Technology helps Swiss keep competitive edge

Technological innovation is helping Switzerland stay in the top ten Keystone

Switzerland has once again come eighth in the annual competitiveness report of the World Economic Forum, helped by its technological innovation.

Released on Wednesday, The Global Competitiveness Report 2005-2006 finds that Finland remains the most competitive economy in the world, followed by the United States and Sweden.

“Switzerland’s greatest competitive strength is its capacity for technological innovation, with high company spending on research and development and high levels of collaboration between industry and the university community,” commented Augusto Lopez-Claros, chief economist and director of the WEF’s Global Competitive Programme.

“The country has high quality public institutions, reflected in well protected property rights and very low levels of corruption by international standards,” he added.

But while the country’s ranking has not changed since last year, some of the specific issues determining its competitiveness have.

WEF senior economist Jennifer Blanke points to the country’s deteriorating macroeconomic environment as an example.

Budget deficit

“There’s a pretty high government budget deficit and this is something that has persisted over years,” she told swissinfo.

“It means that at this point Switzerland has a level of government debt that is getting quite high as a percentage of GDP.”

One of the fears – and this is not a concern only in Switzerland – is that the government is going to find it harder to pay its pension obligations in future as people increasingly live longer.

“If the country is not saving now, it’s going to be even harder to meet those obligations in the future,” Blanke added.

Pessimism

The WEF rankings of 117 economies are not only based on hard data, but on a survey of top business leaders as well. They gave Switzerland lower marks.

“Last year the Swiss business leaders we asked placed the country 56th overall on a world scale and it actually dropped to 79th this year. There was a tangible higher sense of pessimism,” Blanke explained.

The most problematic factors for doing business in Switzerland as seen from the survey are inefficient government bureaucracy, tax regulation and tax rates.

Other problem areas include access to financing, restrictive labour legislation and an inadequately educated workforce.

Least of the business community’s worries are corruption, government instability, crime and theft, and inflation.

Recommendations for Swiss policymakers include the better use of public resources given that Switzerland is one of the most generous subsidisers of agriculture in the OECD, and boosting enrolment rates for higher education.

Higher education enrolment

“For such a wealthy country, and one where there is such innovation, the tertiary enrolment rate in 2003 was 48.7 per cent. Compare that with Finland, which was 87.5 per cent. This is definitely something that should be addressed,” Blanke said.

Earlier this year, Switzerland jumped from 14th to eighth place in the competitiveness rankings of the IMD management school in Lausanne in what was described as a “remarkable performance”.

However, Blanke points out that the WEF and the IMD use different models for their reports.

“We allow countries to benchmark their performance against other countries across a wide variety of measures that are very important for competitiveness.

“Since we do this on an annual basis we allow countries to track their own performance over time,” Blanke said.

swissinfo, Robert Brookes

Key facts

Top ten in the World Economic Forum’s competitiveness rankings:

Finland
United States
Sweden
Denmark
Taiwan
Singapore
Iceland
Switzerland
Norway
Australia

In brief

Switzerland is ranked 8th for the second year in a row in the WEF’s top ten competitive countries, with technological innovation its greatest strength.

It is also praised for high company spending on research and development, and high levels of cooperation between industry and universities.

But it could do better when it comes to public finances and boost enrolment for higher education, the WEF says.