The “forgotten backbone” of the Swiss economy

Tricky work, then there's the red tape in the evening swissinfo C Helmle

Say the words “Swiss economy”, and most people immediately think of major multinationals like Nestlé, Novartis, UBS or ABB.

The public authorities have also tended to neglect Switzerland’s real financial “backbone” – the small- and medium-sized enterprises (SMEs) that make up the majority of the national economy.

SMEs in Switzerland – those with up to 250 employees – represent 99.7 per cent of the country’s 300,000 companies and account for well over two-thirds of jobs.

They guarantee the production and local distribution of goods and services for the entire population.

However, their national umbrella organisation says that, despite their members’ economic importance, the public authorities are still more sensitive to the interests of corporate giants.

Now, the association of small- and medium-sized enterprises is calling for action to reduce the administrative and tax burden in particular.

Wake-up call

It took the recession of the 1990s, which led to a record number of bankruptcies, to make the government wake up to the need for special promotion programmes for SMEs.

In 1998, the economics ministry set up an SME Task Force to coordinate these projects – the name itself highlights both the need to take rapid action and the delay in doing so.

Task force head Christian Weber says: “The fundamental economic role played by SMEs was only discovered at a late stage in Switzerland, as was also the case in other countries.

“Even the OECD [Organisation for Economic Cooperation and Development] only started to address their concerns around ten years ago.”

According to Weber, the reasons for this delay can be found at the political level.

“SMEs are well represented in parliament, but their spokespersons mainly defend specific interests relating to the corresponding economic sectors.”

The result is that SMEs often find the government more of an obstacle than a help.

Virtual counter

On average, SMEs spend 55 working hours per month on administrative tasks required by the public authorities – reporting salaries, social insurance, taxes, etc.

The burden can prove almost unbearable, especially for smaller companies, which often have to engage costly specialists to decipher complex and voluminous legal documents.

One priority for the task force is therefore to reduce the administrative burden, largely by taking advantage of new technologies.

For instance, it is setting up a special “virtual counter” for information and transactions relating to SMEs.

Pierre Triponez, director of the Swiss association of small and medium-sized enterprises, says: “Compared with other countries in Europe, Switzerland is not excessively bureaucratic.

“However, the problem here is that many administrative procedures are handled by the cantons and municipalities”.

Losing ground

Another priority for the organisation is the interminable process of corporate fiscal reform.

Says Triponez: “In fiscal terms too, Switzerland is relatively well placed at the European level.

“However, we have been losing ground for several years, and in future we risk lagging behind.”

He points out that much-needed reforms will not enter into force before 2008-2010 at the earliest.

Other key issues where the organisation is pushing for reforms include more liberal shop opening hours and electricity market deregulation – large companies today can often negotiate better prices than smaller rivals.

The SME representatives also support Swiss moves towards further integration with the European Union – despite the fact that many members have political views close to the anti-EU right wing.

Even globalisation is far from a taboo, although it often seems to favour multinational companies.

Says Triponez: “SMEs are much more flexible and able to adapt to the new challenges of the third millennium.”

Weber agrees: “It is precisely the new tools available in a global society that open up new prospects for SMEs – for example, the Internet now enables even small firms to have a presence and to sell their products in far-off countries”.

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Key facts

Small- and medium-sized enterprises (SMEs) are those that employ up to 250 people.
They account for 99.7% of the 307,000 companies in the Swiss private sector and provide jobs for 66.8% of the workforce.
87.9% of SMEs have fewer than 10 employees.

In brief

SMEs often find it hard to compete with larger rivals because of the relatively high cost of administrative overheads.

The economics ministry set up a task force to promote SMEs in 1998, but their umbrella organisation says it is not moving fast enough.

The association of small and medium sized enterprises wants to see rapid action in fields ranging from taxation to Sunday shopping.