Economy of Liechtenstein
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Economy - overview:
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 18% - 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 90% 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.
Economy - in greater depth:
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.
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.
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 and Austria. Industrial exports doubled in 10 years from $1.4 billion (SFr. 2.2 billion) in 1990 to $2.9 billion (SFr. 4.6 billion) in 2000. Some 12.7% of Liechtenstein goods are exported to Switzerland, 42.1% to the EU, and 45.2% to the rest of the world. Liechtenstein imports more than 90% of its energy requirements.
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 5% 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 $149 million (233 million francees).
The Principality of Liechtenstein also 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 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 75,000 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.
GDP (PPP): $1.786 billion (2001 est.)
GDP - real growth rate: 11% (1999 est.)
GDP (PPP) - per capita: purchasing power parity - $52,150 (2001 est.)
GDP - composition by sector:
agriculture: N/A
industry: N/A
services: N/A
Population below poverty line: N/A
Household income or consumption by percentage share:
lowest 10%: N/A
highest 10%: N/A
Inflation rate (consumer prices): 1% (2001)
Labor force: 29,000 of whom 19,000 are foreigners; 13,000 commute from Austria, Switzerland, and Germany to work each day (31 December 2001)
Labor force - by occupation: agriculture 1.3%, industry 47.4%, services 51.3% (31 December 2001 est.
Unemployment rate: 1.3% (September 2002)
Budget:
revenues: $424.2 million
expenditures: $414.1 million, including capital expenditures of $NA (1998 est.)
Industries: electronics, metal manufacturing, textiles, ceramics, pharmaceuticals, food products, precision instruments, tourism
Industrial production growth rate: N/A
Electricity - production: 80,857 MWh (2002)
Electricity - production by source:
fossil fuel: 3330 MWh (4.12%)
hydro: 76166 MWh (94.2%)
nuclear: none (0%)
other: 1361 MWh (1.68%)
Electricity - consumption: 318,340 MWh
Electricity - exports: none
Electricity - imports: 237,483 MWh
Agriculture - products: wheat, barley, corn, potatoes; livestock, dairy products
Exports: $2.47 billion (1996)
Exports - commodities: small specialty machinery, dental products, stamps, hardware, pottery
Exports - partners: EU 62.6% (Germany 24.3%, Austria 9.5%, France 8.9%, Italy 6.6%, UK 4.6%), US 18.9%, Switzerland 15.7%
Imports: $917.3 million (1996)
Imports - commodities: agricultural products, raw materials, machinery, metal goods, textiles, foodstuffs, motor vehicles
Imports - partners: EU countries, Switzerland
Debt - external: $0 (1996)
Economic aid - recipient: none
Currency: Swiss franc (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
