Indo Swiss Ezine

By Daniel Freihofer, Counsellor, Economic & Commercial Affairs
Embassy of Switzerland

Commercial and trading relations between India and Switzerland date back to the pre-independence days of this country, a fact that many Indians may not be aware of. It was as early as 1856 that a Swiss operation was established in India by the Volkhart Brothers. This relationship got further reinforced when India and Switzerland signed the Treaty of Friendship on 14th August 1948, the first such treaty to be signed by independent India.

In the last six decades, both countries have strived to raise the level of cooperation and collaborations in various fields. More recently, our relations have been strongly intensified and diversified, especially in the economic sector.

Recent years have seen exchange of several high-level visits, and intensification of dialogue between the two governments to ensure that together they can explore new means to further strengthen the bilateral trade and investment ties.

India has been identified as a priority country in the framework of Switzerland's Foreign Economic Strategy. In addition to the bilateral agreements for the Avoidance of Double Taxation and the Promotion and Protection of Investments, Switzerland together with the other EFTA countries (Iceland, Liechtenstein, Norway) and India are in process of negotiating a broad-based agreement on trade and investments. Such an agreement will substantially improve market access for goods and services and therefore open up an era of a new, modern, efficient and more profitable level of mutual integration.

Further, Switzerland and India have set up a Joint Committee on Intellectual Property Rights in 2007 to conduct a fruitful dialogue in this important field. The fact that the Indo-Swiss Joint Economic Commission meetings, that used to be held every four years, are now held every year (the 12th JEC meeting is scheduled for October 2009) also reflects the intensified economic relations between our two countries.

Switzerland and India have also strengthened the cooperation in the fields of science, technology and education. For instance, Switzerland will soon open "Swissnex" in Bangalore, which can be described as a "knowledge outpost" or a "science consulate" in order to establish links between Swiss institutions of higher education and other scientific organizations with their Indian counterparts. Another example for is the VET (Vocational Education and Training) initiative of the Swiss Indian Chamber of Commerce and Federal Office for Professional Education and Technology which aims to introduce elements of the Swiss dual track vocational system to India to address. Its high quality and its sharp alignment towards industrial market needs might be valuable for addressing India's shortfall of skilled factory labour and providing the Swiss companies in India with sufficiently skilled workforce.

The two-way trade between Switzerland and India has been growing robustly over the past years. It expanded from CHF 1.56 billion in 2004 to CHF 3.50 billion in 2008, reflecting an increase of 125 percent in four years. Machinery, chemicals and pharmaceuticals, precision instruments, precious metals, jewellery, and watches account for the major share of Swiss exports to India, whereas chemicals, precious stones and jewellery, textiles, and agricultural products are the major products being imported by Switzerland from India. Due to the current global economic slowdown, the growth momentum in the Swiss-Indian bilateral trade has no doubt been impacted in 2009. Nevertheless, there is still a huge potential to further enhance bilateral trade and investment flows, once the economic slowdown is reversed.

India also remains an important emerging market for Swiss tourism. During 2008, Indian tourists spent 327,300 overnights in Switzerland (336,996 in 2007), a decline of 2.9 percent. Another area of bilateral trade in services, software and IT-enabled services is progressing well as more Swiss companies are now outsourcing to India. During the fiscal year 2007-08, the export of software and IT-enabled services from India to Switzerland is estimated to have reached US$ 375 million, as compared to US$ 225 million in previous year.

With regard to direct investments, Switzerland has been actively involved in India for the past many decades and it currently ranks as the 11th largest foreign investor in India. About 160 Swiss companies have formed joint ventures or subsidiaries in India. The total Swiss direct investment inflow into India is for the period from April 2000 to December 2008 estimated to be around USD 4 billion, if the investment by Swiss companies routed through Mauritius is taken into account. In terms of industry-wise distribution of Swiss collaborations in India, the traditional sectors of Swiss excellence, e.g. engineering and industrial equipment, services (tourism, financial, logistics), chemicals and pharmaceuticals, precision instruments, continue to maintain top positions.

Switzerland has one of the most liberal and competitive economies in the world, and with many other advantages, it remains a preferred destination for foreign investors. Be it an attractive geo-strategic location in the centre of Europe, world class R&D institutions, dedicated professional labour force, flexible labour laws, reliable and highly developed financial centre, excellent infrastructure, high standard of living, or competitive tax rates, Switzerland offers all of these. Switzerland, despite its modest size, is one of the 20 most attractive destinations for direct investments. More than 1,000 foreign companies now control their global or European business activities from within Switzerland. Not only some big Indian IT companies such as Tata Consultancy Services, Infosys, Wipro, Satyam and Polaris are having their offices in Switzerland, but companies like Apollo Tyres, Glenmark Pharmaceuticals, and Wockhardt have also invested in Switzerland.

Though Switzerland is not a member of the European Union, it has gained full access to the European market through its numerous bilateral treaties. There is not only free trade, but also a free exchange of services and capital movement, and even the movement of persons is highly liberalized. Indian investors do not face any disadvantages whatsoever by entering the European market via Switzerland. In fact, Indian investors can benefit from Switzerland's competitive advantages and have at the same time full access to the benefits of the integrated European market. A recent survey among leading international executives with business operations in Switzerland showed that Switzerland's non-membership to the European Union is even considered to be an advantage.

There are hundreds of domestic and foreign multinationals and hundreds of thousands of small and mid-sized companies operating in Switzerland. It's not just the financial or pharmaceutical sector but also clusters in biotechnology, micro-, medical- and nanotechnology as well as clusters in the field of environmental and information technology which contribute to Switzerland's leading position among industrialized countries. The traditional sectors of Swiss excellence comprehend engineering and industrial equipment, precision instruments and machine manufacturing. In many product segments Switzerland is even among the world leaders: For example, paper-processing machinery (2nd), machine tools (4th), printing machinery and textile machinery (5th), turbines, precision scales and packaging machinery (6th), food processing machinery (7th), precision tools (8th) and compressors as well as vacuum technology (9th).

Indeed, Switzerland and India have a lot to offer to each other and to gain in developing cooperation in high-tech and knowledge-based industries. The future looks very bright, and both sides are committed in continuing their efforts to deepen and widen their economic ties.