swiss economy by buxd8nd9


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                                                                                   Economic Freedom Score
                                                                                                  25                 75
                                                                                   Least                                         Most
                                                                                    free    0                             100 free
 World Rank: 6	                                   Regional Rank: 2                                      81.1

s  witzerland’s economic freedom score is 81.1, making its
   economy the 6th freest in the 2010 Index. Its score has
improved by 1.7 points since last year. Switzerland is ranked
                                                                                  Country’s Score Over Time
                                                                                                        Most free

2nd out of 43 countries in the Europe region, and its overall
score is much higher than the world average.
The Swiss economy is diversified and modern, with high
levels of prosperity and institutional strengths that include
strong protection of property rights and an efficient legal
framework. Openness to global trade and investment has                                            World average
enabled Switzerland to become one of the world’s most
competitive and flexible economies. Despite some stress
in the financial system, Switzerland has emerged from the
global economic turmoil relatively unscathed.                               40

With an efficient and stable business climate, Switzerland
has created a vibrant entrepreneurial environment. The                                             Switzerland
average tariff rate is low, and commercial operations are
aided by a flexible labor market and not overly burdened by
regulation. Inflationary pressures are under control. Foreign
investment is welcome, and screening applies to only a few
sectors. Investors have access to adequate sources of credit.                                           Least free
The judicial system, independent of political interference                        1995     1998        2001    2004       2007    2010
and free from corruption, enforces contracts reliably.
Background:	Switzerland, one of the world’s richest and                                         Quick Facts
most investment-friendly destinations, is a multicultural                         Population: 7.6 million
society with four official languages. It has a long tradi-                        gdP	(PPP): $324.6 billion
tion of openness to the world yet jealously guards its inde-                                 1.6% growth in 2008
pendence and neutrality. The seat of the ill-fated League                                    2.7% 5-year compound
of Nations, Switzerland joined the United Nations only                                          annual growth
in 2002. Two referenda on membership in the European                                         $42,536 per capita
Union have failed by wide margins, and membership in                              unemployment: 3.5%
the European Economic Area was rejected by referendum
                                                                                  Inflation	(cPI): 2.4%
in 1992. Swiss–EU relations are based instead on an exten-
sive range of bilateral technical agreements that are con-                        FdI	Inflow: $17.4 billion
sidered quite successful. Switzerland is an international                         2008 data unless otherwise noted
banking center, but its economy also relies heavily on pre-                       Data compiled as of September 2009
cision manufacturing, metals, pharmaceuticals, chemicals,
and electronics.

                                 How Do We Measure Economic Freedom?
       See page 457 for an explanation of the methodology or visit the Index Web site at

sWitZERLAnD’s tEn ECOnOMiC fREEDOMs                                          sidies, and state-owned utilities. Ten points were deducted
   Business Freedom     81.2                                                 from Switzerland’s monetary freedom score to account for
      Trade Freedom     90.0                                                 policies that distort domestic prices.
       Fiscal Freedom   68.2
Government Spending     68.9                                                 inVEstMEnt fREEDOM — 80
  Monetary Freedom      81.3
                                                                             Foreign investment receives national treatment, and most
Investment Freedom      80.0
   Financial Freedom    80.0                                                 sectors are open to private investment. Project screening
      Property Rights   90.0                                                 applies in a few sectors. Joint stock companies must have
Fdm. from Corruption    90.0                                                 a majority of resident Swiss nationals on their boards.
      Labor Freedom     81.8                                                 Foreign investments are subject to review by the Competi-
                               0                   50                 100    tion Commission if the value of the investing firm’s sales
                               0        20    40        60     80      100
                               least free                       most free
                                             = world average                 reaches certain levels. The investment code and its imple-
                                                                             mentation are generally transparent and efficient, but this
BUsinEss fREEDOM — 81.2                                                      varies widely across cantons. Residents and non-residents
The overall freedom to start, operate, and close a business                  may hold foreign exchange accounts. There are no restric-
is well protected under Switzerland’s regulatory environ-                    tions on repatriation of profits or current transfers. Real
ment. Starting a business takes 20 days, compared to the                     estate purchases by non-residents must be approved by
world average of 35 days. Obtaining a business license                       the canton in which the property is located.
takes less than the world average of 18 procedures and
218 days. Bankruptcy proceedings are relatively easy.                        finAnCiAL fREEDOM — 80
                                                                             Switzerland is a leading financial center with highly devel-
tRADE fREEDOM — 90                                                           oped and well-regulated institutions. Foreign and domestic
Switzerland’s weighted average tariff rate was 0 percent in                  investors have adequate access to capital and a wide vari-
2008. However, prohibitive agriculture tariffs and quotas                    ety of credit instruments. Mergers and acquisitions have
block trade in some products altogether, and services mar-                   reduced the number of banks, but there are still over 300
ket access barriers, import taxes, restrictive biotechnology                 banks operating in the country. The two largest banking
regulations, and export subsidies add to the cost of trade.                  groups account for around 60 percent of the system’s total
Ten points were deducted from Switzerland’s trade free-                      assets. Credit is allocated on market terms. Insurance is
dom score to account for non-tariff barriers.                                well developed, and the state-owned postal service offers
                                                                             a variety of financial services. Capital markets are strong,
fisCAL fREEDOM — 68.2                                                        and the stock exchange is one of Europe’s largest. The
Taxation is more burdensome at the cantonal levels than                      global financial crisis hit the country’s two major banks
it is at the federal level. The top federal income tax rate is               (UBS and Credit Suisse) hard. The government bailed out
11.5 percent, and the combined top income tax rate (federal                  UBS in 2008 with asset purchases and a capital injection but
and sub-federal) can be as high as 41.5 percent, though it                   sold off its stake in 2009.
is generally much lower. The top combined corporate tax
rate can be as high as 24 percent. Other taxes include a                     PROPERtY Rights — 90
value-added tax (VAT), a tax on securities and insurance                     The judiciary is independent, and contracts are secure.
premiums, and cantonal-level property taxes. In the most                     Switzerland has one of the world’s best protection regimes
recent year, overall tax revenue as a percentage of GDP                      for both foreign and domestic holders of intellectual
was 29.7 percent.                                                            property.

gOVERnMEnt sPEnDing — 68.9                                                   fREEDOM fROM CORRUPtiOn — 90
Total government expenditures, including consumption                         Corruption is perceived as almost nonexistent. Switzerland
and transfer payments, are moderate. In the most recent                      ranks 5th out of 179 countries in Transparency Internation-
year, government spending equaled 32.2 percent of GDP.                       al’s Corruption Perceptions Index for 2008. Corruption is
Direct government participation in the economy has been                      not pervasive in any area of the economy, and enforcement
confined to such public services as post offices, railways,                  against domestic corruption is effective. In 2007, the Fed-
and defense.                                                                 eral Council approved the U.N. Convention Against Cor-
                                                                             ruption, but ratification has not yet taken place.
Inflation has been very low, averaging 1.9 percent between                   LABOR fREEDOM — 81.8
2006 and 2008. Government measures influence the prices                      Switzerland’s labor regulations are relatively flexible. The
of agricultural goods and pharmaceutical products, and                       non-salary cost of employing a worker is moderate, but
the government influences prices through regulation, sub-                    dismissing an employee can be costly.

398                                                 2010 Index of Economic Freedom

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