Switzerland is ploughing ahead with plans to target foreign innovative companies. Despite Covid restrictions, the country has digitally reaffirmed its proposition to investors with great success. In 2020, it saw the largest annual increase of inbound FDI projects globally, according to the latest data from greenfield investment tracker fDi Markets.
Patrik Wermelinger, the head of investment promotion at Switzerland Global Enterprise (S-GE), its national investment promotion agency (IPA), discusses the benefits of the digital environment, Switzerland’s focus on emerging technology and the future of investment promotion.
Q: What is behind Switzerland’s resilience as a location for FDI?
A: First is our leading position in innovation. We have a dense innovation and technology ecosystem, which is composed of many globally leading research labs and centres, two top local universities, a fast-growing start-up and venture capital scene, and a high density of multinational companies.
Second is political and financial stability. Our political stability comes out of the multi-party system in Switzerland and the direct democracy that goes with it. Financially, we introduced a “debt brake” instrument on a national level in 2003, which has a simple rule that expenditure may not exceed receipts over an economic cycle. This helps us to keep our debt-to-GDP ratio low on an international basis and enables a long term competitive tax environment.
Q: What lessons have you learned from the Covid-19 crisis?
A: Due to the pandemic, our target audience of decision makers within foreign innovative companies became better available to talk about expansion and centralisation of projects in Europe.
After the initial phase, when everyone was connecting digitally, we found that a kind of digital fatigue was growing in the second half of 2020. It was harder and harder to connect digitally through major events or webinars. We had to be creative to assure the target audience of our performance.
The positive thing was the shift of investment has gone more and more into the digital channels, both in terms of content and advertisement. IPAs can address their target audience much better on digital channels, with the right arguments to alter the decision-maker level or function within a company — the reactions are better trackable and the results are more measurable. There are lower conversion costs to generate leads on a digital channel than on a physical channel — this is really positive for IPAs.
Last year, we grew our digital channels tremendously — we have 86% more followers worldwide on our social media accounts. We also grew the total direct contacts on our website across various countries by 75%.
Q: Have you changed your strategic focus in response to the crisis?
A: We redrafted our strategy in 2018, where we switched from a geographical based focus to a technology-based focus, and started implementing it last year. We have defined five technologies we position Switzerland in: advanced manufacturing, artificial intelligence, blockchain, personalised health and robotics.
This strategy helped us focus on our target audience and on horizontal technologies which have an impact on life sciences, ICT and machinery — the industries in which Switzerland is strong. Over the past year, 70% of our projects came out of those five technology-focused industries. We will continue that five-tech focus for the next few years.
Q: What do you think is the future of investment promotion?
A: Meeting investors face-to-face remains important. I think it can even gain back more importance after the pandemic. People want to travel and meet other people, that’s a basic element in every human being.
At S-GE, it’s really client requirements which start everything. The main question for every IPA is how can their country — with its economic tissue, research and development landscape, regulations, international connectivity and talent pools — add value to those globally active companies. The IPA which does that better, and more consequentially, will have better results.
I see a major mid-term shift starting in the industry. For the past few decades, investment promotion has heavily been tax-based competition between countries, but now it has switched to more technology- and talent pool-based competition.
After that shift, I foresee more value-based competition among countries — meaning what values does a country, region or city stand for and how does that fit with the value of a company looking for a new location.
In Switzerland, we are aiming to add value to companies — after all, our flag is a white plus on a red square. We will stay open for business, resilient and trustworthy.
Patrik Wermelinger is the head of investment promotion and a member of the executive committee at Switzerland Global Enterprise.
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