Liechtenstein has been a member of the European Economic Area (EEA) for over 20 years and at the same time maintains close ties with Switzerland. This combination forms a model for success which benefits everyone and makes Liechtensteins economy more competitive than ever before.
For some it is one of the main arguments in favour of relocating to or setting up a business in Liechtenstein; for others it forms the basis for a long-term commitment to the Principality as an economic hub. Whichever way you look at it, Liechtensteins close relationship with both the European Economic Area (EEA) and Switzerland opens up unique opportunities for the countrys economy. Thanks to an economic, customs and currency union formed with Switzerland in 1923, Liechtenstein is today part of one of the worlds most stable economic areas. At the same time, it has been a member state of the EEA since 1995 and enjoys access to the European Single Market the largest single market in the world, with 500 million consumers across 31 countries.
Two sets of regulations exist in Liechtenstein. The main advantage for companies based here is that they have access to two economic areas at the same time, explains Andrea Entner-Koch, head of the EEA Coordination Unit in Vaduz. As with Iceland and Norway, both also EEA states, Liechtenstein applies the EU provisions governing the Single Market centred on the four fundamental freedoms: free movement of goods, services, persons and capital.
As an export-orientated country, Liechtenstein with its strong economy benefits from this situation. Large and small companies from both the industry and service sector are able to offer their products to an international clientele. In 2017, 60.9% of Liechtensteins exports were to other EEA countries (not including Switzerland). One of the most prominent exporters based in the Principality is Hilti and its famous red tools. For this global player with headquarters in Schaan, barrier-free access to the European Single Market is of great importance. As Hilti spokesman Matthias Hassler explains, Europe is today still the most important market for the company and accounts for around 50% of turnover. Accession to the EEA has further strengthened Liechtensteins economy and made a significant contribution to growth. Whats more, it provides the conditions for a stable relationship with the EU another positive factor for Liechtensteins economy, Hassler says.
A government survey carried out in 2015 among companies based in the Principality paints a clear picture of the advantages offered by EEA membership. Asked to give their opinion on Liechtensteins participation in the European Economic Area, many business representatives highlighted market access and legal security as two important factors. Furthermore, many believe that EEA membership has a positive influence on the countrys competitiveness and image. The vast majority of companies with fewer than 250 employees and 100% of companies with more than 250 employees see the Principalitys membership of the EEA as positive for doing business in Liechtenstein. One of the most well-known companies in Liechtenstein with more than 250 employees is Hoval. Based in Vaduz, this innovation-driven manufacturer of heating and ventilation technologies has developed since its foundation in the 1930s to become one of the major players in the heating and cooling sector. Head of Finance and Services at Hoval, Richard Senti, emphasises the competitive advantage the EEA gives Liechtenstein over other EU states. Both Switzerland and Europe are hugely important markets for Hoval, he comments. Looking to the future, Senti believes that there is no alternative to the Liechtensteins special business model, which gives firms the option of doing business according to Swiss law or EEA law.
These advantages are just as valid for businesses still at an early stage of development. A good example is the start-up Loviit from Ruggell. Liechtensteins membership of the EEA was one of the main reasons why we decided to set up our company here, explains Aron Veress, Head of Risk and Operations at Loviit. The firm, which provides intelligent payment solutions for online shops, does almost 80% of its business in EEA states and the remaining 20% in Switzerland. As PhD graduates from the University of Liechtenstein, Aron Veress and Loviit founder Marcel Vaschauner are familiar with the business advantages offered by the Principality. EEA membership meant we were able to gain an EU Single Passport, enabling us to operate throughout the EEA, explains Veress.
Liechtensteins membership of the EEA offers all sectors in the Principality the chance to adopt a more diverse and international approach not least the traditionally important financial services sector. It goes without saying that for Liechtensteins largest bank, the LGT Group, the EU member states represent a key market which is accessible thanks to the countrys position as a member of the EEA. The free movement of services enables us to offer approved and recognised financial products throughout the EU, says Markus Werner, a member of the LGT Bank AG management team, who sees Liechtenstein as a bridge between Switzerland and the EU a position which opens up many interesting and exciting opportunities.
Financial experts in Liechtenstein appreciate the Principalitys good relationship with neighbouring Switzerland. Simon Tribelhorn, Director of the Liechtenstein Banking Center, emphasises the opportunities that Liechtensteins membership of the EEA offers to the financial service industry: If you for example look at the current EU Investment Plan, which aims at strengthening and financing growth in Europe, then you see that companies based in Liechtenstein can play a role in this area as well. The flow of information within the EEA and Liechtensteins position as a member state enables it to be part of important EU bodies and, as a result, remain up to date with the latest European developments. Relations between the EU and Liechtenstein are strong, not least as a result of Liechtensteins excellent record when it comes to implementing relevant legislation and playing an active role in the automatic exchange of information.
While it is hard to put an actual figure on the direct consequences of Liechtensteins EEA membership, accession in 1995 undoubtedly gave a boost to the Principalitys economy. Christian Frommelt, research coordinator at the Liechtenstein-Institute and responsible for the company survey on EEA membership, confirms this phenomenon. Liechtensteins economic growth is normally similar to Switzerlands, but in the five years following Liechtensteins admission to the EEA it grew at a disproportionally high rate, Frommelt explains.
Among the most important resources for a strongly growing economy is a well-qualified workforce. With Liechtensteins position as a hub for quality and innovation, local firms are always on the lookout for the best of the best in their field. In total, 37,000 workers are employed in Liechtenstein, most of whom are highly qualified. That is a remarkable figure if you consider that the population of Liechtenstein amounts to roughly 38,000 inhabitants. This is a further reason why the EEA and its provisions on free movement of workers are key to the success of Liechtensteins economy: companies based in the Principality can recruit the best brains from both Europe and Switzerland. The only derogation agreed between Liechtenstein and the EEA concerns the right of residence. According to the Office of Statistics, in 2013 almost 69% of workers in Liechtenstein were non-residents.
The people, businesses and administration in Liechtenstein are all overwhelmingly in favour of Liechtensteins membership of the EEA. A 2015 poll found out that 74% of the countrys residents see this path chosen by Liechtenstein as a model for success. Public support is much smaller in other EEA states, emphasises Frommelt. One of the reasons may be the feeling that Liechtensteins accession to the EEA gave it additional autonomy when it comes to foreign affairs. However, the main reason, states Frommelt, is that the advantages for all parties are clear to see.
By Yvonne von Hunnius