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.
Besides its efficient industry, Liechtenstein also has a strong services sector. Four out of ten employees work in the services sector, a relatively high proportion of whom are foreigners, including those who commute across the border from the neighboring states of Switzerland and Austria. Total exports increased from $3 billion (SFr. 3 billion) in 2000 to $3.6 billion (SFr. 3.6 billion) in 2006, while total imports increased from $1.5 billion (SFr. 1.5 billion) to $2.16 billion (SFr. 2.16 billion) during the same period. In 2005, about 14% of Liechtenstein's goods were exported to Switzerland, 44% to the EU, 18% to the U.S., 24% to the Asia/Pacific, and the remaining share to the rest of the world. Liechtenstein imports more than 90% of its energy requirements. The Liechtenstein industrial sector contributes 44% of the country's GDP, followed by services (26%) and agriculture (7%). Despite Liechtenstein's overall good competitive performance, there is a trend among businesses to outsource their production in low cost countries.
In 2005, the U.S. was the third most important trading partner for Liechtenstein, with approximately $521 million (SFr. 521 million) worth of exports and $72 million (SFr. 72 million) of imports. Germany was first with a total trade value of $2.1 billion (SFr. 2.1 billion) and Austria second with $1.4 billion (SFr. 1.4 billion). Although Switzerland is an important trading partner, trade statistics are unavailable because both countries are in a customs union. Approximately 5% of the country's revenue is invested in research and development, one of the driving forces of the success of Liechtenstein's economy. The Principality of Liechtenstein is also 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 17 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 (2004): U.S. $4.28 billion (SFr. 4.28 billion).
Annual growth rate: 2.6%.
Unemployment (2006): 3.3%, or 584 individuals (based on new definition).
Avg. inflation rate (2006): 1.1%.
Agriculture (7% of GDP): Wheat, barley, corn, potatoes, livestock, dairy products.
Industry (44% of GDP): Electronics, metal manufacturing, textiles, ceramics, pharmaceuticals, food products, precision instruments.
Services (26% of GDP): Financial, tourism.
Trade (2006): Exports--$3.6 billion (SFr 3.6 billion, +11.7% over 2005). Main products--small specialty machinery, dental products, stamps, hardware, pottery. Major markets--U.S., Germany, Switzerland, France, Italy, Taiwan, Japan, Austria, and United Kingdom. Imports--$2.16 billion (SFr 2.16 billion, +13.3% over 2005). Main products--machinery, metal goods, textiles, foodstuffs, motor vehicles. Major suppliers--EU countries, Switzerland.
Exchange rate (April 2008): Swiss francs per U.S. dollar = 1.0.
