Bureaucracy jeopardizes investment in Switzerland as a business location

Administrative burden is too high – investments under pressure

How urgent the need for action is is shown by the first nationwide bureaucracy monitor, which gfs.bern conducted on behalf of economiesuisse. 1,527 companies from all language regions and company sizes were surveyed. The representative survey presents a clear picture:

• Regulatory burden weighs heavily: 67 percent of companies rate the administrative burden as high. 
• Bureaucracy has increased: 64 percent of the companies surveyed find that bureaucracy has continued to increase over the past five years. Companies report onerous procedures, information requested multiple times, and differing requirements from various authorities. Bureaucracy ties up time and personnel resources that are missing for the actual core business. 
• Investments are being scaled back: Three out of ten companies (30 percent) say that due to administrative requirements they have postponed, reduced, or abandoned business initiatives and investments altogether. Affected above all are developments of new products and services, investments, and the training of apprentices. This is slowing down precisely the dynamism that secures Switzerland’s prosperity and competitiveness.

Red tape is a self-inflicted problem

The fact that companies are holding back and cutting investments in Switzerland must be a wake-up call for the country. “The growing regulatory burden and the associated red tape are home-made. We urgently need to take countermeasures here. Companies need more entrepreneurial freedom again. Only then can prosperity and jobs in our country be secured,” says Silvan Wildhaber, President of economiesuisse, at a joint business press conference. Other countries show how it’s done: Scandinavian countries in particular design their administrative processes far more efficiently and digitally. “We need to measure ourselves against the best – and finally move forward in cutting unnecessary red tape,” Wildhaber adds.

The need for action is evident in many sectors. “The export-oriented chemical and pharmaceutical industry needs risk-based requirements that are internationally compatible, as well as efficient approval and licensing procedures. Red tape is patient; innovation needs speed. When good ideas run into lengthy and cumbersome procedures, Switzerland as a business location loses valuable ground,” says Annette Luther, President of scienceindustries and Vice President of economiesuisse.

The tech industry is also struggling with rising costs and more difficult access to key sales markets. “Tech-industry companies are under pressure from two sides: margins are shrinking, and bureaucratic costs are rising. The resources absorbed by bureaucracy are missing for investments in the future. That is an unhealthy development,” says Martin Hirzel, President of Swissmem and Vice President of economiesuisse.

The insurance industry, as a heavily regulated sector, is particularly affected by complex regulatory requirements and administrative burdens. “A strong insurance industry needs a reliable regulatory framework. Customer protection, stability and competitiveness go hand in hand. That is why the competitiveness of the financial center should be enshrined as an equal regulatory objective and consistently taken into account when introducing new requirements. This will strengthen Switzerland as an insurance and reinsurance location in the long term,” says Stefan Mäder, President of the Swiss Insurance Association SIA and Vice President of economiesuisse.

Now pull the right levers for location policy

The warning signals from Swiss companies must be taken seriously. Determined action is needed in location policy. From the business community’s perspective, the following economic policy priorities are at the forefront in order to systematically reduce bureaucracy:

• Fully and comprehensively digitize administrative processes: Digital processes need to become simpler. Full digitization of the interfaces between the economy and public administration is needed to remove unnecessary hurdles and discontinuities. Access to reporting offices must be fast, transparent, and digital for companies. In addition, standardized forms and interfaces are needed across all three levels of government. Switzerland as a digital hub has the necessary ingredients for this: know-how and leading digital companies. 
• Create investment-friendly framework conditions: It must not be the case that companies forgo investing in Switzerland as a location due to lengthy permitting processes and high administrative requirements. Clear improvements are needed at all three levels of government, for example in the area of building permits or in standardizing procedures and processes for obtaining further permits. 
• Consistently simplify existing legal requirements: By now, more than 37,000 business obligations apply at the federal level alone. This makes it all the more urgent to simplify existing requirements. The premise should be that a given matter should, wherever possible, need to be regulated, reviewed, or reported only once. The Corporate Relief Act provides an initial basis for action. The measures in the Federal Council’s “Competitiveness Package” must be implemented consistently. Beyond that, further innovative and practical measures are needed (such as “one-stop shops”). 
• Reduce technical barriers to trade: The economy, which is strongly export-oriented, needs access to sales markets with as few barriers as possible. Free trade agreements and updating the MRA within the framework of Bilaterals III are concrete examples of how unnecessary bureaucracy can be avoided and existing barriers reduced.
• Courage to (still) do nothing: Too often, the reflex is to regulate immediately when challenges arise. Regulatory burdens are rising sharply, particularly at ordinance level. Regulation needs to be designed to be more risk-based, principle-based, and proportionate again, instead of prescribing every detail. A “mindset change” is needed in politics and public administration, coupled with structural measures that promote restraint in regulation and oversight of regulations. In addition, regulatory impact assessments should be rethought—too often they do not do justice to the actual consequential costs in practice.