Economy of Liechtenstein
Encyclopedia
Despite its small size and limited natural resources, Liechtenstein
has developed into a prosperous, highly industrialized, free-enterprise economy
with a vital financial service sector and living standards on a par with the urban areas of its large European neighbors.
Low business taxes - the maximum tax rate is 20% - and easy incorporation rules have induced about 73,700 holding
or so-called letter box companies to establish nominal offices in Liechtenstein, providing 30% of state revenues. The country participates in a customs union with Switzerland
and uses the Swiss franc
as its national currency. It imports more than 85% of its energy requirements. Liechtenstein has been a member of the European Economic Area
(an organization serving as a bridge between European Free Trade Association
(EFTA) and EU) since May 1995. The government is working to harmonize its economic policies with those of an integrated Europe
.
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
. Currently there are 21 Swiss boarder guards stationed in Liechtenstein and 20 Austria border guards securing its border (as of 2011
).
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 capitalist 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.
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, Liechtenstein developed from a mainly agricultural state to one of the most highly industrialized countries in the world.
For the last 2 years, the United States
has been the most important export
market for Liechtenstein, totaling $561 million (SFr. 876 million); Germany is second, with $479 million (SFr. 748 million) worth of imports, and Switzerland third, with $375 million (SFr. 587 million). France and Italy were able to maintain their positions, while Austria and the United Kingdom have been overtaken by Taiwan and Japan.
About 32% of the country's revenues are invested in research and development, one of the driving forces of the success of Liechtenstein's economy. Total R&D spending in 2000 rose by 20.7% to approximately $140 million (213 million francees).
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 2009 legislation has strengthened regulatory oversight of illicit funds transfers.
Liechtenstein has chartered 17 banks, three 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 73,000 entities (primarily corporations, institutions, or trusts), party
for non-Liechtenstein residents. About 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.
Agriculture - products:
wheat
, barley
, corn
, potatoes; livestock
, dairy products
Liechtenstein
The Principality of Liechtenstein is a doubly landlocked alpine country in Central Europe, bordered by Switzerland to the west and south and by Austria to the east. Its area is just over , and it has an estimated population of 35,000. Its capital is Vaduz. The biggest town is Schaan...
has developed into a prosperous, highly industrialized, free-enterprise economy
Economic system
An economic system is the combination of the various agencies, entities that provide the economic structure that defines the social community. These agencies are joined by lines of trade and exchange along which goods, money etc. are continuously flowing. An example of such a system for a closed...
with a vital financial service sector and living standards on a par with the urban areas of its large European neighbors.
Low business taxes - the maximum tax rate is 20% - and easy incorporation rules have induced about 73,700 holding
Holding company
A holding company is a company or firm that owns other companies' outstanding stock. It usually refers to a company which does not produce goods or services itself; rather, its purpose is to own shares of other companies. Holding companies allow the reduction of risk for the owners and can allow...
or so-called letter box companies to establish nominal offices in Liechtenstein, providing 30% of state revenues. The country participates in a customs union with Switzerland
Switzerland
Switzerland name of one of the Swiss cantons. ; ; ; or ), in its full name the Swiss Confederation , is a federal republic consisting of 26 cantons, with Bern as the seat of the federal authorities. The country is situated in Western Europe,Or Central Europe depending on the definition....
and uses the Swiss franc
Swiss franc
The franc is the currency and legal tender of Switzerland and Liechtenstein; it is also legal tender in the Italian exclave Campione d'Italia. Although not formally legal tender in the German exclave Büsingen , it is in wide daily use there...
as its national currency. It imports more than 85% of its energy requirements. Liechtenstein has been a member of the European Economic Area
European Economic Area
The European Economic Area was established on 1 January 1994 following an agreement between the member states of the European Free Trade Association and the European Community, later the European Union . Specifically, it allows Iceland, Liechtenstein and Norway to participate in the EU's Internal...
(an organization serving as a bridge between European Free Trade Association
European Free Trade Association
The European Free Trade Association or EFTA is a free trade organisation between four European countries that operates parallel to, and is linked to, the European Union . EFTA was established on 3 May 1960 as a trade bloc-alternative for European states who were either unable to, or chose not to,...
(EFTA) and EU) since May 1995. The government is working to harmonize its economic policies with those of an integrated Europe
European Union
The European Union is an economic and political union of 27 independent member states which are located primarily in Europe. The EU traces its origins from the European Coal and Steel Community and the European Economic Community , formed by six countries in 1958...
.
History
Since the signing of the Customs Treaty in 1916, Liechtenstein and SwitzerlandSwitzerland
Switzerland name of one of the Swiss cantons. ; ; ; or ), in its full name the Swiss Confederation , is a federal republic consisting of 26 cantons, with Bern as the seat of the federal authorities. The country is situated in Western Europe,Or Central Europe depending on the definition....
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
Austria
Austria , officially the Republic of Austria , is a landlocked country of roughly 8.4 million people in Central Europe. It is bordered by the Czech Republic and Germany to the north, Slovakia and Hungary to the east, Slovenia and Italy to the south, and Switzerland and Liechtenstein to the...
. Currently there are 21 Swiss boarder guards stationed in Liechtenstein and 20 Austria border guards securing its border (as of 2011
Law enforcement in Liechtenstein
Law enforcement in Liechtenstein is handled solely by the small National Police of Liechtenstein , consisting of 87 officers and 38 civilian staff, a total of 125 employees who police the 160 km² doubly landlocked alpine country in Western-Central Europe...
).
Liechtenstein is a member of EFTA
EFTA
EFTA may refer to:* European Family Therapy Association, an NGO.* European Fair Trade Association, an association of eleven Fair Trade importers in nine European countries....
, and joined the European Economic Area
European Economic Area
The European Economic Area was established on 1 January 1994 following an agreement between the member states of the European Free Trade Association and the European Community, later the European Union . Specifically, it allows Iceland, Liechtenstein and Norway to participate in the EU's Internal...
(EEA) in 1995 in order to benefit from the EU internal market. The capitalist 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.
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, Liechtenstein developed from a mainly agricultural state to one of the most highly industrialized countries in the world.
Foreign Trade
Besides its efficient industry, there also is a strong services sector. Four out of 10 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, Austria and Germany. Industrial exports more than doubled in 20 years from $1.21 billion (SFr. 2.2 billion) in 1988 to $2.9 billion (SFr. 4.6 billion) in 2008. Some 15.7% of Liechtenstein goods are exported to Switzerland, 62.6% to the EU, and 21.1% to the rest of the world. Liechtenstein imports more than 85% of its energy requirements from the Swiss. While Liechtenstein produces only 15% of its energy requirements.For the last 2 years, the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
has been the most important export
Export
The term export is derived from the conceptual meaning as to ship the goods and services out of the port of a country. The seller of such goods and services is referred to as an "exporter" who is based in the country of export whereas the overseas based buyer is referred to as an "importer"...
market for Liechtenstein, totaling $561 million (SFr. 876 million); Germany is second, with $479 million (SFr. 748 million) worth of imports, and Switzerland third, with $375 million (SFr. 587 million). France and Italy were able to maintain their positions, while Austria and the United Kingdom have been overtaken by Taiwan and Japan.
About 32% of the country's revenues are invested in research and development, one of the driving forces of the success of Liechtenstein's economy. Total R&D spending in 2000 rose by 20.7% to approximately $140 million (213 million francees).
Banking and Finance
The Principality of Liechtenstein also is known as an important financial centre, 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 secrecyBank secrecy
Bank secrecy is a legal principle in some jurisdictions under which banks are not allowed to provide to authorities personal and account information about their customers unless certain conditions apply...
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 2009 legislation has strengthened regulatory oversight of illicit funds transfers.
Liechtenstein has chartered 17 banks, three 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 73,000 entities (primarily corporations, institutions, or trusts), party
for non-Liechtenstein residents. About 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.
Statistics
- GDP (PPP): $5.028 billion (2008)
- GDP - real growth rate: 3.8%% (2008)
- GDP (PPP) - per capita: purchasing power parity - $141,100 (2008)
- Inflation rate (consumer prices): 0.7% (2011)
- Labor force: 35,440 of whom about 10,440 are natives 7,550 are foreigners; 17,450 commute from Austria, Switzerland, and Germany to work each day (2008)
- Labor force - by occupation: griculture: 8%; industry: 41%; services: 51% (31 December 2008)
- Unemployment rate: 1.5% (December 2007)
- Currency: Swiss francSwiss francThe franc is the currency and legal tender of Switzerland and Liechtenstein; it is also legal tender in the Italian exclave Campione d'Italia. Although not formally legal tender in the German exclave Büsingen , it is in wide daily use there...
(CHF) - Exchange rates: Swiss francs per US dollar - 1.3467 (2003), 1.5586 (2002), 1.6876 (2001), 1.6888 (2000), 1.5022 (1999)
- Fiscal year: calendar year
Budget
- revenues: $420.8 million
- expenditures: $420.1 million, including capital expenditures of $NA (2000 est.)
Industries
electronics, metal manufacturing, textiles, ceramics, pharmaceuticals, food products, precision instruments, tourism- Industrial production growth rate: N/A
Electricity
- production by source
- fossil fuel: 3330 MWh (3.12%)
- hydro: 76166 MWh (94.2%)
- nuclear: none (0%)
- solar/wind: 1361 MWh (2.68%)
- Electricity - production: 80,105 MWh (2010)
- Electricity - consumption:about 350,645 MWh (2010)
- Electricity - exports: none
- Electricity - imports: about 270,540 MWh (2010)
Agriculture - products:
wheat
Wheat
Wheat is a cereal grain, originally from the Levant region of the Near East, but now cultivated worldwide. In 2007 world production of wheat was 607 million tons, making it the third most-produced cereal after maize and rice...
, barley
Barley
Barley is a major cereal grain, a member of the grass family. It serves as a major animal fodder, as a base malt for beer and certain distilled beverages, and as a component of various health foods...
, corn
Maize
Maize known in many English-speaking countries as corn or mielie/mealie, is a grain domesticated by indigenous peoples in Mesoamerica in prehistoric times. The leafy stalk produces ears which contain seeds called kernels. Though technically a grain, maize kernels are used in cooking as a vegetable...
, potatoes; livestock
Livestock
Livestock refers to one or more domesticated animals raised in an agricultural setting to produce commodities such as food, fiber and labor. The term "livestock" as used in this article does not include poultry or farmed fish; however the inclusion of these, especially poultry, within the meaning...
, dairy products
Exports
- Commodities: small specialty machinery, dental products, stamps, hardware, pottery
- Partners: EUEuropean UnionThe European Union is an economic and political union of 27 independent member states which are located primarily in Europe. The EU traces its origins from the European Coal and Steel Community and the European Economic Community , formed by six countries in 1958...
62.6%, Others 21.1% GermanyGermanyGermany , officially the Federal Republic of Germany , is a federal parliamentary republic in Europe. The country consists of 16 states while the capital and largest city is Berlin. Germany covers an area of 357,021 km2 and has a largely temperate seasonal climate...
, the US, the UK, FranceFranceThe French Republic , The French Republic , The French Republic , (commonly known as France , is a unitary semi-presidential republic in Western Europe with several overseas territories and islands located on other continents and in the Indian, Pacific, and Atlantic oceans. Metropolitan France...
, ItalyItalyItaly , officially the Italian Republic languages]] under the European Charter for Regional or Minority Languages. In each of these, Italy's official name is as follows:;;;;;;;;), is a unitary parliamentary republic in South-Central Europe. To the north it borders France, Switzerland, Austria and...
, AustriaAustriaAustria , officially the Republic of Austria , is a landlocked country of roughly 8.4 million people in Central Europe. It is bordered by the Czech Republic and Germany to the north, Slovakia and Hungary to the east, Slovenia and Italy to the south, and Switzerland and Liechtenstein to the...
, TaiwanTaiwanTaiwan , also known, especially in the past, as Formosa , is the largest island of the same-named island group of East Asia in the western Pacific Ocean and located off the southeastern coast of mainland China. The island forms over 99% of the current territory of the Republic of China following...
and JapanJapanJapan is an island nation in East Asia. Located in the Pacific Ocean, it lies to the east of the Sea of Japan, China, North Korea, South Korea and Russia, stretching from the Sea of Okhotsk in the north to the East China Sea and Taiwan in the south...
, SwitzerlandSwitzerlandSwitzerland name of one of the Swiss cantons. ; ; ; or ), in its full name the Swiss Confederation , is a federal republic consisting of 26 cantons, with Bern as the seat of the federal authorities. The country is situated in Western Europe,Or Central Europe depending on the definition....
15.7% as of (2008)
Imports
- Commodities: agricultural products, raw materials, machinery, metal goods, textiles, foodstuffs, motor vehicles
- Partners: EU countries, SwitzerlandSwitzerlandSwitzerland name of one of the Swiss cantons. ; ; ; or ), in its full name the Swiss Confederation , is a federal republic consisting of 26 cantons, with Bern as the seat of the federal authorities. The country is situated in Western Europe,Or Central Europe depending on the definition....
, GermanyGermanyGermany , officially the Federal Republic of Germany , is a federal parliamentary republic in Europe. The country consists of 16 states while the capital and largest city is Berlin. Germany covers an area of 357,021 km2 and has a largely temperate seasonal climate...
and the US.