When SMEs reach their limits when expanding abroad, Switzerland Global Enterprise is there to help. The organization often works together with the financial sector, but cooperation has suffered recently, as SBU President Ruth Metzler-Arnold tells finews.com.
Ms. Metzler-Arnold, as President of Switzerland Global Enterprise (SGE), you have your finger on the pulse of the Swiss export industry. So first the question: How are export companies doing at the moment?
Until recently, the pent-up demand during the Corona crisis was still boosting the export economy. Since July, however, there have been signs of a slowdown, especially in the major export markets of the US and Europe.
Are these the harbingers of a major downturn?
Perhaps. But the structural reorganization of value chains is now leading to increased discussion. Where production requirements are high, we are increasingly seeing reshoring to Eastern Europe or even closer to the Swiss border. In addition, the withdrawal from Russia due to the war is leading to relocation to Central Asian countries or Latin America.
Aren't Swiss exporters also directly threatened by the rise in the franc, in that it makes their products less competitive abroad?
So far, the stronger franc has not had a negative impact on the export business. The currency-related increase in Swiss prices has so far been absorbed by the even higher inflation-related price increases on foreign markets.
So are fears similar to the last franc shock in 2015 exaggerated?
With the lifting of the minimum exchange rate by the Swiss National Bank (SNB), exporters have had to learn to live with a high franc permanently and have virtually become fitness champions.
What does that mean exactly?
They reorganized their supply chains, for example. In some cases, Swiss suppliers were replaced by foreign ones, but the companies were able to maintain and sometimes even strengthen their home base. The worries about de-industrialization have not come to pass in recent years. With regional diversification, they can also align their production facilities with sales markets and thus better manage currency risks.
«Credit Suisse made an important contribution with training courses in 2015»
Or they hedge their foreign currency risk within the company. Incidentally, the Swiss banks, above all Credit Suisse, made an important contribution here in 2015 by quickly and competently initiating training courses.
You owe the banks a debt of gratitude. Does the cooperation between SBU and the Swiss financial center always work so well?
Overall, we have very good and ongoing relations, not only with the banks, by the way, but with all players engaged in the Swiss foreign trade sector. Our organization sees itself as a service provider, especially for small and medium-sized enterprises (SMEs) looking for support in their international expansion that the market does not offer. This is where the privately organized, federally funded SBU comes into its own in a subsidiary capacity.
«Banks can be an important building block in the financing of export projects»
Our core mission is to identify and analyze new markets for SMEs and plan market entries. To do this, we have around 90 employees in 30 countries, who are attached to the respective embassies and are professionally managed by us.
What other tasks does the SBU perform in addition to export promotion?
We provide support for the establishment of foreign companies in Switzerland. Together with chambers of commerce, we frequently deal with technical issues or help to understand what is required in the application of a free trade agreement, for example.
When are there points of contact with the banks?
Banks can be an important building block in the financing of export projects. Let me give you an example. An SME wants to participate in an infrastructure project in an emerging country that will expand electricity production or transportation capacity.
Initially, after a thorough examination, Swiss Export Risk Insurance (SERV) typically assumes special political risks or payment defaults the private insurance market does not otherwise cover.
«The two major Swiss banks are the main providers of special solutions»
If SERV, which itself has an AAA rating, green lights a project, these guarantees can make it easier for the exporter's main bank to contribute to the financing with its funds.
Which banks are particularly active in this type of export financing?
The two major Swiss banks are the main providers of such special solutions. Among the cantonal banks, Zuercher Kantonalbank (ZKB) is active, especially when it comes to financing in India. Beyond that, however, hardly any other banks are active.
You have been president of SGE for eleven years. Has this reluctance on the part of the banks increased since you took up this post?
Unfortunately, we have to say the expertise of many banks in export finance has been somewhat lost over the past decade.
On the one hand, this may be related to the general shortage of specialists. On the other hand, export transactions in which the SBU is involved are sometimes time-consuming and complex, even if they are not large projects.
We often hear from business circles that the banks are ignoring the SME sector.
We do not share this criticism. Still, there are no unacceptable risks involved in an SME project that SERV has waved through. This should not be a reason for house banks to stand back and not offer a hand in financing.
«To improve the interplay, a 'house of trade' could be a good idea»
In addition, many banks active in the SME sector alongside UBS and CS are probably not internationally oriented and therefore have little expertise in SME export financing in rather difficult countries.
How could this situation improve again?
As a coordinating partner, SGE has a vital interest in ensuring export projects do not fail due to outdated structures or a lack of knowledge. SGE is therefore taking an active role and wants to bring all the players even more to the same table.
Are you planning anything concrete?
We are currently looking into how expertise can be better anchored again with the banking industry and other players in the foreign trade sector. To improve the continuous interaction between all players, a «House of Trade» could be a good idea, be it physical or virtual.
«This kind of Swissness is an excellent embodiment of the financial industry»
We also want to explore whether our organization can provide even better support in this area for SMEs, which, after all, prefer to work with their principal bank. We continue to see ourselves as a subsidiary service provider with expertise and experience, not a strategy consultant.
Will new financing instruments also be considered?
Of course. We do not omit any topics. However, in the case of SMEs, the dimensions are often too small for private equity to be used for established companies or venture capital for young companies to expand abroad.
When expanding abroad, Swissness can certainly be a competitive advantage. How important is the charisma of the financial sector, which is strongly intertwined internationally?
The Swiss economy can only score points with quality, innovation, and reliability. This kind of Swissness is perfectly embodied by the financial sector.
So the banking industry doesn't have a reputation problem?
The frequent comments about a tarnished reputation are an expression of navel-gazing that is at times perhaps somewhat typical of Switzerland. As with many things, the reputation of the financial sector is worse at home than abroad. I realize this time and again during the many foreign trips I make on behalf of SGE, where representatives from the banking industry are usually part of the delegation. The exchange is always very intensive and we present a united front.
Togetherness is also a hallmark of Switzerland
Exactly. I am always amazed and delighted to see how local bosses abroad feel committed to other local Swiss companies and help each other out. Helping each other out is not tied to a Swiss passport, but rather to typical Swiss values. I am always particularly pleased to see such a Team Switzerland.
Ruth Metzler was Federal Councillor and Head of the Department of Justice and Police (1999-2003). She is President of Switzerland Global Enterprise (SGE), Asteria Investment Managers, and Fehr Advice & Partners. She is Vice President of Axa Switzerland and a member of the Board of Directors of the Reyl banking group, among others. She also chairs the Board of Trustees of the Pontifical Swiss Guard in the Vatican and is a member of the Board of Trustees of the liberal think tank «Avenir Suisse».
