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Switzerland Launches Emerging Markets Fund

Tuesday, March 9, 2010

It has recently emerged that Switzerland has created a finance institution for economic cooperation and development, in a bid to facilitate access to long-term finance for small- and medium-sized enterprises (SMEs) in developing countries and countries in transition.

The Swiss Federal Council took the decision on March 5 to establish the development finance institution SIFEM AG (Swiss Investment Fund for Emerging Markets), which will have the mandate to manage investment operations in relation to economic cooperation and development. This new structure is to be set up as a revolving fund.

In creating SIFEM AG, capitalized by the Swiss Confederation, Switzerland is equipping itself with a modern management structure to handle investment instruments for cooperation and development, based on the model used by European development agencies.

According to the Federal Administration, this new structure has become necessary due to the growth of the State Secretariat for Economic Affairs’ (SECO) investment activities over the past 12 years. It notes that almost CHF400m (EUR274m) has been invested to date in around 40 participations in venture capital funds supporting SMEs, particularly in Asia, in sub-Saharan Africa and in South-Eastern Europe.

The Federal Administration has emphasized that this offers a promising model for development, given that every franc invested in a venture-capital fund generates on average twelve francs in the local economy of the partner countries, including through the creation of long-term jobs, according to case study research carried out in 2007.

The capitalization of this company, the nomination of its board of directors and the details of its organisation will be the subject of a later decision by the Federal Council. No additional financial funds will be required since the company will be capitalized via transfer of the current portfolio of investments made by SECO.