Economic History - From Agricultural Roots to Export-Oriented Manufacturing Sector and a Financial Center
For centuries, Liechtenstein was a relatively isolated country reliant on its small agricultural sector and some textile production to support its economy. However, following World War II, Liechtenstein redefined itself from an almost exclusively agricultural state into a highly modernized, export-oriented industrial society with manufacturing as its leading sector.
Over the past 60 years, many Liechtenstein businesses have grown to become leaders in their respective fields. This was accomplished through very little government support as no economic sectors other than agriculture receive government subsidies in Liechtenstein.
Since 1923, Liechtenstein has also shared economic integration through a customs union with Switzerland. In addition, Liechtenstein's economy has been greatly enhanced by its regional and global integration through memberships to multilateral organizations such as the European Free Trade Associations (EFTA), European Economic Area (EEA), as well as the World Trade Organization (WTO).
Liechtenstein may be known around the world mostly as a financial center, but the largest contributor to Liechtenstein's economy is its manufacturing sector. Industry accounts for 40% of the gross domestic product (GDP).
Despite the small size of the country, Liechtenstein's national economy covers 15 of the 16 international economic classifications (minus the production of energy), more than most other small European countries.
The largest branches in Liechtenstein's strongly export-oriented industrial sector are machine and tool engineering, plant construction, precision instruments, and the dental and food sectors. In all these areas, companies are less interested in manufacturing mass-market and cheap products and have focused more on producing high-tech products of the highest quality.
In the US, Liechtenstein companies provide approximately close to 4000 jobs.
- Did you know that steering components found in Chryslers, Fords and Teslas produced in the US are made by the Liechtenstein company ThyssenKrupp Presta with operations in Terre Haute, IN and Danville, IL?
- Founded in 1941 in Schaan, Liechtenstein, HILTI is a global industry leader in the manufacturing of precision tools. The company’s tools are used commercially and privately throughout the U.S., with its North American headquarters based in Dallas, Texas.
- Ivoclar Vivadent, with operations in Amherst, NY, is one of the top global producers of dental products many of which are used by dentists across America.
- Many of the microphones and audio devices used by the United States Congress, top musicians and businesses consist of components manufactured by the Liechtenstein company Neutrik.
28% of the Liechtenstein economy is in the area of general services. This sector includes tourism, real estate, information technology, cleaning and repair services, and retail to name just a few. Public administration constitutes a special branch within this sector. The largest private employers are services for companies, real estate companies, and information technology companies. They provide about 8% of Liechtenstein's jobs. 8% of Liechtenstein's workforce is employed in retail and repairs. The State, including the National Administration and the municipalities, employs about 14% of the workforce through jobs primarily in education, healthcare, social services and public administration.
Although not the largest economic sector, financial services play an important role in Liechtenstein’s national economy, accounting for 24% of the nation’s GDP. The Liechtenstein financial center is home to:
- 17 banks
- 401 trust companies
- 47 Liechtenstein insurance undertakings
- 27 fund management companies with roughly 360 investment funds
- 163 investment companies
8.8% of persons employed in Liechtenstein are in the financial services sector. The services offered include in particular private asset management, international asset structuring, investment funds, and insurance solutions.
The last 15 years have been a particularly dynamic period for the Liechtenstein financial center. The number of banks increased from 3 to 16, and new fields of business have opened up in the funds and insurance sectors. The accession to the European Economic Area in 1995 acted as a catalyst for a series of fundamental changes and made access to the markets of other countries possible.
However, this fast growth in the 1990's – not only in Liechtenstein, but in the financial services sector worldwide – also increased the risk of abuses. Liechtenstein reacted to this risk with a new Law on Mutual Legal Assistance in Criminal Matters, stricter due diligence provisions, and a massive staff expansion of the supervisory authorities, the National Police, and the courts. These efforts of the State and of the financial service providers in implementing the new provisions were subsequently positively recognized by international organizations such as the International Monetary Fund in Washington, the Financial Action Task Force (FATF) in Paris and the Moneyval committee of the Council of Europe in Strasbourg.
Liechtenstein as a Domestic and Global Job Provider
Did you know that Liechtenstein companies employ more people than its total population of roughly 37,000 and that the vast majority of these jobs are in its manufacturing sector?
Within the borders of Liechtenstein the economy offers 36,680 jobs (2014) with half of the workforce commuting into Liechtenstein daily from Switzerland, Austria and Germany. Globally, Liechtenstein offers over 30,000 jobs with roughly 4000 of these positions in the United States. In total, Liechtenstein companies employ over 60,000 people domestically and globally.
Until the 19th century, Liechtenstein's economy could only support around 8,000 citizens, which led to large waves of emigration primarily to the New World. This trend, however, reversed itself in the 1950s once Liechtenstein's economy began to modernize.
Broken down by sector, General Services employs most people in Liechtenstein at 51.6%, Industry at 38.8%, Financial Services 8.8% and agricultural and households at 0.8%.
Employers in Liechtenstein benefit not only from its central location within Europe, but also from access to highly educated professionals. This combination makes Liechtenstein a strong site for businesses.