GlobalArenaRank 2011 Comparative Advantages Analysis for Thurgau.

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•  Thurgau Overview

•  Executive summary

•  GlobalArenaRank™ - The process

o  What is measured?

o  Data Sources

•  Comparative Advantages Analysis-Consolidated Results

o  At a glance

o  Focus on specific cases

o  By location factors

•  Appendices

o  GlobalArenaRank™ – Explained

o  Data Sources

Contents

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Thurgau overview

The canton of Thurgau is located between Lake Constance and the foothills of the Swiss Alps in north-eastern Switzerland – in the heart of Europe. It borders Germany, embraces the high-tech triangle “Stuttgart-Munich-Milan” and pools resources with the university town of Constance right on the doorstep.

This is where some 230,000 inhabitants feel at home. Zurich city is only 40 km away from the canton capital, Frauenfeld. Even closer is Zurich International Airport. Furthermore, you can easily reach nearby airports in Friedrichshafen (Germany) and Altenrhein. Plus there’s a close-packed road and railway network so that getting there and getting around in Thurgau is a breeze.

•  Visit Thurgau

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Executive Summary

Thurgau has several competitive advantages in comparison with similar competing regions in neighboring countries which makes it a very interesting region as it comes down to attracting foreign investment and setting up headquarters for small and medium-sized ICT companies in particular:

•  Thurgau’s ICT infrastructure is highly developed, more advanced than Germany, Austria and Italy, and is far ahead of its competing regions in Eastern Europe.

•  Switzerland’s labour availability relative to its population is highest among all competing countries. Switzerland shows a very high employment rate.

•  Thurgau’s labour market flexibility is second least rigid in comparison with its competing regions: it is least difficult to hire and dismiss employees and the redundancy costs are low.

•  From an investor’s point of view, Switzerland has the highest FDI inflow per capita. Moreover, Thurgau has a higher than average purchasing power and population size.

•  Switzerland is highly politically stable and corruption perception is low.

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GlobalArenaRank™ The process

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GlobalArenaRank – What is measured?

Global Arena RankTM utilizes basic macroeconomic data provided by a wide variety of providers including: international financial research firms (e.g.Thomson-Reuters), government-provided statistical reports, World Bank information and others. Global Arena validates the raw data. Then, statistical analysis is used to identify correlations in the data series. The correlated data is categorized as follows:

Economic Talent Attractiveness

Labor Cost Education Consumer Market Potential

Labor Productivity Labor Availability Socio-Political

Infrastructure Labor Market Flexibility Cost of Living

(A full definition of each category as well as an explanation of the data used in each category is provided in the appendix.)

For each of the nine categories, the component inputs for all in-scope locations are statistically correlated to create an ordered list. A meaningful overall ranking, i.e. one that depends on all nine categories, is possible only if there is a mathematically consistent way to compare rankings across categories. Global Arena RankTM solves this issue by mapping the raw ordered list of each category into a Gaussian distribution - a mechanism to allow each category to be converted to a ranking number between -1 and 1. (If the number of data sources is inadequate to make a Gaussian distribution mathematically viable, a flat mapping is used.) For convenience, these are presented in ranking reports as percentages. Informally, a location with a rank of 85% in a specific category would rank higher than 85% of any other location.

Once the macroeconomic data has been correlated and mapped, the information necessary for to complete the ranking is in place. Global Arena ranks are not static, but are computed based on the relative importance, assigned by the user, of each of the location categories. Different weights will lead to different results. This dynamic feature of the model is useful since the economic fundamentals that are important for locating a call center are not the same as those for a HQ.

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GlobalArenaRank – Data Sources

•  Market labour costs: Economic Research Institute, IMF

•  Labour productivity: Eurostat

•  ICT infrastructure: CIA World Factbook, OECD

•  Education: United Nations

•  Labour availability: CIA World Factbook

•  Labour market flexibility: the World Bank

•  Consumer Market Potential: Eurostat, CIA World Factbook, IMF, regional statistical offices

•  Socio-political: the World Bank, the Heritage Foundation, Transparency International

•  Cost of living: Economic Research Institute

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Comparative Advantages Analysis Consolidated Results at a glance

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Overview – Top EU cities by factors

Rank Labor Cost Labor productivity

IT Infra-structure

Education Labor Availability

Labor Flexibility

Consumer Market Potential

Socio-Political

Cost of Living

1 Wroclaw Galway Limburg Wroclaw Fribourg (CH) Aalborg Thurgau Fribourg Bratislava

2 Bratislava Linz Almere Bratislava Thurgau Fribourg Aalborg Thurgau Wroclaw

3 Almere Bregenz Aalborg Galway Aargau Thurgau Limburg Aargau Galway

4 Galway Vercelli Fribourg (CH) Aalborg Aalborg Aargau Bregenz Galway Chester

5 Vercelli Varese Thurgau Chester Malmo Galway Galway Aalborg Almere

6 Limburg Almere Aargau Malmo Augsburg Chester Fribourg Malmo Limburg

7 Linz Limburg Malmo Fribourg (CH)

Chester Linz Chester Linz Vercelli

8 Chester Malmo Augsburg Thurgau Limburg Bregenz Aargau Bregenz Malmo

9 Bregenz Fribourg (CH) Chester Aargau Almere Vercelli Malmo Limburg Augsburg

10 Malmo Thurgau Galway Limburg Linz Varese Almere Almere Varese

11 Varese Aargau Linz Almere Bregenz Bratislava Varese Augsburg Linz

12 Fribourg (CH) Chester Bregenz Vercelli Vercelli Wroclaw Linz Chester Fribourg

13 Aalborg Augsburg Varese Varese Varese Limburg Vercelli Bratislava Aalborg

14 Augsburg Aalborg Vercelli Augsburg Bratislava Almere Augsburg Wroclaw Bregenz

15 Thurgau Bratislava Bratislava Linz Galway Malmo Bratislava Vercelli Thurgau

16 Aargau Wroclaw Wroclaw Bregenz Wroclaw Augsburg Wroclaw Varese Aargau

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Thurgau comparative advantages in relation to European locations with similar size and sectors

Analysis • Equal weighting doesn’t illustrate Thurgau’s advantages. • Ranking results depend on planned business activity. • Subsequent graphics will focus on Thurgau’s competitors (Germany, Austria, Italy, Switzerland).

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Thurgau comparative advantages in relation to bordering countries and Swiss locations

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Analysis •  Thurgau does very well against

bordering competitors. •  Position changes as relative

importance of the location factors change.

•  Thurgau should focus on businesses that match Thurgau’s strength.

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Comparative Advantages Analysis Consolidated results focus on specific cases

  IT start-up   Small to Medium Sized Enterprise HQ

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Comparison of Swiss locations and bordering country’s locations for the selection of IT Start-up: Thurgau #1

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Analysis •  IT Infrastructure, Labor

Flexibility, Labor Availability and Socio-political weighted equally

•  Thurgau outperforms its neighboring regions on the above mentioned factors which makes it an ideal location to attract IT and manufacturing companies.

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Comparison of Swiss locations and bordering country’s locations for the selection of HQ (SME): Thurgau #1

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Analysis •  IT Infrastructure, Labor

Flexibility, Labor Availability Socio-political and Consumer Market Potential weighted equally.

•  Reasonable allocation for HQ location for Small to Medium sized Enterprise.

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Comparative Advantages Analysis Consolidated results by location factors

(Backup)

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Ranking Component: Labour Market Cost

Data Series Used • Market labour cost, ICT sector • GDP per capita, PPP

Analysis • Thurgau’s labour costs are very high in comparison with its main competitors. • Moreover, fierce competition from Eastern low labour cost countries is still a major challenge to be addressed.

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Ranking Component: Labour Productivity

Data Series Used • Labour productivity per person employed

Analysis • Switzerland's labour productivity is on slightly lower than average among the countries in scope. The results are based on average country productivity data.

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Ranking Component: ICT Infrastructure

Data Series Used • Internet users per thousand inhabitants • Internet hosts per thousand inhabitants • Broadband subscriptions per 100 inhabitants

Analysis • Thurgau is in the top three as it comes down to ICT infrastructure • Thurgau scores significantly higher than average on internet users, hosts per thousand inhabitants and broadband subscriptions per 100 inhabitants. • Only the Netherlands and Denmark score more favourable on ICT infrastructure.

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Ranking Component: Education

Data Series Used • Graduates in all programs – tertiary education – total per 1000 inhabitants • Enrolment in tertiary education – all programs – per 1000 inhabitants

Analysis • Switzerland has a slightly lower than average number of university graduates per 1000 inhabitants. • Thurgau performs better in comparison with The Netherlands, Italy, Germany and Austria.

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Ranking Component: Labour Availability

Data Series Used • Labour force per 1000 inhabitants • Unemployment rate

Analysis • Thurgau scores most favorable on labour availability with a very high labour force (per 1000 inhabitants). • Italy, Ireland and Poland score far below average on labour availability.

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Ranking Component: Labour Flexibility

Data Series Used • Difficulty of hiring index • Rigidity of hours index • Difficulty of redundancy index • Redundancy costs

Analysis • Together with Denmark, Switzerland is in the top two of most attractive countries concerning labour law rigidity. • Among the countries in scope, it is least difficult to hire and dismiss employees in Switzerland. The redundancy costs in terms of weeks of salary are lower than average among the countries in scope. • Germany and Sweden score least favorable on the labour market flexibility indicators.

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Ranking Component: Consumer Market Potential

Data Series Used • FDI inflow per capita • GDP per capita • Population

Analysis •  Thurgau and Aalborg are most favorable in terms of market attractiveness; Bratislava and Wroclaw are least favorable. •  From an investor's point of view, Thurgau has the highest FDI inflow per capita and a higher than average purchasing power and population size.

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Ranking Component: Socio-Political

Data Series Used

• Political Stability index • Index of economic freedom • Corruption perception index

Analysis • Switzerland is highly politically stable and corruption perception is low. It is at the top among the researched countries. • Switzerland scores best on the political stability index and the index of economic freedom. Moreover, corruption perception is far better than average among the countries in scope. • Poland and Italy score least favorable on socio-political stability.

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Ranking Component: Cost of Living

Data Series Used • Consumables • Housing • Health services

Analysis •  Thurgau and Aargau score least favourable on the cost of consumables, housing and health services. •  Bratislava and Wroclaw perform best in terms of cost of living. •  Vercelli, Malmo and Augsburg perform on average as it comes down to cost of living.

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Appendices

• GlobalArenaRank™ – Explained

•  Data Sources

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GlobalArenaRank™ Explained

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GlobalArenaRank™ – Explained

•  Location Ranking Charter

Provide a mathematically sound and objective analysis of macroeconomic indicators to support business location decisions.

Provide a dynamic analysis that allows the customer to weight decision criteria. (The requirements for a regional headquarters site are different from those for a shared service center.)

•  Customized Ranking Report Charter

Use GlobalArenaRank™ technology to rank the client location against major competitors.

Develop appropriate decision criteria to show client location in the best way.

(I.e. Identify ideal characteristics for ideal candidate to relocate)

Provide data to identify client location strengths and weaknesses.

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GlobalArenaRank™ – The Process

Challenges •  A common mechanism is needed to compare disparate data sources

Example:

Redundancy costs ($,€,¥,£, etc.)

Population (numbers)

Real GDP Growth (%) . High is ‘good’

Productivity ($/person; $/hour worked – and alternative currencies)

taxation rate (%), Low is ‘good’

•  Common, comparable data sources Research and standard statistical techniques to fill gaps

•  Correlation of multiple fields into a single index Standard statistical techniques

•  Mapping into a comparable index Normal (bell) curve – mapped from 0% - 100%

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GlobalArenaRank™ – Example

Labor Market Flexibility •  Select the locations to be analyzed

•  Choose, standardize validate (correlation analysis) index components Difficulty of hiring index

Rigidity of hours worked index

Difficulty of Redundancy index

Redundancy Cost

•  Adjust data sources so that ‘good’ is always interpreted the same way

•  Perform correlation statistical analysis

•  Map results into Normal Curve, determine Standard deviation

•  Convert results into percentages (mean = 50%) Low percentage corresponds to less than mean

High percentage corresponds to higher than mean

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GlobalArenaRank™ – Partial Result Labor Market Flexibility

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GlobalArenaRank™ – Process sequence

•  Repeat the process Remaining components

Taxation

Labor Market Productivity

Labor Market Cost

Labor Market Flexibility

Socio-economic stability

IT Infrastructure

Quality of Life

Cost of Living

Etc.

  Create Ranking Database (indices, countries)

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GlobalArenaRank™ – Consolidated Result

•  Get Decision Criteria input from client

•  Generate consolidated result

Decision Criteria Weighting

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The Data Sources

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Variable definitions: •  GDP per capita (International monetary fund, 2010)

–  Gross domestic product (GDP) at purchasing power parity (PPP) per capita is a measure for the value of all final goods and services produced within a nation in a given year divided by the average (or mid-year) population for the same year.

•  Average salary for the ICT sector (Economic research institute, 2010)

–  Average salaries are straight-time, gross pay, and exclusive of premium pay. Included are base wage and salary rates, cost-of-living allowances, guaranteed pay, hazardous-duty pay, incentive pay including commissions and production bonuses, and on-call pay. Excluded are back pay, jury duty pay, overtime pay, severance pay, shift differentials, non-production bonuses, and tuition reimbursements.

•  Labour productivity per person employed (Eurostat, 2010)

–  Gross domestic product (GDP) is a measure for the economic activity. It is defined

•  as the value of all goods and services produced less the value of any goods or

•  services used in their creation. GDP per person employed is intended to give an overall impression of the productivity of national economies expressed in relation to the European Union (EU-27) average. If the index of a country is higher than 100, this country's level of GDP per person employed is higher than the EU average and vice versa.

•  Telephones – mobile cellular per thousand inhabitants (CIA Word Factbook, GA calculations, 2009)

–  This figure gives the country’s number of mobile cellular telephone subscribers per thousand inhabitants.

The Data Sources

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•  Internet users per thousand inhabitants (CIA World Factbook, GA calculations, 2009)

–  The number of users within a country, expressed per thousand inhabitants, that access the Internet. Statistics vary from country to country and may include users who access the Internet at least several times a week to those who access it only once within a period of several months.

•  Internet hosts per thousand inhabitants (CIA World Factbook, GA calculations, 2010)

–  This indicator lists the number of Internet hosts available within a country per thousand inhabitants. An Internet host is a computer connected directly to the Internet; normally an Internet Service Provider's (ISP) computer is a host. Internet users may use either a hard-wired terminal, at an institution with a mainframe computer connected directly to the Internet, or may connect remotely by way of a modem via telephone line, cable, or satellite to the Internet Service Provider's host computer. The number of hosts is one indicator of the extent of Internet connectivity.

•  Graduates in tertiary education (United Nations, 2009)

–  The total number of a country’s tertiary education graduates.

•  Students enrolled in tertiary education (United Nations, 2009)

–  The total number of a country’s students enrolled in tertiary education.

•  Labour force (CIA World Factbook, 2009)

–  The country’s total labour force figure.

•  Unemployment rate (CIA World Factbook, 2010)

–  This number contains the percent of the labour force that is without jobs.

The Data Sources

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•  Difficulty of hiring index (the World Bank, 2010)

–  The Difficulty of Hiring index measures (i) whether term contracts can only be used for temporary tasks; (ii) the maximum duration of term contracts; and (iii) the ratio of the mandated minimum wage (or apprentice wage, if available) to the average value-added per working population.

•  Rigidity of hours index. (the World Bank, 2010)

–  The Rigidity of Hours index has five components: (i) whether night work is restricted; (ii) whether weekend work is allowed; (iii) whether the workweek consists of five-and-a-half days or more; (iv) whether the workday can extend to 12 hours or more (including overtime); and (v) whether the annual paid vacation days are 21 days or less.

•  Difficulty of redundancy index (the World Bank, 2010)

–  The difficulty of redundancy index has eight components: (i) whether redundancy is not grounds for dismissal; (ii) whether the employer needs to notify the labour union or the labour ministry for firing one redundant worker; (iii) whether the employer needs to notify the labour union or the labour ministry for group dismissals; (iv) whether the employer needs approval from the labour union or the labour ministry for firing one redundant worker; (v) whether the employer needs approval from the labour union or the labour ministry for group dismissals; (vi) whether the law mandates training or replacement prior to dismissal; (vii) whether priority rules apply for dismissals; and (viii) whether priority rules apply for re-employment.

•  Redundancy costs (the World Bank, 2010)

–  The redundancy costs indicator measures the cost of advance notice requirements, and severance payments and penalties due when firing a worker, expressed in terms of weekly wages.

The Data Sources

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The Data Sources

•  Received FDI per capita (CIA World Factbook, GA calculations, 2009)

–  The level of accumulated foreign investment in a country, expressed per capita. Foreign investment refers to long term participation by country A into country B. It usually involves participation in management, joint venture, transfer of technology and expertise.

•  Political stability index (the World Bank, 2008)

–  This criterion measures the country’s political stability from the following nine dimensions: (1) genocidal incidents involving communal victims or mixed communal and political victims; (2) the occurrence of a civil war; (3) the number of assassinations per thousand population; (4) the number of extraconstitutional or forced changes in the top government elite and/or its effective control of the nation’s power structure; (5) the number of illegal or forced changes in the top government elite, any attempt at such change, or any successful or unsuccessful armed rebellion whose aim is independence from the central government; (6) violent demonstrations or clashes involving more than a hundred citizens involving the use of physical force; (7) the number of major government crises, where a crisis is defined as any rapidly developing situation threatening to bring the downfall of the present regime, excluding instances of revolt aimed at overthrow; (8) the number of times in a year that a new premier is named and/or 50 percent of the cabinet posts are occupied by new ministers; and (9) the number of basic alterations in a state’s constitutional structure, the extreme case being the adoption of a new constitution that significantly alters the prerogatives of the various branches of government.

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The Data Sources

•  Index of economic freedom (the Heritage Foundation, 2010)

–  Economic freedom is defined as the absence of government coercion or constraint on the production, distribution, or consumption of goods and services beyond the extent necessary for citizens to protect and maintain liberty itself. In other words, people are free to work, produce, consume, and invest in the ways they feel are most productive. In order to measure economic freedom, the index is comprised of ten broad categories:

o  Trade policy o  Fiscal burden of the government o  Government intervention in the economy o  Monetary policy o  Capital flows and foreign investment o  Banking and finance o  Wages and prices o  Property rights o  Regulation and o  Informal market activity

•  Corruption perception index (Transparency International, 2010)

–  The corruption perception index measures the country’s degree to which corruption is perceived to exist among public officials and politicians. This criterion focuses on corruption in the public sector and defines corruption as the abuse of public office for private gain. This index incorporates the misuse of public power for private benefits, with a focus, for example, on bribe-taking by public officials in public procurement.

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The Data Sources

•  Cost of living – housing (Economic research institute, 2010)

–  The monthly rent for 2 bedroom 80 sq.mt. flat in US dollars.

•  Cost of living – consumables (Economic research institute, 2010)

–  The price of one Big Mac or equivalent 100 gram meat sandwich (with toppings) in US dollars.

•  Cost of living – health care (Economic research institute, 2010)

–  The cost of an Office Visit with general practitioner for physical exam in US dollars.

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Thurgau Business Development Agency

Zürcherstrasse 183, CH – 8510 Frauenfeld

Your contact person: Ms. Natasa Rosic

natasa.rosic@tg.ch

+41 52 724 26 06

Global Arena AG

Beethovenstrasse 47, CH – 8002 Zürich

Your contact person: Mr. Kris Mattens

Kris.mattens@global-arena.com

+32 (0) 486 14 10 50

7 Contact

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