Liechtenstein‘s ongoing economic success

1. Liechtenstein‘s ongoing economic success

2. Liechtenstein‘s ongoing economic success 1. Basic facts 2. Historical background 3. Long lasting economic weakness 4. Economic improvement 5. Ongoing success 6. Conclusion

3. 1. Basic facts • Situated between Switzerland and Austria • 160 km2 • Population about 35,000

4. 1. Basic facts

5. 1. Basic facts

6. 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

7. 1. Basic facts

8. 2. Historical background • Part of the Holy Roman Empire • Since about 500 part of the episcopate of Chur (see map) • Since about 1400 Habsburg territories to the east and Swiss controlled territories to the west

9. 2. Historical background • Part of Roman province Raetia Prima • Part of rhaetic dominions • County of Vaduz established 1342; imperial feod • Counts of Werdenberg; Brandis; Sulz; Hohenems • Economic crisis; „witchhunt“; indebtedness • Vaduz and Schellenberg fall back to Empire

10. 2. Historical background • 1699: Schellenberg bought by Prince Johann Adam I of Liechtenstein • 1712 Vaduz bought as well • 1719 Unification of Vaduz and Schellenberg by Imperial Order under the name „Principality of Liechtenstein“

11. 2. Historical background • The possession of Liechtenstein gave Princes „sovereignty“ and right to sit and vote in Imperial Diet (Reichstag) • Princes kept residence in Vienna and main territories in Austria, Bohemia and Moravia

12. 2. Historical background • 1806: Dissolution of the Holy Roman Empire • Liechtenstein sovereign in modern terms • Part of Rhine-Confederation established by Napoleon • Structure of state (administration, law etc. mostly Austrian)

13. 2. Historical background • 1848: Liberal Revolution with little effect on Liechtenstein • 1865 Constitution: Parliament; princely Governor • 1866: Austro-Prussian war; Austria not part of new Germany; neither Liechtenstein • Neutral during WW I • 1921 New constitution: Liechtenstein Government; constitutional monarchy; Constitutional Court • 1938 Princely Residence moved to Vaduz

14. 3. Long lasting economic weakness • 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

15. 3. Long lasting economic weakness • 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

16. 4. Economic 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“)

17. 4. Economic 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

18. 4. Economic 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)

19. 5. Ongoing success • Financial and political stability in „Switzerland‘s shadow“ • Steep increase in financial business and industrial production • Increase of population and wealth

20. 5. Ongoing 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

21. 5. Ongoing 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)

22. 5. Ongoing 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

23. 5. Ongoing success • Membership • 1975 OSCE • 1978 CoE • 1990 UN • 1991 EFTA • 1992 / 1995: EEA • 1995: WTO

24. 5.Ongoing success:The new Inter-nal Market

25. 6. Conclusion • 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

26. 6. Conclusion • 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

27. 6. Conclusion • Future? • EU-Membership?

28. 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

29. … and do come and see for yourself!