Special Address - Role of Small countries in a Globalised World

Venue: Seminar Hall-I
Speaker: Minister Dr. Aurelia Frick, Minister of Justice, Foreign Affairs and Cultural Affairs (Liechtenstein)
Chair: Ms. Smita Purushottam

Dr. Aurelia Frick is one of the current cabinet ministers of the Liechtenstein government that was elected in the March 2009 Parliamentary elections. She currently holds the portfolio of Ministries of Justice, Foreign Affairs and Cultural Affairs. Her presentation at the IDSA was on the role of small countries in a globalised world, by focussing on Liechtenstein as an exemple.

To give a better insight into how small countries add value to the international community, Dr. Frick began with a brief introduction about Liechtenstein. The independent principality of Liechtenstein is located in central Europe and bordered on the east by Austria and on the south, west, and north by Switzerland. Along with Uzbekistan in Central Asia, Liechtenstein is one of the only two doubly landlocked countries in the world (bounded by other land-locked countries only). It is the fourth smallest country in the world, with a total area of only 160 square kilometres, inhabited currently by a population of 36,000. Despite being small in area and population, it has succeeded in political and economic spheres, among others.

Dr. Frick explained as to why Liechtenstein has done well. First of all, she said, Liechtenstein has high political stability and a continuing political system. Despite its move from a complete hereditary constitutional monarchy to a parliamentary system with a constitutional monarch (called the Prince), the transition has been smooth. They have struck a good balance between the constitutional monarchy and the parliamentary system, wherein the Prince acts as a stabilising and mediating factor thus contributing to political stability. The Prince deals with foreign relations and one of the successful efforts was Liechtenstein’s successful entry as a member state of the UN in 1990.

Apart from being only known for stamps, castles, and as a tax haven, Dr. Frick highlighted that Liechtenstein has high culture and a strong industry sector. It has developed a prosperous, highly industrialized free-enterprise economy and boasts a financial service sector as well as a living standard which compares favourably with those of the urban areas of Liechtenstein's large European neighbours. In India itself Liechtenstein industries have created 800 jobs. They provide annually 33,000 jobs within their country, of whom 17,000 are foreigners commuting into Liechtenstein. She drove home the point as to how a small country plays a significant role in the world by stating that a country with 36,000 people provides for 60,000 jobs worldwide.

Dr. Frick emphasised the fact that Liechtenstein industries focus primarily on producing high-tech or niche products. Their success in this field is also due to the fact that industries invest 8 per cent in research and development. Liechtenstein has carved a niche for itself in the world economy as a small-scale producer of precision manufactures like optical lenses, dental products, high-vacuum pumps, heating equipment, electron microscopes, electronic measuring and control devices, steel bolts, knitting machines, and textiles. These industries are all export based. Other important industries are in pharmaceuticals, electronics, ceramics, and metal manufacturing. The largest industrial companies in Liechtenstein are Hilti (construction services), Balzers (electro-optical coatings), Hilcona (frozen foods), and Ivoclar-Vivadent (dental medical technology). Around 48 per cent of the labour force is engaged in industry, trade, and construction. Industry contributes 39 per cent of the GDP, with 42.2 per cent of the total workforce; financial services 31 per cent of GDP with 17 per cent of the total workforce; and general services 23 per cent of GDP with 38.9 per cent of the total workforce.

In terms of being an offshore financial centre, the Liechtenstein Declaration commits to global standards as developed by the OECD and steps up its participation in international efforts to counteract non-compliance with foreign tax laws. During the recent economic crisis, Liechtenstein did not face major problems in its economic performance. For instance, its banks did not need state support. Liechtenstein has very low unemployment, i.e., 2.5 per cent, which rose up to only 3.5 per cent during the recent economic crisis. Here, Dr. Frick said that, free trade agreements came in the way of the catastrophe. So she emphasised the need to have free trade agreements with other states. Liechtenstein has 22 agreements in this respect. Also, as Liechtenstein has a small domestic market, it depends on exports and relies on clients from foreign markets. Therefore it joined EFTA in 1991 and the European Economic Area (EEA) Agreement in 1995 to achieve its economic objectives.

With regard to foreign relations, Dr. Frick stressed that Liechtenstein aims to build good and peaceful relations with other countries, while maintaining its sovereignty. It endeavours to enhance relations with strong and visible partners, like India. In this regard, Liechtenstein (as part of EFTA - European Free Trade Association) had participated in the fifth round of India-EFTA broad based Trade and Investment Agreement ministerial negotiations. It is a member of important international organizations like the UN, OSCE, EFTA, WTO, and ICC. It has always maintained friendly relations with Switzerland. In 1924, the Customs Treaty between Liechtenstein and Switzerland entered into force wherein the Swiss franc was adopted as the official currency as it was considered a strong currency for Lichtenstein’s economy.

On a multi-lateral platform Liechtenstein focuses on core areas. Dr. Frick illustrated this point by saying that Liechtenstein is a strong supporter of the International Criminal Court and thus takes a very active role in the Assembly of States Parties of the ICC. Ambassador Wenaweser served as the Chairman of the Special Working Group on the Crime of Aggression, which was mandated to develop proposals for a definition of the crime of aggression. Thus in this manner, it seeks to and works for small core or niche areas in order to be visible within international platforms. And so in its small way it wants to bring equilibrium to international security.

Ms. Smita Purushottam concluded by commending Dr. Frick’s extremely insightful presentation by explaining how small countries play significant roles in the world through the example of Liechtenstein. She ended on the note that Lichtenstein has indeed created not only a niche in manufacturing industries, but also a niche and important link in world politics.

Report prepared by Joyce Sabina Lobo, Research Assistant, IDSA