ECONOMY
Since
the signing of the Customs Treaty in 1924, Liechtenstein and Switzerland
have represented one mutual economic area. Therefore, the borders
between those states are open. The country also uses the Swiss
franc as its national currency, and Swiss customs officers secure
its border with Austria.
Liechtenstein is a member of EFTA and joined the European Economic Area (EEA) in 1995 in order to benefit from the EU internal market. The liberal economy and tax-system make Liechtenstein a safe, trustworthy and success-oriented place for private and business purposes, especially with its highly modern, internationally laid-out infrastructure and nearby connections to the whole world. In 2007, Liechtenstein had an obligation under the EEA treaty to harmonize its laws with EU directives 2005/36 and 1999/42 on the mutual recognition of EU and EEA university and professional diplomas. Liechtenstein is also part of the EU fund on research and technology and is entitled to participate to EU projects and subsidies.
The Principality of Liechtenstein has gone through economic and
cultural development in the last 40 years like no other Western
country. In this short period of time Liechtenstein developed
from mainly an agricultural state to one of the most highly industrialized
countries in the world.
The Principality of Liechtenstein ranks among the strongest industrialized areas of Europe according to a 2008 government economic study. The strong industrial sector focusing on the metal and machine industries, vehicle manufacturing, and the electrical and optical areas were well able to sustain their position in spite of the growing service sector. Approximately 5% of the country's revenue is invested in research and development.
The significance of the industrial sector for the Liechtenstein economy is reflected in foreign trade. The 2007 export surplus was estimated at $36,500 (SFr. 42,000) per capita, thus higher than in neighboring countries. Total exports almost doubled from $3.2 billion (SFr. 3.6 billion) in 2006 (already a 12% increase over 2005) to $6 billion (SFr. 6.9 billion) in 2007.
The export economy is tied to Western Europe. Approximately 61% of all Liechtenstein exports go to Western Europe, followed by North America and East Asia. In 2007, about 11% of Liechtenstein's goods were exported to Switzerland, 47% to the EU, 15% to the Americas, 23% to the Asia/Pacific, and the remaining share to the rest of the world. In 2007, the U.S. was the second most important trading partner for Liechtenstein, with approximately $521 million (SFr. 597 million) worth of exports and $72 million (SFr. 44.3 million) of imports. Germany was first with a total trade value of $1.5 billion (SFr. 1.8 billion).
The Liechtenstein industrial sector contributes 39% of the country's GDP, services 54%, and agriculture 7%. Despite Liechtenstein's overall good competitive performance, there is a trend among businesses to outsource their production to low-cost countries.
In addition to the industrial sector, Liechtenstein has developed a strong services sector, with an important financial center that includes a multitude of related service enterprises. Between 2000 and 2006, the number of enterprises located in Liechtenstein increased from 2,906 to 3,416. This 17.5% increase applies almost exclusively to the service sector. In particular, branches such as real estate, information systems, and other services for enterprises showed a sharp increase, followed by trust companies and legal services. Five out of ten employees now work in the services sector. As a rule, these newly established enterprises tend to be small. The 2008 economic study showed that approximately 99.5% of businesses located in Liechtenstein are mostly small and medium-sized enterprises.
The economy of the Principality of Liechtenstein provides approximately 32,000 jobs, of which slightly more than half are filled by commuters from Switzerland, Austria, and Germany.
The Principality of Liechtenstein is known as an important financial center primarily because it specializes in financial services for foreign entities. The country's low tax rate, loose incorporation and corporate governance rules, and traditions of strict bank secrecy have contributed significantly to the ability of financial intermediaries in Liechtenstein to attract funds from outside the country's borders. The same factors made the country attractive and vulnerable to money launderers, although late-2000 legislation has strengthened regulatory oversight of illicit funds transfers.
Liechtenstein has chartered 15 banks, 3 non-bank financial companies, and 71 public investment companies, as well as insurance and reinsurance companies. Its 270 licensed fiduciary companies and 81 lawyers serve as nominees for, or manage, more than 75,000 entities (primarily corporations, institutions, or trusts), mostly for non-Liechtenstein residents. Approximately one-third of these entities hold the controlling interest in other entities, chartered in countries other than Liechtenstein. The Principality's laws permit the corporations it charters to issue bearer shares. Until recently, the Principality's banking laws permitted banks to issue numbered accounts, but new regulations require strict know-your-customer practices for all accounts.
GDP (2005): U.S. $3.6 billion (SFr. 4.55 billion).
Annual growth rate: 2.6%.
Unemployment (Nov. 2008): 2.3%, or 405 individuals.
Avg. inflation rate (2008): 0.7%.
Consumer price index: +3.4% since 2005.
Agriculture (7% of GDP; 1.9% of the total workforce): Wheat, barley, corn, potatoes, livestock, dairy products.
Industry (39% of GDP; 43.5% of the total workforce): Electronics, metal manufacturing, textiles, ceramics, pharmaceuticals, food products, precision instruments.
General services (25% of GDP; 38.6% of the total workforce).
Financial services (29% of GDP; 16% of the total workforce).
Workforce: 50.1% of total 32,000-person workforce is filled by foreign commuters (49% Swiss, 46.7% Austrians), and 32.5% by Liechtenstein citizens.
Trade (2007): Exports--$3.48 billion (SFr 4.18 billion, +16% over 2006). Main products--small specialty machinery, dental products, stamps, hardware, pottery. Major markets--Americas (16%), Switzerland (11%), EU-EEA (47%), Asia (23%). Imports--$2 billion (SFr 2.41 billion, +13.3% over 2005). Main products--machinery, metal goods, textiles, foodstuffs, motor vehicles. Major suppliers--EU countries, Switzerland.
Banking assets: In 2007, customer deposits were valued at $142.8 billion (SFr. 171.4 billion, +6.5% over one year).
Exchange rate (December 2008): Swiss francs per U.S. dollar = 1.2.
