Foreign direct investment (FDI) inflows into Switzerland have been making a slow recovery since their 2018 fall to -$53bn. The UN Conference on Trade and Development’s 2020 World Investment Report shows that FDI inflows had increased to -$21.7bn in 2019. This was attributed to the large repatriations of earnings by US parent companies from their foreign affiliates due to the US’s 2018 tax reform.
Given the widespread impact of the Covid-19 pandemic, the Swiss state Secretariat for Economic Affairs (SECO) has released new projections for the country’s economy. It expects Switzerland’s GDP to drop by 6.2% in 2020, which SECO says is the country’s biggest economic slump since 1975. In terms of FDI figures, Switzerland’s FDI flows plummeted by -$16.5bn in March 2020, down from a positive $14.4bn in the final quarter of 2019.
In more positive news, Switzerland has climbed back up the IMD World Competitiveness Ranking, moving from fourth place in 2019 to third in 2020. The country’s key attractiveness indicators included policy stability and predictability, reliable infrastructure, high educational levels and a skilled workforce.
High-tech sectors stand out in Switzerland’s FDI landscape
Key sectors for Switzerland include life sciences, ICT and advanced engineering. The biggest FDI source markets for the country are the Netherlands and Luxembourg.
Switzerland is not an EU or European Economic Area member but is part of the European Single Market. This means that unlike EU members that have ramped up their FDI screening regulations in response to the pandemic, Switzerland has not followed in kind. Instead it has followed FDI rules set by the Swiss code of obligations, the Lex Friedrich/Koller declaration, the securities law and the cartel law.
A recent change to FDI screening in Switzerland was passed in March 2020. After the takeover of Swiss agrochemical company Syngenta by China’s ChemChina for $43bn in 2016, a pattern of approximately 50 Chinese takeovers of Swiss companies followed. This propelled the Swiss government to pass a bill that makes all investments by foreign companies in Swiss organisations subject to official approval.