Protectionist barriers have been rising worldwide recently. The intensifying U.S.-China trade conflict, coupled with Western efforts to address Chinese overcapacity, is extending to the European Union (EU). This global shift towards protectionism poses a significant threat to South Korea, which has built its economic growth on exports. Experts recommend that South Korea diversify its export markets and reduce its dependence on any single economy, such as the U.S., to navigate this crisis. In response, ChosunBiz will explore how major export and import partners perceive the South Korean market. This analysis will examine how domestic companies can develop new export strategies and achieve breakthroughs in this era of protectionism. [Editor’s note]
Last year, 2023, marked the 60th anniversary of diplomatic relations between South Korea and Switzerland. The partnership began with the 1971 mutual investment and protection agreement, followed by the 1980 double taxation avoidance agreement. In 2006, South Korea and Switzerland signed a free trade agreement through the European Free Trade Association (EFTA), solidifying a long-standing collaboration.
Though Switzerland’s land area is less than half that of South Korea, its nominal GDP per capita is among the highest in the world. Located centrally between Germany, France, and Italy, Switzerland leverages its geographic position and stunning natural landscape—75% of its territory is covered by mountains and lakes, including the Alps—to excel in tourism and watchmaking. It is also a major hub for global businesses, thanks to its innovation and technology.
Switzerland has topped the Global Innovation Index (GII) for 12 consecutive years, according to the World Intellectual Property Organization (WIPO). As of 2022, the United States ranked second, Sweden third, and South Korea ranked sixth, surpassing Singapore to secure the top spot in Asia. This success stems from Switzerland’s investment of 3% of its GDP in research and development and its collaboration with leading universities and research institutions.
The Swiss embassy and investment agency are keenly interested in South Korea’s competitive companies and technologies. As of last year, over 40 South Korean companies, including Samsung Electronics, HD Hyundai Electric, Sejin Precision, Noeul, and Korean Reinsurance, have established active subsidiaries in Switzerland. ChosunBiz met with Andrea Clementi, head of the Swiss Business Hub Korea, at the Swiss Embassy in Seoul’s Jongno district to discuss the ongoing exchanges and synergies between the two countries.
What significance does South Korea hold for Switzerland in areas of trade and technological exchange?
“South Korea is one of the most dynamic and technologically advanced economies in the world, making it a key partner for Switzerland in various fields. There are here opportunities for Swiss companies in high-tech industries, biotechnology, quantum technology. South Korea’s market is also interested in high-quality and luxury goods, presenting significant growth opportunities in this sector.
In terms of trade, Switzerland exports high-quality goods, including pharmaceuticals, chemicals, machinery, and luxury watches to Korea. In 2023, the bilateral trade volume between Switzerland and Korea amounted to CHF 5.77 billion. Pharmaceutical products were the largest import category from Switzerland, highlighting the strong demand for Swiss healthcare products in Korea. Conversely, Switzerland imports Korean electronics, automobiles, and machinery, reflecting a balanced trade relationship that benefits both economies.”
The largest import item from Switzerland to South Korea is watches. Do you know about the high demand for Swiss watches in South Korea?
“I’m well aware of the popularity of Swiss watches in South Korea. The demand for Swiss watches in Korea has seen a significant increase over the past five years. wiss watches are renowned for their precision, craftsmanship, and quality—attributes that resonate well with Korean consumers who value high-quality luxury goods. The ‘Swiss Made’ label is associated with reliability, innovation, and status, making Swiss watches highly desirable in the Korean market. Additionally, the growth in the affluent middle class in Korea has led to higher disposable incomes and an increased willingness to spend on luxury items. Swiss watches are often perceived as a symbol of success and sophistication, further driving their popularity.”
Biotech industry has been the main driving force of the Swiss economy. Why do you think Switzerland excels globally in the life sciences and biotech sectors?
“Switzerland’s global excellence in the life sciences and biotech sectors can be attributed to several key factors. Firstly, Switzerland boasts a strong network of renowned research institutions, such as ETH Zurich, EPFL, and several specialized research centers, which are leaders in scientific research and development. This network fosters innovation and attracts top-tier talent from around the world. Switzerland is among the countries with the highest spending on R&D in relation to their gross domestic product, using over 3% of GDP for research and development. Secondly, Switzerland’s regulatory environment is conducive to biotech and pharmaceutical development. The country has streamlined processes for clinical trials and drug approvals, which ensures high standards while maintaining efficiency. This regulatory support encourages companies to invest in research and development within Switzerland.
Switzerland also has a highly skilled workforce with a strong background in life sciences. Its dual education system, which combines academic learning with practical experience, produces well-trained professionals who excel in the biotech field. Additionally, Switzerland offers a favorable business environment with strong intellectual property protection, political stability, and attractive tax incentives. Last but not least, the presence of major pharmaceutical companies like Novartis and Roche drives significant R&D investment and creates a collaborative ecosystem that benefits smaller biotech firms and startups through partnerships and knowledge sharing.”
Switzerland is renowned for its hydrogen industry, alongside its strong biotechnology sector, even though only a few countries can claim to have a well-developed hydrogen industry.
“The Swiss Federal Council has been exploring alternative energy sources as part of its goal to achieve carbon neutrality by 2050. Hydrogen, a key component of Switzerland’s energy strategy, has been studied in the country since 1813. Leveraging its rich natural resources and extensive hydropower infrastructure, Switzerland has positioned itself as a leader in hydrogen production. Numerous Swiss companies are actively engaged in all facets of the hydrogen value chain, from production and storage to distribution.”
South Korea is also investing in hydrogen energy development to reduce carbon emissions, but it faces challenges. Why is hydrogen energy development more difficult compared to other alternative energy sources?
“Developing hydrogen energy comes with significant challenges. One of the primary obstacles is the high cost of producing and distributing hydrogen. The production of green hydrogen through electrolysis requires a substantial amount of energy, making it more expensive compared to fossil fuels or other renewable sources. Moreover, the infrastructure needed for hydrogen storage and transportation is still in its infancy and involves considerable investment. Even for a technologically advanced country like Switzerland, further research and development are crucial. Additionally, hydrogen technologies, particularly fuel cells, are less familiar to the public compared to other alternative energy sources. This unfamiliarity can lead to skepticism or resistance from industries and consumers accustomed to traditional energy systems. Therefore, education and awareness campaigns are vital to addressing these concerns and highlighting the benefits of hydrogen power.”
What specific goals do Switzerland and Hyundai Motor Company have in their collaboration on advancing hydrogen technology, especially given Hyundai’s focus on hydrogen development and the success of the hydrogen electric truck Xcient?
“In 2019, Hyundai Motor partnered with the Swiss company H2 Energy to create the joint venture Hyundai Hydrogen Mobility (HMM), which manages the entire hydrogen value chain. Hyundai Motor’s hydrogen-powered trucks have collectively covered 10 million kilometers in Switzerland, demonstrating the safety and technological sophistication of hydrogen fuel cells. The partnership aims to improve the efficiency and cost-effectiveness of hydrogen technology and to further develop the required infrastructure.”
What kind of support can South Korean companies expect from the Swiss government or Switzerland?
“Switzerland offers a stable and relatively low-volatility business environment. Centrally located in Europe, it provides strategic advantages for trade, business expansion, and access to the European market. The Swiss government incentivizes foreign investment through various measures, such as tax benefits and support for research and development. Additionally, Switzerland’s liberal labor laws and highly skilled workforce make it easier to recruit talented personnel.
For businesses interested in the hydrogen industry, there are even more benefits. Switzerland actively fosters innovation in hydrogen technology, with the Swiss Federal Office of Energy (SFOE) supporting numerous projects through funding for infrastructure development and pilot initiatives. Swiss companies, known for their expertise in advanced hydrogen technology and infrastructure, are eager to collaborate with South Korean firms, creating opportunities for mutual benefits and technological synergy.”
Are there any promising industries, products, or projects being promoted by the Swiss government?
“Switzerland traditionally avoids prioritizing specific industries through government policy. Instead, the government focuses on fostering a favorable environment for all industries, encouraging a bottom-up approach driven by the private sector. Prominent sectors include biotechnology and pharmaceuticals, hydrogen and renewable energy, advanced manufacturing, and digital and ICT industries. To support innovation, the government provides backing for startups and established companies across various advanced technology fields, facilitated by a nationwide network of innovation hubs like the Switzerland Innovation Park.”
Despite reports of low economic growth from the Swiss State Secretariat for Economic Affairs (SECO), does Switzerland still provide a compelling business environment for our companies?
“Switzerland is expected to grow by approximately 1.2% this year, consistent with the European average, while maintaining a low inflation rate of around 2%. These factors contribute to Switzerland’s appeal as a business destination. The country is known for its stable economic and political environment, high quality of life, and leadership in innovation and research, consistently ranking high on the Global Innovation Index. Switzerland’s education system produces a highly skilled workforce, especially in technical and scientific fields. Its strategic central location in Europe offers excellent access to the European market.
Moreover, Switzerland features highly developed infrastructure, liberal labor laws, competitive tax rates, and robust intellectual property protections. These elements together make Switzerland a highly competitive and attractive option for businesses, reinforcing the decision of Korean companies to establish a presence there.”
