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The Swiss National Bank draws a distinction between ‘direct investment' and ‘portfolio investment'. Direct investment refers to general capital outlays from an investor made for the purpose of influencing the business activities of a company abroad in a direct and lasting manner. Statistically, international direct investment includes the following two cases: formation of a subsidiary or branch office abroad or an investor shareholding with voting rights of at least 10% in a foreign company. In contrast, portfolio investment occurs when capital is invested abroad without the intention of directly influencing company management. Examples of portfolio investment include: debt certificates (money market securities, bonds), dividend-paying securities (shares, participation certificates, profit certificates) and mutual fund certificates.
As in most other countries, international investments are a key factor for economic growth and prosperity in Switzerland. Swiss-based companies have traditionally exported not just industrial goods and services but also capital, particularly in the form of direct investment. At the same time, Switzerland has successfully positioned itself as a location for capital investment from abroad.
According to the Swiss National Bank, the stock of direct investment by Swiss companies in production, distribution and research facilities abroad stood at CHF 809 billion by the end of 2008. In addition to large-sized enterprises, there are also several thousand small- and medium-sized enterprises (SMEs) that have contributed. Combined, they employ nearly 2.44 million people outside of Switzerland. In comparison, foreign direct investment (FDI) in Switzerland currently stands at CHF 467 billion (2008), which corresponds to roughly 242,000 jobs. Compared to other countries, Switzerland maintains relatively high levels of foreign direct investment (FDI). This can be seen in the ratio between the level of Swiss foreign direct investment (FDI) and gross domestic product (GDP). According to the Swiss National Bank, the ratio at the end of 2008 was 149%. The importance of foreign investment for the Swiss economy can also be seen from a historical perspective as the stock of Swiss FDI has quadrupled since 2000.
As a multilateral regulatory framework, the OECD's Code of Liberalisation of Capital Movements is also important for Switzerland. Under this code, Switzerland undertakes to refrain from discriminatory practices against foreign investments made by investors from fellow OECD member countries, regardless of the economic sector involved. At the same time, Swiss investors may also benefit from the principle of non-discrimination for their investments in other OECD member countries. The OECD's Code of Liberalisation of Capital Movements and its Code of Liberalisation of Current Invisible Operations allow for certain reservations that have to be spelled out in lists. Attempts to reach a comprehensive Multilateral Agreement on Investment (MAI), which would have liberalised and afforded protection to international investments and introduced legally binding dispute settlement mechanisms, failed in 1998 after several years of negotiations.
Multilateral Investment Rules applying to specific sectors
As far as multilateral investment rules applying to specific sectors are concerned, Switzerland adheres to the Energy Charter Treaty (ECT), which affords investment protection for non-commercial risks associated with investments in the energy sector. The ECT also includes an investor-state dispute settlement mechanism. However, an initially planned schedule to this treaty that would have covered the liberalisation of investments in the energy sector did not materialise. The ECT is the first multilateral investment treaty that includes a dispute settlement mechanism. In addition to Switzerland, the signatory countries to the ECT include all EU member states, all Balkan countries as well as all members of the Commonwealth of Independent States CIS (with the exception of Russia) and Japan.
Bilateral Investment Promotion and Protection Agreements (BITs)
Due to the absence of a multilateral framework to protect international investments, Switzerland negotiates on bilateral tracks international law disciplines on the protection of investments in the form of BITS. There are over 2,500 such agreements worldwide, a complex network which explains the interest in a multilateral solution. Additional information regarding the bilateral investment treaties of other countries can be found on the UNCTAD website. Switzerland also negotiates free trade agreements through the European Free Trade Association (EFTA), some of which contain provisions on investment.
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