Distinguished audience,
Dear friends and colleagues,
Ladies and gentlemen,

When I look back at the rich history of our relationship, I cannot help thinking about how friendly and mutually beneficial it has been ever since the Russian Empire opened its first Embassy in Switzerland in 1814. Swiss people have not forgotten the role played by Czar Alexander I to reestablish the Swiss Confederation after the Napoleonic Wars, nor the economic assistance given to impoverished Switzerland by Russia in the 19th century.

Since then, Switzerland has supplied Russia with countless scholars, teachers, doctors, artists, architects, officers and entrepreneurs who have all helped to shape Russia and whose influence lasts to this day. It is thanks to the efforts of these unifying forces on both sides that we can now enjoy a thriving and very intense relationship between our nations. It is a honour and great pleasure for me to speak to such a distinguished audience today in order to discuss the bilateral economic relations between Switzerland and Russia and to focus particularly on the importance of continuous innovation for our economic success. At the outset of my speech I would like to emphasize my delight with the excellent current state of our bilateral relations. The reason why my economic mission brings me to Russia is the great importance Switzerland attributes to Russia.

Your country is an important economic partner for Switzerland and a focus-country for Swiss foreign economic policy. The quality of our relations is made evident by the frequency of mutual visits of high ranking representatives to both countries. These frequent Swiss-Russian encounters are ample evidence of the mutual interest our countries invest in each other. Russia appreciates Switzerland as a stable, reliable and competent partner. Switzerland on the other hand recognizes Russia's great economic potential in general and the importance of the customs union of Russia, Belarus and Kazakhstan in particular. Your country is a major market with a considerable potential for growth. Remarkable data proves our good bilateral economic relations: Between 2003 and 2008 our exports to Russia tripled.

Our imports from Russia have remained stable with 1 billion CHF per year. While exports collapsed in 2009 due to the global economic and financial crisis, we witnessed very positive figures in 2010: Exports to Russia rose by 26% while imports from Russia went up by an impressive 43%! Did you know that today around 150 Swiss companies are active in Russia and that they create more than 75'000 jobs in Russia?

Among them still dominate big multinational companies, but small and medium enterprises too are showing a growing interest in the Russian market. Swiss companies are active in a variety of branches, e.g. in investment goods, services, chemistry, pharmaceuticals and others. Although bilateral trade and investment have reached a respectable volume, the huge potential is far from being fully tapped.

One purpose of my visit to Russia is to examine with my Russian counterparts ways how to further intensify our fruitful cooperation in different economic areas. I did not come alone, but am accompanied by a delegation of around 20 high ranking business people and representative member of the government of the Canton of Valais.

They want to test the water and explore your business potential. Represented in the delegation are various branches, e.g. the engineering sector, the chemical and pharmaceutical industry, financial services, industrialists and representatives of Swiss chambers of commerce. Let me now come to the core topic of today's speech: the importance of innovation in economic success by quoting a passage from a seminal speech given by President Medvedev on November 24, 2009: "We are absolutely sure that, without urgent modernization, the Russian economy has no future, even with the enormous natural resources Russia has... Instead of an archaic society, in which the leaders think and make decisions for everyone, we will become a country of intelligent, free and responsible people."

These words by President Medvedev demonstrate that the current Russian government puts a lot of emphasis on the modernisation of the Russian economy and society as a whole. I can assure you that Switzerland is on your side: We support your efforts and would like to strengthen our cooperation in this field. That is why Switzerland and Russia decided last year to draft a common declaration on cooperation in the interest of economic modernisation. I am pleased to announce that this declaration will be signed by Minister Nabiullina and myself on Wednesday. The Joint Declaration will undoubtedly help to focus on the most interesting and promising fields of mutual cooperation.

I'm sure that Switzerland with its modern economic structure, its potential in know-how and innovative high-technology-products can be an interesting partner for Russia in the process of realizing its ambitious modernizing efforts, e.g. in the areas of energy efficiency, health, engineering as well as information- and nanotechnologies. I would now like to share with you some ideas on the importance of continuous innovation for the economic success of a modern country like Switzerland with its complex economic structure and high degree of international integration. Switzerland has a long tradition as an outstanding location for innovation. Let me just mention a couple of well known examples: in the mid 19th century, Henri Nestlé invented a new formula for children's food that helped to fight infant mortality. Today, Nestlé is the world's largest food and beverage company. Should you ever have enjoyed a cup of Nespresso coffee you are acquainted with one of Nestlé's current innovative products.

As another example let me name the Swiss company Logitech, which started in 1981 by inventing the computer mice. The company became the worldwide leader in computer mice, and has reinvented the mouse in dozens of ways to match the evolving needs of PC and laptop users. With products sold in almost every country in the world, Logitech's leadership in innovation now encompasses a wide variety of personal peripherals, with special emphasis on products for PC navigation, gaming, Internet communications, digital music and home-entertainment control. Let me proudly mention that Switzerland leads both the IUS 2010 and the Global Competitiveness Report 2010 of the World Economic Forum.

Another example ist Novartis which is committed to become Russia's key partner in governmental health reform. Novartis will invest 500 mio USD in:

the construction of of a new, full scale, state of the art manufacturing plant in St. Petersburgh;
in R&D partnerships, in particular in Skolkovo, but also with local universities;
in public health development projects.

On Wednesday, together wit the Swiss president Micheline Calmy-Rey and President Medvedev I will have have the pleasure to take part at the inauguration of a new cement factory of the Swiss company Holcim near Kolomna. Holcim, one of the biggest investors in Russia, is famous for investing in new sustainable and energy efficient technologies. In 2010, Holcim produced and sold 2 mio tonnes of cement in Russia - this equals a share of 5% of the Russian cement market.

What is the secret to Switzerland's strong innovation performance? Switzerland's success in innovation is due to several factors. I want to mention three of them:

The general conditions of Switzerland's domestic and foreign economic policy,
The clever mix of skills and grades,
The strong performance in Research and Development.

1. General conditions of Switzerland's domestic and foreign economic policy
A crucial role in the innovative process play the general conditions of the economic framework such as pro-competition regulations in product markets, macroeconomic stability, highly developed financial markets, international openness and more.

Internal conditions:

Macroeconomic conditions in Switzerland create a fertile ground for innovation: Switzerland's economy is very stable, with low inflation and real interest rates. The latter reduce the cost of long-term investments, including Research & Development. Price stability reduces uncertainty as to the rate of return for investors. The Swiss labour market is characterized by a high degree of flexibility and an easy access to high quality education. Switzerland also benefits from sound public finances: from 2006 onwards the federal budget has achieved surpluses thanks to the so called "debt brake rule". And thus, Switzerland is at the moment confronted with the problem of its strong currency, the Swiss Franc, which is opposed to the weak Euro.

This situation causes high risks to your export economy and hinders general growth. The federal government is conscious of this problem and took appropriate measures last February. It continues to examine the developments tightly. Furthermore, the federal government has made significant progress in improving the framework conditions for entrepreneurs: An ongoing task is the removal of unnecessary costs imposed by administrative requirements on firms which hamper economic competition and innovation. Further elements are Switzerland's well developed infrastructure and strong intellectual property rights, which provide an important incentive to invest in innovation by enabling firms to recover their investment costs.

External conditions:

Switzerland, as a small country poor in natural resources, is highly integrated into the world economy. The Government's priorities for Switzerland's external economic strategy is based on three objectives. The first is to improve access to external markets and help to ensure the introduction of a coherent and observed set of international rules; the second is to improve Switzerland's competitiveness by making its products more competitive; and the third is to integrate the largest possible number of countries into the global economy. In line with this, we strongly support our partners' accession to the WTO and the conclusion of free trades agreements on a uni- and multilateral level. Therefore, Switzerland welcomes the accession of the Russian Federation to the WTO.

It will strengthen and complement our bilateral economic relations. Furthermore, Switzerland has an interest in a stable, inclusive and rule-based multilateral trading system, which provides for Most-Favourite Nation market access and a dispute settlement mechanism. I commend the Russian Federation for the work accomplished in the accession process so far and I am looking forward to see the Russian Federation as a Member of the WTO in the very near future. One of the most important projects on Switzerland's foreign economic agenda are the current negotiations on a free trade agreement between the EFTA States and the customs union of Russia, Kazakhstan and Belarus. I had the great pleasure to sign the launching with my dear friend Minister Nabiullina last November in Zurich.

It will remain a great memory since it was my first launching signature for a free trade agreement. Switzerland and the other EFTA Member States will make the necessary steps to support these negotiations and to bring them to a successful conclusion within a reasonable period of time. We have already had two important and constructive rounds of negotiations, and experts are currently preparing the third round of negotiations going to be held in Geneva in August. I hope that the free trade negotiations between our countries will be successfully concluded as soon as possible, contributing to enhanced economic ties between us und thus stimulating the flow of ideas, technologies and innovation.

2. The clever mix of skills and grades
Switzerland has a highly developed education system with a broad spectrum of practical training programmes directly linked to the labour market and different academic courses. Switzerland's education system is very permeable: The permeability between the different education paths encourages lifelong learning and allows vocational education and training graduates access to academic courses and vice versa. The range of educational paths, the labour market orientation of many training programmes and the permeability contribute to ensuring a mix of skills and grades, which corresponds to the needs of the labour market. With regard to upper-secondary vocational education and training in Switzerland, the dual-track approach to learning combining part-time, work-based learning at a host company and studies at a vocational school, is very important in providing apprentices with the skills needed by the labour market. The "dual system" connecting school and worked-based learning is a crucial element that contributes to Switzerland's innovation performance. We are very proud of this system. That's why our experts from my Federal Office for Professional Education and Training welcome delegations from abroad in order to explain to other countries the success of our dual system.

3. Strong performance in Research and Development
Switzerland has already reached the Europe 2020 target of a combined public and private R&D spending of 3 percent of its GDP. It is remarkable that the biggest share of this expenditure falls onto the private sector. It accounts for about two third of Swiss domestic R&D. Public funding is traditionally not directed towards private research projects for the reason that it might substitute for private funding without significantly raising total R&D performance. Rather, Switzerland's public funding of activities in this field is focused on basic research at university level. An important player in strengthening the technology transfer between the educational system and individual companies is the federal innovation promotion agency, the Swiss Commission for Technology and Innovation. This commission finances R&D projects for the business sector at Swiss public research institutions based on a public-private partnership model. Apart from such projects, CTI supports entrepreneurship as well as the development of start-up companies.

Let me conclude my ideas on innovation by stressing that at the heart of our success in the field of innovation lies our policy mix and our constant efforts to improve the internal and international framework and business environment. At the same time there are still areas in which policy reforms could strengthen innovation even further and help Switzerland to maintain its leading position in the face of a changing global environment. Similar conclusions may hold true for Russia. Russia's innovation potential is outstanding given its well-developed science base, the high quality of its science and engineering and the significant public resources spent on research and development: All the "push factors" for successful innovation are in place.

However, according to recent findings by the OECD, key framework conditions for innovation such as competition and trade policy, financial policy and judiciary policy could still be improved: Only by creating open and undistorted markets can an environment be conducive to long-term investment in innovative activities. It is a well known fact that countries with a highly developed and diversified economy interact most intensely with those countries that have a similar economic structure.

To the degree that Russia succeeds in its efforts to diversify its economy, supports innovation and allows foreign competition, the economic exchange between Switzerland and Russia will undoubtedly gain momentum. The perspectives of our bilateral economic relations are promising: A growing interest of Swiss companies in entering the Russian Market can be witnessed for the last few years, a tendency which is stressed by the increasing number of enquires addressed to the Swiss Business Hub in Moscow.

The interest of Russian companies in Switzerland has grown too. The Russian government has launched a comprehensive process of diversifying and modernizing the Russian economy and is currently looking for foreign partners, investors and technologies. I have already mentioned the areas of cooperation defined by the "Swiss-Russian Action Plan for Economic Cooperation 2011-2013", in particular the areas of energy efficiency, health, engineering, machine tools, precision instruments, and others. There are plans for establishing a centre for the development of new technologies near the village of Skolkovo.

I don't think it is a coincidence that despite strong international competition the Technopark Zurich was chosen as one of the main partners in this ambitious project. Russia has initiated other great development projects in the last couple of years. The development of the Russian infrastructure was partly sparked by large and prestigious projects like the Olympic Games in Sotchi 2014 and the Football World Cup 2018. We are ready to share with Russia our know-how and experience, i.e. in the successful realisation of big sport's events.

I cannot come to an end without giving you an update on the current development of Misha and Masha. I know that in Russia these names are quite common. In Switzerland they are strongly associated with the two young bear cubs generously given to the Zoo of Bern by President Medvedev's wife Svetlana on occasion of their visit to Switzerland in 2009. Let me assure you, both brother and sister develop beautifully and if such dynamism and youthful strength is the result of the combination of Russian vigour with a healthy Swiss environment, the prospects for our mutual relations are truly promising!

I thank you for your kind attention and look forward to an interesting and fruitful discussion!

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Switzerland and Russia as economic partners: The role of innovation in economic success