Two-way Investment
Key to Further Strengthen
Indo-Swiss Trade Ties
- Fabian T. Stiefvater
Right at the outset, Open Trade Magazine salutes Fabian T. Stiefvater, for his courage of conviction in taking up his new assignment in Mumbai as Director, Swiss Business Hub India, despite security concerns and the advice to delay his arrival in the wake of the November 26 terrorist attacks on the city. “We decided to come in order to send a strong message that we stand in solidarity with the victims and people of India,” he says in an interview with Satya Swaroop, Managing Editor, New Media. Stiefvater also talks in detail about the challenges and opportunities that the emerging Indian domestic market offers to Swiss companies. As India and Switzerland celebrate the 60th anniversary of their friendship treaty, Stiefvater calls for two-way investment to further strengthen it. He says that while in terms of export promotion Swiss SMEs are increasingly focusing on the emerging Indian market, it is crucial for Switzerland to overcome its picturesque holiday image and to more actively promote its competitive business advantages as the prime location for European headquarters. Excerpts.

What was your motivation for moving from Switzerland to Mumbai?
It's the challenge of India's emerging economy and the exciting opportunities that the Indian market offers for export driven Swiss companies. While growth opportunities are limited in the traditional, well developed markets, the emerging Indian market will be one of the most important battlegrounds in the years to come. It's the dynamic of Indian economy which is fascinating me and the exciting challenges Swiss investors are facing in terms of market entry, risk management and cultural differences. Last but not least the motivation to come here relates to my passion for India and my genuine interest in Indian culture - which is a precondition for feeling comfortable in daily Indian routine and workaday life. I travelled numerous times throughout India and India has in the meantime become my home.

Arriving in Mumbai in the aftermath of the terrorist attacks: Did you ever regret your decision to move from safe Switzerland to Mumbai?
There is no longer such a thing as a safe place. Be it London, New York, Mumbai or Zurich anything can happen anytime. Despite security concerns and recommendations to postpone our arrival we decided to come in order to send a strong message that we stand in solidarity with the victims and people of India. Mumbai is generally safe and I feel privileged to have the opportunity to live in such a vibrant and exciting place.

What are your priorities to strengthen the business ties between the two countries?
In times of credit crunch and recession of US and European economy, it is crucial for the export depending Swiss industry to partly compensate the decrease in demand in the traditional markets by focusing on new emerging markets such as the Indian. Once it was all about cost saving and leveraging, now, it is about growth and the potential offered by the strong domestic Indian market. While the majority of big multinational Swiss firms are already playing an active role and successfully doing business with India, the focus of the SBH India is against the background of export promotion to strengthen the business ties between small and midsized Swiss and Indian enterprises (SMEs). Hence, in terms of export promotion our main focus is to facilitate and improve the access to the Indian market for Swiss SMEs and to support their ability to successfully compete at international level.

What is Switzerland 's concept in terms export and foreign trade promotion?
Under the roof of OSEC (the official Swiss export, import, investment and location promotion agency) the SBH India together with its network of expert partners and consultants supports SMEs in their efforts to successfully penetrate the Indian market. OSEC can draw on an extensive network of expert partners (“Pool of Experts”) in the field of foreign trade in Switzerland and abroad. The online database www.PoolofExperts.ch offers with more than 400 experts worldwide a quick and easy support for Swiss SMEs in all aspects of internationalisation. The interested SME can select an expert based upon country-, market- and functional competencies. As for export promotion our main priority is to render together with our Pool of Expert Members efficient and effective high quality consulting services. Within Switzerland OSEC cooperates with Cantonal Chamber of Commerce and other industry organisations and offers its services to export focused SMEs. Swiss companies seeking export advice for India can either contact us directly or indirectly via their local OSEC consultant. OSEC and the SBH are using a transparent “Export Step-by-Step” consulting concept (initial information, basic consulting and detailed consulting). Typical areas of expertise include services such as:

• Market research and analysis as well as market clarification (market check)
• Identification of business opportunities by industry sectors (business opportunity check)
• Identification of qualified business partners (business partner check and mediation)
• Evaluation of opportunities to promote SMEs (promotion check)
• Organisation and coordination of visits in the target market (experience check)
• Initiating and coordination of trade fair participation (Swiss Pavilion)
• Information gathering regarding public tenders
One of the SBH's main goals for 2009 is to cultivate and extend our existing network of Pool of Experts.

What are the pitfalls Swiss SMEs are today facing in India ?
In order to manage risks in emerging markets effectively, it is crucial to understand the local market and its sectors. Local expertise is critical in order to find the right business partner and to develop strong local relationships. To understand local laws, regulations, cultural aspects and usages is a precondition for doing successful business with India.

While the big Swiss multinationals are mainly operating their Indian business through 100 percent subsidiaries, many of the Swiss SMEs rely on joint ventures or mere contractual collaboration with Indian partners (e.g. distributorship agreement). Joint ventures can be risky if the partners have different objectives or if there is an imbalance in levels of expertise, investment or assets brought into the joint venture by the partners. It takes time and effort to build the right relationship and there are numerous examples of successful joint ventures between Swiss and Indian firms. However, before setting up a joint venture it is crucial to make sure that the services or knowledge of interest can not be bought through an arm's length contract (i.e. without sharing ownership). Against the background of how costly and difficult an exit can be joint ventures should be the last resort. In terms of content of a joint venture agreement it is decisive to have a simple and clear exit provision as well as incentive provisions penalizing non-cooperation. Against the background of adverse future impacts non-competition clauses need to be carefully drafted. What nowadays becomes more popular, are flexible joint ventures with a limited life span only covering limited commitments in certain areas of collaboration.

What needs to be done in order to improve the investment climate in India?
An important step towards a more investor friendly environment was the conclusion of a Memorandum of Understanding on Intellectual Property Rights in August 2007 and the launch of negotiations for a broad-based agreement on trade and investment between India and the EFTA countries. Even though investment climate in India has improved significantly over the last years, Swiss firms doing business in India are facing according to a survey conducted by SECO (Swiss State Secretariat for Economic Affairs) the following main obstacles:
• Tariff barriers (customs duties, taxes etc): High import duties for certain products
• Non-tariff import barriers: Import procedures, administrative burden, bureaucracy etc
• Intellectual property rights: Protection of trade marks and patents
• Rigid labour laws
• Difficulties in public tender / procurement
• Taxation: Transfer pricing rules

What are your priorities in terms of location promotion following the 60 years' of Indo-Swiss friendship treaty celebration?
As a result of India being one of the fastest growing emerging markets, Indian companies have in the past years significantly increased their presence in Switzerland. At a time when more and more Indian firms are internationalizing their activities, Switzerland is of course very keen of being a partner of Indian companies seeking to invest in Europe. Our focus in terms of location promotion is to more actively promote our business advantages and to create awareness that Switzerland is a prime headquarter location in Europe. According to a report of the consultancy firm McKinsey, Switzerland does not get the right message across in Asia. While in general the perception of Switzerland is a definitely positive one, most Asian decision makers do not perceive Switzerland as a prime business location but more as a tourist destination. Many Indians still have a Bollywood image of Switzerland but do not have the awareness of the competitive advantages Switzerland offers for European headquarters.

Fabian Stiefvater has been appointed as Counsellor and Managing Director of the Swiss Business Hub in India and is in this capacity responsible for export and location promotion. He is a Swiss Certified Tax Expert and has a Master of Law from the University of St. Gallen (HSG). He formerly worked as tax consultant for a Swiss law firm and an international consultancy firm. His extensive practical experience includes tax advice for SME's, multinationals and private equity firms in the field of corporate restructuring, mergers & acquisitions, international tax structuring, reorganisation and relocation as well as supply chain management.

This is in contrast to the fact, that more and more multinationals are choosing Switzerland as the place to establish their International Headquarters or Principal Companies. Besides social and political stability, first-rate infrastructure, high quality of life, high productivity and highly skilled labour force, competitive business environment and flexible labour law Switzerland offers traditionally low taxes - one of the key reasons for having attracted more than 180 multinational firms in the past decade. In 2009 we will tour across India with interesting events such as investor seminars, CEO roundtables, ambassador's breakfast, trade shows, networking events and roadshows in order to be in a position to tab the full potential. According to the McKinsey Report, at least 1,400 Asian companies are looking to establish operations and headquarters outside of Asia. It is our goal to attract more than 120 regional headquarters in the next ten to fifteen years.