The Swiss Confederation became independent from the Holy Roman Empire in 1499. A constitutional government replaced the Confederation in 1874. Switzerland has a history of neutrality and was not involved in either of the two world wars, but it has continued to strengthen ties with other countries. Although the country is a UN member and a valued partner for NATO, it retains its commitment to neutrality by keeping out of the bloc.
At 41,277 sq km, it is slightly less than twice the size of the US state of New Jersey. Switzerland is east of France and north of Italy, also bordered by Austria, Liechtenstein and Germany.
Manufacturing in Switzerland
Switzerland has a highly developed manufacturing industry specializing in high-tech and knowledge-based production. Other important industries include food and beverage, machinery, chemicals, textiles, precision instruments and pharmaceuticals, along with the legendary Swiss watch. Industry makes up 25.6% of the country’s GDP.
Industrial production is growing at about 3.4% annually as of 2017, putting it at number 92 in the world for growth.
Manufacturing is the growth engine of the swiss economy, but the country has lagged in innovation during the last several years. However, a more important drawback to manufacturing in Switzerland is the high costs associated with the area. The strength and volatility of the Swiss franc is creating additional challenges, and global competition is exacerbating this effect by increasing costs for raw materials, labor, and energy compared to other regions.
Swiss wages are higher than those in many other geographic areas partly because of the talent shortage. Because swiss workers are highly skilled and well educated, nearby countries often hire Swiss workers, leaving in-country manufacturers scrambling for talent–and paying higher wages to existing employees as a result. In addition, workers are less inclined to enter the manufacturing arena than other sectors, forcing manufacturers to pay high wages new hires just to attract the necessary talent.
Switzerland has a reputation for high quality products which can help it overcome some of the cost challenges, but manufacturers will also need to address innovation and cost challenges to ensure continued success.
Other Important Swiss Industries
Tourism, banking, insurance and business services are the other important drivers of the Swiss economy, making up about 76.9% of the GDP.
Switzerland produces grain, fruit, vegetables, meat and dairy products. Agriculture makes up 0.7% of the country’s GDP but employs 3.3% of its workforce.
Supply Chain Infrastructure for Manufacturing in Switzerland
Transportation and communication are strong in Switzerland, and its central European location makes it ideal for both imports and exports. As a partner to the EU, Switzerland has open borders with EU nations, and there are no tariffs on imports except for a few agricultural products. The Swiss are known for their efficiency, so imports and exports move quickly and easily, so unexpected delays are rare.
In 2015, Switzerland had 40 airports with paved runways and moved 1,322,379.468 Mt-km by air. The robust air infrastructure ensures that manufactured goods and raw materials can move quickly to and from all parts of the globe.
Within Switzerland, there are 5,690 km of rail track, 71,557 km of paved roads, 1,292 km of waterways, two heliports as well as gas, oil and refined products pipelines. Regardless of the mode of transportation for manufactured products, Switzerland has a robust infrastructure that makes it simple to move.
As of 2017, Switzerland’s labor force reached 5.159 million strong, and most of the workforce is well-educated. The unemployment rate was relatively steady at 3.2% in 2017, down from 3.3 in 2016. Agriculture employs 3.3% of the workforce; industry at 19.8% and services at 76.9%. Most Swiss citizens complete at least 16 years of education.
The population distribution varies according to the area’s elevation, with the higher Alps in the south limiting settlement. About 74% of the population lives in urban areas with 1.395 million in Zurich and 430,000 in the capital city of Bern.
With low unemployment, a highly skilled and educated workforce, economic and political stability transparent legal system, modern, efficient infrastructure, low inflation, and its low corporate tax rates and global capital markets, Switzerland has one of the most stable and prosperous economies in the world. Its per capita of $62,100 ranks number 17 in the world. Its GDP ranks number 39 at $523.1 Billion.
In 2017, Switzerland exported about $313.5 billion worth of goods. Primary trading partners included Germany, the U.S., China, India, France, the U.K., Hong Kong and Italy. Machinery, chemicals, metals, watches and agricultural products are the primary exports.
Switzerland imported around $264.5 billion in 2017. The primary commodities included machinery, chemicals, vehicles, metals, agricultural products and textiles. Primary import partners were Germany, the U.S., Italy, the U.K., France and China. The country ranked 18 in the world for imports.
As a major global financial center, Switzerland is known for its commitment to privacy in banking transactions.
Switzerland has 26 cantons. Six of the cantons are half-cantons, because they elect only one member to the council of states. The country has an excellent civil law system and accepts ICJ jurisdiction for international disputes.
As of January 2020, the President of the Swiss Confederation is Simonetta Sommaruga and the vice president is Gary Parmelin. The Federal Assembly elected members of the Federal Council to four-year terms.
The federal Swiss tax rate is a flat 8.5% of income, but all income is also taxable at the canton level. Rates vary by canton and range from about 5% to around 30% depending on location. All taxes are deductible in Switzerland, so the effective tax rate is lower than it appears at first.
Switzerland is one of the easier countries in the world for doing business. It is easy to incorporate and register property. The average company pays about 28.8% in total tax and contribution. Various taxes must be paid 19 times per year, and companies average 63 hours per year in tax calculation.
Getting Down to Business
Doing business in Switzerland can be simple and profitable. However, as a global trading partner to the EU, Swiss companies are subject to a variety of tax rules and must be comfortable doing business in any number of currencies. QAD Adaptive ERP supports IFRS and multi-GAAP reporting. QAD Internationalization enables companies to identify and overcome the challenges associated with taxes, regulations and globalization. QAD Adaptive ERP enables rapid, agile and effective business for any style of manufacturing in any part of the world.
How would you describe the state of Manufacturing in Switzerland.? Learn more about manufacturing and doing business in other great countries around the world.