Both indicators are firmly on the radar of Katalysen, small-growth companies and start-ups being our first focus area, AI the second.
From the report, “Country Tables” page 1971:
“Switzerland is ranked 33 of 190 countries in overall ‘doing business’. Top decile scores are obtained only in
1. ‘Getting Electricity’, 7 of 190,
2. ‘Registering Property’, 16 of 190
3. ‘Paying Taxes’ 19 of 190, on the limit of the decile.
Below top-decile scores are found on:
4. ‘Trading across borders’ 38 of 190
5. ‘Enforcing contracts’ 45 of 190
6. ‘Resolving insolvency’ 45 of 190
7. ‘Dealing with construction permits’ 62 of 190
8. ‘Getting a credit’ 68 of 190
9. ‘Starting a business’ 73 of 190
10. ‘Protecting minority investors’ 108 of 190”
‘Getting a credit’ matters
World bank puts a lot of emphasis on ‘credit bureau coverage’ and ‘credit registry coverage’ in terms of percentage of all persons and firms in order to get a high score in this rubric.
Swiss population that has not applied for a credit is not registered, resulting in the relatively low 26%. Also, there is no credit registry as such, but a ‘debt collection registry’. In this registry, once the debt is paid back, and both parties agree, the record is deleted, otherwise the record is deleted after 5 years.
The strength of legal rights scores only 6 out of 12. This is based on the fact, that the Swiss insolvency legislation is not as modern and that many aspects regarding credits are agreed privately, not through institutions (e.g. collateral registries). Please note, in Switzerland credit defaults and non-performing loans are low. Moreover, the debt market is exceptionally deep and healthy.
In context of globalization, it has to be kept in mind, that Switzerland is one of the major commodity trading hubs, an industry that hinges on credit and is global; e.g. a Swiss bank will facilitate the purchase of oil by a Dutch company from a Nigerian counterparty brokered by a Swiss trading company.
Protecting minority investors is important, but regulation has to be reasonable
Switzerland scores 108 regarding the protection of minority investors. That is behind countries like Zimbabwe, Syria and Sierra Leone.
On one hand, the Doing Business report uses a check list to assess the protection of minority investors and Switzerland scores miserably, behind many frontier market countries, On the other hand, Switzerland has an exceptionally large private equity and public equity market.
So far, In Switzerland, protecting minority interests, are governed by shareholder agreements, and in case of derivatives, the term-sheets and their annexes.
This is of course good for the big guys.
The new complexity of recent development in financial markets cannot be handled easily by law. Such a complexity would be needed to be mirrored in the regulation and would have to be non-ambiguous. And, more regulation does not mean healthier markets.
An example, Switzerland is one of the first countries to regulate crypto-currencies and crypto-shares4. Both are products of globalization, namely the spreading innovation. Like traditional shares, crypto-shares give an ownership in a company, often as minority shareholder. How do the other 107 countries with better scores protect minority investors in crypto shares?
The example of Switzerland shows the limitations of the ‘Doing Business’ report clearly. The two indicators analysed do not reflect the reality in a useful way in the analysed case of Switzerland. No 67 countries exist where real credit is easier facilitated than Switzerland and there exist no 107 countries with better real protection of minority shareholders.
New market entrants, copying models of Equity Crowd Funding Investment Banks like the Swedish Pepins, would allow to offer protection to the even smallest investors. We look forward, having professional Equity Crowd Funding Investment Banks in Switzerland.
1. World Bank Group: Doing Business 2018, 2018 Doing Business Full Report
2. IMD World Competitiveness 2017, https://worldcompetitiveness.imd.org/
3. IMD World Digital Competiveness 2017, https://www.imd.org/wcc/world-competitiveness-center-rankings/world-digital-competitiveness-rankings-2017/n
4. FINMA, ICO regulation, 2018, https://www.finma.ch/en/news/2018/02/20180216-mm-ico-wegleitung/
Heiner Weber 2018-02-03