Located in the centre of Europe, Switzerland (officially the Swiss Confederation or Confoederatio Helvetica) is a mountainous, land-locked country with a multi-ethnic and multinational population of slightly over 8 million people. The official languages are German, French, Italian and Romansh, but English is widely spoken. The largest Swiss cities are Zürich, Geneva, Basel, Lausanne and Bern, the country's capital.
Switzerland's political system is framed by federalism and direct democracy. The federal structure consists of three levels: the confederation, 26 cantons (states) and approximately 2,300 municipalities. The cantons enjoy broad autonomy in many areas such as taxes, public law and organisation of the courts within the limits of federal law. On the other hand, legislation in the field of civil and criminal procedure and substantive laws, including corporate and securities laws, is predominantly a federal matter, as is most financial market regulation. In the Swiss system of direct democracy, the people are given a direct say in the legislative process to an extent which is unparalleled in most other countries. Generally, the Swiss people have applied a pragmatic, measured approach to popular votes in order to ensure the stability and prosperity of the Swiss economy.
Many factors make Switzerland an attractive place to do business and to live. Switzerland is a politically stable country with one of the highest per capita GDPs in the world. It is a prosperous and modern market economy with a low unemployment rate (around 3% as of mid-2017), a skilled workforce and well-developed infrastructure including reliable public transport. The competitive tax environment, which is strongly influenced by the country's federal structure, leads to a moderate tax burden for both companies and individuals. In 2017 Switzerland was, for the seventh year in a row, ranked as the world's most innovative economy according to the Global Innovation Index.
Switzerland is home to a strong and internationally-oriented financial marketplace. The Swiss Financial Market Supervisory Authority FINMA considers innovation key to the competitiveness and long-term success of Switzerland as a financial centre. It is dedicated to removing unnecessary regulatory obstacles for advanced business models while maintaining a high standard of oversight and enforcement against bad actors. The principle-based approach to financial regulation is conducive to enabling the development of new business models in the financial sector in general and the Fintech sector in particular. In recent years, the region around the city of Zug has established itself as a centre for innovation in the areas of blockchain and cryptocurrencies, and is known as the Swiss crypto-valley.
Investors and businesses active in Switzerland benefit from a competitive and stable economy, a business- and innovation-friendly legal environment and an efficient and reliable judicial system, as well as one of the highest standards of living in the world. Switzerland's attractiveness for doing business is reflected by the number of global players with headquarters in Switzerland, such as the consumer products multinational Nestlé, large pharmaceutical companies Novartis and Hoffmann-La Roche, engineering company ABB and numerous financial institutions, including UBS, Credit Suisse, Swiss Re and Zurich Financial Services. Switzerland is also an important hub for commodities trading companies. Additionally, numerous small and medium enterprises make up the backbone of the Swiss economy, in particular in the medical, biotech, and financial industries. Switzerland ranks first in Europe and fourth globally for economic freedom, in particular due to its openness to foreign trade and investment.
Separately, numerous international bodies such as the World Trade Organization, World Economic Forum and World Intellectual Property Office are headquartered in Switzerland, as are the International Olympic Committee, the international and European football bodies FIFA and UEFA and the International Ice Hockey Federation IIHF. Furthermore, the International Committee of the Red Cross is headquartered in Geneva, where the United Nations also maintains an office.
Switzerland continues to be an attractive place to take up residence, especially for wealthy foreigners who are eligible for lump sum taxation (taxation based on a person's expenditure, as opposed to their income). On 14 June 2015, the Swiss people voted with a majority of 61.3% against an initiative which requested general inheritance taxation of 20%.
Half of Swiss exports go to Eurozone countries (over 14% to Germany alone), with Switzerland being the EU's third-biggest trading partner after the United States and China. As a consequence, the Swiss National Bank's surprising decision to abandon the CHF/EUR exchange rate peg in January 2015 severely affected Switzerland's economy, putting pressure on key sectors like industry, finance and tourism. The event continues to influence economic activity, but the outlook is positive with a sizeable GDP growth of 2.0% expected for 2018 according to the State Secretariat for Economic Affairs SECO, compared to 0.9% in 2017. Switzerland is also one of the few countries with a positive trade balance with China and Hong Kong, despite not exporting natural resources: the surplus was CHF1.8 billion in the first half of 2017.
Activity on the Swiss M&A market remains strong. The most significant deal in 2017 was the acquisition of Swiss biotech company Actelion by the US pharmaceutical and consumer goods manufacturer Johnson & Johnson for a total purchase price of approximately USD30 billion. After the USD43.8 billion take-over of Syngenta by China National Chemical Corp in 2016, this is already the second big-ticket deal on the Swiss M&A market within one year, and it is among Switzerland's five largest transactions of all time. These acquisitions demonstrate the attractiveness of Swiss companies for foreign investors.
As for capital markets activity, so far six IPOs took place in 2017. The biggest IPO was the listing on the SIX Swiss Exchange of Landis+Gyr, a provider of metering solutions for electricity and gas utilities, with a market capitalisation of CHF2.317 billion. Furthermore, Switzerland has established itself as a centre for Initial Coin Offerings (ICOs) by technology start-ups. Four out of the fifteen largest ICOs so far have been conducted out of Switzerland, with amounts raised ranging from USD95 million to USD238 million.