Switzerland: An “island” of competitiveness, but for how long?

The overall ranking is based on data up to the end of 2013 and the opinions of leading global executives collected during the first quarter of 2014. The USA retains first place as a result of its dynamic and vigorous employment and private consumption. Singapore (3^rd) and Hong Kong (4^th), both characterized by a strong export sector and a favorable business environment, stay near the top of the ranking. In Europe and Asia we observe a diversity of profiles. While some countries (Denmark, Spain, Japan, and Malaysia) rise in the competitiveness ranking, others fall (Italy, Greece, China, and South Korea). Germany rises three places to 6^th. As the main trade partner of Switzerland, Germany’s performance can have a positive impact on future commercial relations.

Competitive advantages and challenges
Switzerland’s strengths remain unchanged from the perspective of Swiss business leaders: in the quality of life and the resilience of the economy criteria it ranks 1^st; in social cohesion, 2^nd; in diversification, 5^th; in well-managed public finances, 5^th; in the adaptability of enterprises to market changes, 1^st ; and in the value system supporting competitiveness, 1^st. The evolution of the country’s competitiveness (2010-2014) shows a high degree of stability in the overall ranking. Switzerland also maintains its image of a competitive and innovative country offering an environment that stimulates businesses (6^th). Contrary to these positive patterns, the strength of the Swiss Franc continues to hinder the competitiveness of enterprises (50^th). Moreover, the country faces a decline in attractiveness due to a drop in foreign investment flows and a trend towards the unpredictability of its laws.

Uncertainties of the labor market
With Switzerland awaiting the consequences of the February vote (initiative to limit immigration), leading Swiss executives remain optimistic about the labor market. They believe that workers’ motivation is very high (1^st), and that their international experience is significant (1^st). Furthermore, executives believe the country’s labor regulations facilitate business activities (1^st). In addition, the success of the Swiss dual educational system in meeting the needs of enterprises is often recognized. Executives indicate that the apprenticeship scheme is well implemented (1^st) and that employee training is a high priority for companies (1^st).

However, there are some concerns about future relations with the EU. In the long term, will Switzerland be able to sustain the congruence of its educational system and competitiveness? Will Swiss labor regulations prevent companies from employing highly-skilled migrants (the country fell from 5^th to 16^th in this criterion in 2014) and retaining talent?

The country has strong assets that enable it to maintain its economic competitive advantages over its trade partners. Nevertheless, Switzerland will remain an island of competitiveness only if it is able to manage effectively its political influence when facing larger economies.