jean - pierre roth : switzerland and singapore - small countries as platforms for global business keynote address by mr jean - pierre roth, chairman of the governing board of the swiss national bank and chairman of the board of directors of the bank for international settlements, at the swiss business association, singapore, 18 september 2006. * * * once in a while, the annual meetings of the international monetary fund and the world bank do not take place in washington, as usual, but are held somewhere else in the world. the fact that we are meeting in singapore this time is a welcome opportunity for me to return to the " city of the lion ". i am happy to be with you today and i would like to thank the swiss business association and ambassador woker for hosting this association lunch. for swiss people, it is always a pleasure – even a delight – to spend time in this fascinating city. since singapore is often referred to as the " switzerland of asia " it is particularly interesting for them to make comparisons with their home country. as a matter of fact, i am one of some 50, 000 swiss who visit singapore each year. 1 singapore is a unique place with its beautiful skyline, its outstanding location, its pulsating life, and – most of all – its openness to the world. interestingly, singapore and switzerland share many common features. in particular, both of our countries have to deal with surrounding neighbours that are much larger and more powerful. some believe this must make it harder to succeed in competition of any kind, but in fact the opposite is true. let me show you why our position needn't be a disadvantage, but, on the contrary, an asset. cliches are very hard to overcome. in the case of switzerland, as you know, we are best known for our banks, watches, chocolate and cheese. other than this, and despite the strong presence of swiss multinationals abroad, the world doesn't usually take too much notice of what some regard as a " small village in the heart of europe ". in international surveys, we are largely ignored, and in european statistics we are almost non - existent. sometimes this can be an advantage. however, in a more and more globalised world, it is rather the opposite. success depends heavily on your marketing. so, let me show you some hidden aspects of switzerland. you will see that modern switzerland is adjusting rapidly to the changing reality of the world economy. let's consider a few facts

##igated speculative pressures on the franc. when the euro was launched, its exchange rate against the swiss franc was 1. 60 ; now it is only 1 - 2 cents below this rate – in other words, almost unchanged. on the whole, the euro has stabilised the monetary scene in europe, and our currency is therefore less volatile than before. to be sure, floating rates still mean volatility, especially in the case of market disruption. at times, the swiss franc has been pushed up to levels no longer compatible with the economic reality of our country ’ s fundamentals. however, these episodes have usually lasted for a limited period only. after september 11 and before the outbreak of the war in iraq, the safe - haven function of the franc triggered a 10 % appreciation in our currency against the euro. as a consequence, we pursued a more aggressive interest rate policy than the ecb in order to lower the attractiveness of our currency and give our economy some room for manoeuvre. also, in the current business cycle, with a rapidly growing swiss economy, we started lifting interest rates earlier than – and independently of – the ecb. in the last two years, we have already increased interest rates on six occasions. contrary to the pessimistic assumption that the swiss national bank would be forced to shadow the policy of the european central bank, we have been able to set interest rates according to the needs of the swiss economy. and we will continue to do so. summing up, we are as happy as central bankers can be with the outcome of the test imposed by the change in the european monetary system. why joining the eu and the euro is not a realistic option and what about the european issue? as you know, we are not a member of the european union, nor do i foresee switzerland joining the eu in the near future. the swiss people remain sceptical about the efficiency of the union and are very aware of what they stand to lose in terms of political rights and economic freedom in the event of integration. but our relationship with the eu is of key importance, since europe accounts for two - thirds of our foreign trade, as i mentioned before. in order to secure our access to the european market and to avoid discrimination, we have concluded two packages of bilateral agreements with the union – one in 2002 and one in 2004. the present situation – with free movement of goods, capital and labour, but without monetary and fiscal integration –