SOURCE: steady tide of foreign investment. http://www.tradingeconomics.com/switzerland/gdp-growth Switzerland Inflation Rate The inflation rate in Switzerland was last reported at -0.1 percent in October of 2011. From 1971 until 2010, the average inflation rate in Switzerland was 79.12 percent reaching an historical high of 4617.84 percent in June of 1994 and a record low of -0.10 percent in November of 1986. Economy at a Glance ECONOMY AT A GLANCE TABLE NO. 3 GDP (2010) : $475.8 billion (495.8 billion Swiss francs [CHF]). Government Exp. : 38.3% (federal, cantonal, and local) (in GDP%, 2008) Annual growth rate : 2.6%.(2010) Unemployment : 3.4%.(March 2011) Per capita income : $66,367 (2010 est.) Avg. inflation rate : 0.7% (2010); 1.1% (2011 est.). Natural resources : Water power, timber, salt. Agriculture (1% of : Products--dairy (21%), livestock (25%), grains (4%), fruit GDP) and wine (10%), and vegetables (14%). Arable land (1999)--26%. Industry (est. 29% of : Types--machinery, chemicals, pharmaceuticals, time GDP): pieces, precision instruments, textiles and clothing, pigment, transportation equipment. Services : 70% of GDP Trade: : Merchandise exports (2010)--$195 billion (official exchange rate): food, beverages, and tobacco (4%; +8%); metal and chemical industries (44%; +10%); precision instruments (15%; +18%); watches (8%; +27%); machinery and electronics (22%; +12%); clothing (1.5%; -3%). Merchandise imports (2010)--$176 billion (official exchange rate): consumer goods (38%); equipment (19%); energy (7.1%); raw materials (28%). Major suppliers--EU, U.S., Canada, CIS, South Africa. Major markets : EU, United States, Canada, CIS, India, Brazil, Japan. Major suppliers : EU, U.S., Canada, CIS, South Africa. SOURCE: http://www.state.gov/r/pa/ei/bgn/3431.htm OVERVIEW OF INDUSTRIES TRADE AND COMMERCE The World Economic Forum Switzerland is the home of the World Economic Forum (WEF), an international organization which brings together world leaders from the realms of politics and business, to discuss and shape future policies. The WEF, which has its headquarters in Geneva, was founded in 1971 by a German-born professor of business, Klaus Schwab. Switzerland Exports Switzerland exports were SWITZERLAND EXPORTS worth 16.6 Billion CHF in GRAPH NO. 3 September of 2011. Trade has been the key to prosperity in Switzerland. Exports accounts for 50% of its GDP. Swiss main exports are: medicinal and pharmaceutical products, watches and clocks, machinery for special industry and metalworking machinery and tools. Swiss main export SOURCE: http://www.tradingeconomics.com/switzerland/exports partners are Germany, United States, Italy and France. Switzerland Imports Switzerland imports were worth SWITZERLAND IMPORTS 14.8 Billion CHF in September of GRAPH NO. 4 2011. Switzerland imports mostly machinery, chemicals, vehicles, metals; agricultural products and textiles. Its main import partners are: European Union countries (Germany, Italy, France, Netherlands, and Austria) and United States. SOURCE: http://www.tradingeconomics.com/switzerland/imports Switzerland Consumer Confidence In Switzerland, the consumer confidence survey is conducted every year, in the months of January, April, July and October. 1,100 households are questioned for State Secretariat for Economic Affairs regarding their subjective evaluation of the economic situation, financial situation of the household in question, inflation, job security etc. Generally consumer confidence is high when the unemployment rate is low and GDP growth is high. Switzerland Business Confidence In Switzerland, the KOF Swiss Economic Institute economic barometer measures the level of optimism that people who run companies have about the performance of the economy and how they feel about their organizations’ prospects. The most important module included in KOF economic barometer is GDP, which excludes construction and banking sectors and accounts for more than 90% of Swiss GDP. OVERVIEW OF DIFFERENT ECONOMIC SECTORS OF SELECTED COUNTRY About two third of the area of Switzerland is covered with forests, lakes and mountains. Since Switzerland has no mineral resources, it must import, process and resell them as products. "Services" are the most important part of the economy. This includes banking, assurances and tourism. Farming is also an important part of the economy. But the production of the Swiss farmers does not fulfill the needs of all people, so Switzerland must rely on imported goods from other countries.