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Economy of Liechtenstein

Since the signing of a customs treaty in 1924, Liechtenstein and Switzerland have represented one mutual economic area with open borders between the two countries. Liechtenstein also uses the Swiss franc as its national currency, and Swiss customs officers secure the border with Austria. Liechtenstein is a member of EFTA and joined the European Economic Area (EEA) in 1995 in order to benefit from the European Union (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 in EU projects and subsidies. The Principality of Liechtenstein has gone through dramatic economic and cultural development in the last 40 years. In this short period of time, Liechtenstein developed from a mainly 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. As a result of the global economic crisis, total exports decreased by 27.4% and 0.1% in 2009 and 2008, respectively, compared to an increase of +14.5% in 2007, and imports decreased by 21.8% and 0.8% for 2009 and 2008 compared to an increase of +15.2% in 2007. The export economy is tied to Western Europe. Approximately 60% of all Liechtenstein exports go to Western Europe, followed by North America and East Asia. In 2009, about 61% of Liechtenstein's goods were exported to Western Europe, 14.7% to the Americas, 12.49% to Asia, and the remaining share to the rest of the world. In 2008, the U.S. was one of the most important trading partners for Liechtenstein, with approximately $452 million (SFr. 490 million) worth of exports and $40 million (SFr. 43.3 million) of imports. Germany was first with a total trade value of $1.76 billion (SFr. 1.9 billion). The Liechtenstein industrial sector contributes 39% of the country's GDP, services 54%, and agriculture 6%. Despite Liechtenstein's overall good competitive performance, some large manufacturing companies 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. 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 10 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 33,000 jobs, of which about two-thirds 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 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. In November 2009, the Organization for Economic Cooperation and Development (OECD) recognized Liechtenstein as a jurisdiction that has implemented international cooperation standards in tax matters, and it has removed Liechtenstein from the so-called OECD "grey list". Liechtenstein has chartered 15 banks, 3 non-bank financial companies, and 71 public investment companies, as well as insurance and reinsurance companies. Its 395 licensed fiduciary companies and 112 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 (2009): U.S. $5.0 billion (SFr. 5.5 billion). Annual growth rate (2008): +1.1%. Unemployment (February 2009): 2.7%, or 484 individuals. (Unemployment rate for the year 2008: 2.3%.) Avg. inflation rate (2009): 0.5%. Consumer price index: +3.4% since 2005. Agriculture (2008): 6% of GDP; 1.5% of the total workforce. Products --wheat, barley, corn, potatoes, livestock, dairy products. Industry (2008): 39% of GDP; 42.2% of the total workforce. Types --electronics, metal manufacturing, textiles, ceramics, pharmaceuticals, food products, precision instruments. General services (2008): 23% of GDP; 38.9% of the total workforce. Financial services (2008): 31% of GDP; 17.4% of the total workforce. Workforce: 67.7% of total 33,415-person workforce is filled by foreign commuters (50.6% Swiss, 45.3% Austrians), and 32.3% by Liechtenstein citizens. Trade (2009): Exports--$2.79 billion (SFr 3.08 billion). Main products-- small specialty machinery, dental products, stamps, hardware, pottery. Major markets-- Western Europe (61.72%) Asia (12.49%), North America (12.07%). Imports --$1.73 billion (SFr 1.92 billion). Main products-- machinery, metal goods, textiles, foodstuffs, motor vehicles. Major suppliers-- EU countries, Switzerland. Banking assets: In 2009, customer deposits were valued at $127.2 billion (SFr. 139.9 billion; +3.5% over 1 year, -27.0% over 2 years). Exchange rate (November 2010): $1 U.S. = 0.9833 CHF or SFr.

Geography of Liechtenstein

Location: Central Europe, between Austria and Switzerland Map references: Europe Area: total area: 160 sq km land area: 160 sq km comparative area: about 0.9 times the size of Washington, DC Land boundaries: total 78 km, Austria 37 km, Switzerland 41 km Coastline: 0 km (landlocked) Maritime claims: none; landlocked International disputes: claims 1,600 square kilometers of Czech territory confiscated from its royal family in 1918; the Czech Republic insists that restitution does not go back before February 1948, when the Communists seized power Climate: continental; cold, cloudy winters with frequent snow or rain; cool to moderately warm, cloudy, humid summers Terrain: mostly mountainous (Alps) with Rhine Valley in western third Natural resources: hydroelectric potential Land use: arable land: 25% permanent crops: 0% meadows and pastures: 38% forest and woodland: 19% other: 18% Irrigated land: NA sq km Environment: current issues: NA natural hazards: NA international agreements: party to - Air Pollution, Air Pollution-Nitrogen Oxides, Air Pollution-Sulphur 85, Air Pollution-Volatile Organic Compounds, Climate Change, Endangered Species, Hazardous Wastes, Ozone Layer Protection, Wetlands; signed, but not ratified - Air Pollution-Sulphur 94, Biodiversity, Law of the Sea Note: landlocked; variety of microclimatic variations based on elevation

Government of Liechtenstein

According to the constitution, the government is a collegial body consisting of five ministers, including the prime minister. The prime minister and ministers are appointed by the Prince, following the proposals of the parliament. Amendments to the constitution and new laws have to be adopted by parliament, signed by both the Prince and the prime minister, and published in the Principality's Law Gazette. Prince Hans Adam II is the head of state. He is entitled to exercise his right to state leadership in accordance with the provisions of the constitution and of other laws. On August 15, 2004 Prince Hans Adam II entrusted Hereditary Prince Alois as his representative with the exercise of all sovereign rights pertaining to him, in accordance with the Liechtenstein constitution. He represents the state vis-a-vis foreign states. He signs international treaties either in person or delegates this function to a plenipotentiary. In accordance with international law, some treaties only become valid when they have been ratified by the parliament. The Prince's involvement in legislation includes the right to take initiatives in the form of government bills and the right to veto parliamentary proposals. The Prince has the power to enact princely decrees. Emergency princely decrees are possible when the security and welfare of the country is at stake. A countersignature by the prime minister is required. The Prince has the right to convene and adjourn parliament and, for serious reasons, to adjourn it for 3 months or to dissolve it. The Prince nominates the government, district and high court judges, the judges of the Supreme Court, and the presidents and their deputies of the Constitutional Court and of the Administrative Court of Appeal on the basis of the names put forward by the parliament. The Prince's other authorities include mitigating and commuting punishments that have been imposed with legal force and the abolition--i.e. the dismissal--of investigations that have been initiated. All judgments are issued in the name of the Prince. Citizens elect the parliament directly under a system of proportional representation. Until 1989, 15 members represented the population of the two constituencies (6 for the lowland area and 9 for the highland area). Since 1989 the lowland constituency has been entitled to have 10 members and the highland area 15 members. The duties and working procedures of the parliament are laid down in the constitution and in the parliament's standing orders. The parliament's main task is to discuss and adopt resolutions on constitutional proposals and draft government bills. It has the additional duties of giving its assent to important international treaties, of electing members of the government, judges and board members of the Principality's institutions, setting the annual budget and approving taxes and other public charges, and supervising the administration of the state. The parliament observes its rights and duties in the course of sessions of the whole parliament and through the parliamentary commissions that it elects. All members of parliament exercise their mandates in addition to their normal professions or occupations. The president of parliament and his deputy are both elected at the opening meeting for the current year. The president convenes the individual meetings during the session, leads them, and represents the parliament externally. Parliament meets eight to ten times each year for a duration of 1 to 3 days depending on the agenda. During the parliamentary recess--normally from January to February/March--a "state committee" assumes the parliament's duties, and such a committee must also be elected in the case of any adjournment or dissolution of parliament. A "state committee" consists of the president of parliament and four other members. Under the Liechtenstein constitution, voters can call for a legislative referendum to oppose a parliamentary decision if they succeed in collecting 1,000 signatures. This threshold is increased to 1,500 signatures in cases of constitutional amendments and international treaties. POLITICAL CONDITIONS In the February 8, 2009 parliamentary elections, the Patriotic Union (Vaterlandische Union, VU) won an absolute majority in parliament and thereby a mandate to form the government. With a voter turnout of 84.6%, the VU obtained 47.6% of the vote (9.4% greater than 2005), giving it 13 seats in the 25-member parliament. The Progressive Citizens' Party (FBP) obtained 11 seats in parliament, with 43.5% of the votes (5.2% less than 2005). A third party, the Free List, received 8.9% of the votes (down 4.1% from 2005) and one seat in the parliament. Following the elections, the VU offered to enter into a coalition with the FBP, which had led the government previously in a coalition with the VU. The VU and FBP subsequently agreed to form a coalition government in which the VU holds the prime ministership and two additional cabinet seats, and the FBP holds two cabinet seats, including the deputy prime ministership. On March 25, 2009 Klaus Tschutscher (VU) was confirmed as the new Prime Minister, succeeding Otmar Hasler (FBP). There are 6 women in the 25-seat parliament and 2 in the 5-member cabinet. Women first gained the right to vote in Liechtenstein in 1984 and a growing number of women are active in politics. Women serve on the executive committees of the major parties. According to Prime Minister Klaus Tschutscher, the most important tasks of the government under his leadership would be the revision of the 2009 budget with adjustments for the financial and economic crisis, entry into force of a tax act compatible with European norms, and measures to dampen the recession and to secure jobs. Principal Government Officials Prime Minister (Head of the Government), Government Affairs, Finance, and Family and Equal Opportunity--Klaus Tschütscher Deputy Prime Minister, Economic Affairs, Transport, and Construction and Public Works--Martin Meyer Public Health, Social Affairs, Environmental Affairs, Land Use Planning, Agriculture, and Forestry--Renate Müssner Home Affairs, Education, and Sport--Hugo Quaderer Foreign Affairs, Justice, and Cultural Affairs--Aurelia Frick Ambassador to the U.S.--Claudia Fritsche Permanent Representative to the UN--Christian Wenaweser Liechtenstein maintains an embassy in the United States at 1300 Eye Street, NW, Washington, DC 20005, Telephone (202) 216-0460. Type: Hereditary constitutional monarchy. Independence: 23 January 1719 Imperial Principality of Liechtenstein established; 12 July 1806 established independence from the Holy Roman Empire. Constitution: 5 October 1921. Branches: Executive--chief of state: Prince Hans Adam II (since 13 November 1989, but already assumed executive powers since 26 August 1984); Heir Apparent Prince Alois, son of the monarch, was born on June 11, 1968. Alois was appointed the permanent representative of the Prince on August 15, 2004. Head of government: Otmar Hasler (since 5 April 2001). Cabinet: Five cabinet members. The cabinet is elected by the Diet, and approved by the Prince. Legislative--Unicameral Diet or Landtag (25 seats; members are elected by direct popular vote under proportional representation to serve four-year terms). Judicial--District Court (low), Superior Court (medium), Supreme Court (high). Administrative subdivisions: The country is subdivided into 11 districts. Political parties: Fatherland Union (VU), Progressive Citizens' Party (FBP), and the Free List (FL). Currency: Swiss Franc. National holiday: Assumption Day, 15 August.

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History of Liechtenstein

The Austrian Liechtenstein family acquired the fiefs of Vaduz and Schellenberg in 1699 and 1713 respectively, and they became an independent principality under the Holy Roman Empire in 1719 under the name Liechtenstein. The French under Napoleon occupied the country for a few years, but Liechtenstein regained its independence in 1815 within the new German Confederation. In 1868, after the Confederation dissolved, Liechtenstein disbanded its army of 80 men and declared its permanent neutrality, which was respected during both World Wars. In 1919 Liechtenstein entrusted its external relations to neutral Switzerland. After WWII, Liechtenstein became increasingly important as a financial center, and the country became more prosperous. In 1989, Prince Hans Adam II succeeded his father to the throne, and in 1996, Russia returned the Liechtenstein family's archives, ending a long-running dispute between the two countries. In 1978, Liechtenstein became member of the Council of Europe, and then joined the United Nations in 1990, the European Free Trade Association (EFTA) in 1991, and both the European Economic Area (EEA) and World Trade Organization in 1995.

People of Liechtenstein

Nationality: Noun--Liechtensteiner(s), adjective--Liechtenstein. Population (2009): 35,904, of which 67% are Liechtensteiners, 10.1% are Swiss, 5.7% Austrians, 3.4% Germans, 3.3% Italians, and 9.9% others. Annual population growth rate: 0.9% (or 233 persons). Religions (2000): Roman Catholic 78.4%, Protestant 8.3%, others 13.3%. Languages: German (official), Alemannic dialect.