Liechtenstein‘s ongoing Liechtenstein‘s ongoing economic successeconomic success

Liechtenstein‘s ongoing economic Liechtenstein‘s ongoing economic successsuccess

1.Basic facts

2. Historical background

3.Long lasting economic weakness

4.Economic improvement

5.Ongoing success

6.Conclusion

1.1. Basic factsBasic facts

• Situated between Switzerland and Austria

• 160 km2

• Population about 35,000

1. Basic facts

1.1. Basic factsBasic facts

1. Basic facts

• Highly developped industry needs markets, e.g.:

• Hilcona: leading in fresh convenience food

• HILTI leading in building technology

• Unaxis Balzers AG leading in information and vacuumtechnology

• Thyssen Krupp Presta leading in the production of steering systems and camshafts

• Ivoclar Vivadent worldwide third largest producer of artificial teeth and respective technology

1. Basic facts

General Services27%

Industry42%

Agriculture7%

FinancialServices

24%

2.2. Historical backgroundHistorical background

• Part of the Holy Part of the Holy Roman EmpireRoman Empire

• Since about 500 part Since about 500 part of the episcopate of of the episcopate of Chur (see map)Chur (see map)

• Since about 1400 Since about 1400 Habsburg territories Habsburg territories to the east and Swiss to the east and Swiss controlled territories controlled territories to the westto the west

2.2. Historical backgroundHistorical background• Part of Roman province Part of Roman province

Raetia PrimaRaetia Prima• Part of rhaetic Part of rhaetic

dominionsdominions• County of Vaduz County of Vaduz

established 1342; established 1342; imperial feod imperial feod

• Counts of Werdenberg; Counts of Werdenberg; Brandis; Sulz; Brandis; Sulz; HohenemsHohenems

• Economic crisis; Economic crisis; „witchhunt“; „witchhunt“; indebtednessindebtedness

• Vaduz and Schellenberg Vaduz and Schellenberg fall back to Empirefall back to Empire

2.2. Historical backgroundHistorical background

• 1699: Schellenberg 1699: Schellenberg bought by Prince bought by Prince Johann Adam I of Johann Adam I of LiechtensteinLiechtenstein

• 1712 Vaduz bought 1712 Vaduz bought as wellas well

• 1719 Unification of 1719 Unification of Vaduz and Vaduz and Schellenberg by Schellenberg by Imperial Order Imperial Order under the name under the name „Principality of „Principality of Liechtenstein“Liechtenstein“

2.2. Historical backgroundHistorical background

• The possession of The possession of Liechtenstein gave Liechtenstein gave Princes „sovereignty“ Princes „sovereignty“ and right to sit and and right to sit and vote in Imperial Diet vote in Imperial Diet (Reichstag)(Reichstag)

• Princes kept Princes kept residence in Vienna residence in Vienna and main territories and main territories in Austria, Bohemia in Austria, Bohemia and Moravia and Moravia

2.2. Historical backgroundHistorical background

• 1806: Dissolution of the 1806: Dissolution of the Holy Roman EmpireHoly Roman Empire

• Liechtenstein sovereign Liechtenstein sovereign in modern termsin modern terms

• Part of Rhine-Part of Rhine-Confederation Confederation established by Napoleonestablished by Napoleon

• Structure of state Structure of state (administration, law etc. (administration, law etc. mostly Austrian)mostly Austrian)

2.2. Historical backgroundHistorical background

• 1848: Liberal Revolution with little effect on 1848: Liberal Revolution with little effect on LiechtensteinLiechtenstein

• 1865 Constitution: Parliament; princely 1865 Constitution: Parliament; princely GovernorGovernor

• 1866: Austro-Prussian war; Austria not part 1866: Austro-Prussian war; Austria not part of new Germany; neither Liechtensteinof new Germany; neither Liechtenstein

• Neutral during WW INeutral during WW I• 1921 New constitution: Liechtenstein 1921 New constitution: Liechtenstein

Government; constitutional monarchy; Government; constitutional monarchy; Constitutional CourtConstitutional Court

• 1938 Princely Residence moved to Vaduz1938 Princely Residence moved to Vaduz

3.3. Long lasting economic Long lasting economic weaknessweakness

• Equal situation as in most rural societies of the time;

• Important emigration (mainly to the U.S.)

• „Pre-napoleonic“ situation extended way into 19th century

• No presence of governmental power in Liechtenstein: lack of economic interest

• Economic improvement mid-19th century

3.3. Long lasting economic Long lasting economic weaknessweakness

• Frequent natural catastrophies as floods of the Rhine and avalanches

• No urban society• Society not exposed to

„modern“ ideas or changes, e.g. protestantism

• No development of commercial position or early industry

4.4. Economic improvementEconomic improvement

• Customs Treaty with Austria• Treaty on Residence with Switzerland• Access to Austro-Hungarian market• Attraction of Swiss textile industry to

produce for Austro-Hungarian market• Modest wealth of population• First commercial enterprises• 1861: State Bank („Landesbank“)

4.4. Economic improvementEconomic improvement• Foundations for improvement laid:

– Since 1919: de facto use of Swiss currency

– 1921: New Constitution– 1923: Customs Treaty with Switzerland;

postal Treaty; new Tax Law; CHF legal tender

– 1926: New Persons- and Companies Act

• First private banks and trust companies

• Partly Swiss law introduced

4.4. Economic improvementEconomic improvement

• First genuine Liechtenstein Enterprises: mechanical industry; increased production during WW II

• Difficulties– 1927: Political crisis– 1929: Economic crisis– 1938: Threat of being annexed by Germany– 1939: Outbreak of WW II (Liechtenstein

neutral)

5.5. Ongoing successOngoing success

• Financial and political stability in „Switzerland‘s shadow“

• Steep increase in financial business and industrial production

• Increase of population and wealth

5.5. Ongoing successOngoing success

• Industrial production and financial services producing for Swiss market and beyond through Customs Treaty and inclusion into Swiss Free Trade Agreements

• Liechtenstein (Vaduz) gradually becoming regional center

5.5. Ongoing successOngoing success

• Increased need for foreign work force (29000 work places)

• Cross border workers increasing to 13000 daily

• People commuting from Switzerland, Austria and Germany

• EuRegio „Bodensee“ (Lake of Constance)

5.5. Ongoing successOngoing success

• Increased economic success and rise of wealth calls for international cooperation

• Industry in need of free access to larger market

• 1981: Treaty with Switzerland on use of Swiss Currency

5.5. Ongoing successOngoing success

• Membership– 1975 OSCE– 1978 CoE– 1990 UN– 1991 EFTA– 1992 / 1995: EEA– 1995: WTO

5.Ongoing success:

The new Inter-nal Market

6.6. ConclusionConclusion

• Internal factors for economic success:– Geographic situation– Political power interested in economic

success– Political stability and direct democracy– Lean and efficient structure of state and

administration– Financial stability (strong currency)– Liberal tax system and nearly no subsidies– Reliable legal system

6.6. ConclusionConclusion

• External factors:– Size of territory lost relevance– Sovereignty seen less absolute– Membership in international organisations– Partly delegation of sovereignty: European

integration– Free access to large market– Attraction as regional economic stronghold– Availability of workforce

6.6. ConclusionConclusion

• Future?

• EU-Membership?

Thank you!

Georges Baur

Deputy Head of Mission

Mission of Liechtenstein to the EU

1, place du Congrès

BE-1000 Brussels

+32 2 229 39 00

georges.baur@bru.rep.llv.li

www.liechtenstein.li

… and do come and see for yourself!