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$Unique_ID{COW02258}
$Pretitle{427}
$Title{Luxembourg
Chapter 1. Economic and social conditions}
$Subtitle{}
$Author{Board of Economic Development}
$Affiliation{Chamber of Commerce}
$Subject{luxembourg
european
market
economic
industrial
labour
per
social
countries
international}
$Date{1990}
$Log{Economic Statistics*0225801.scf
GNP Statistics*0225802.scf
Table 1.*0225801.tab
Table 2.*0225802.tab
Table 3.*0225803.tab
}
Country: Luxembourg
Book: Investment in Luxembourg
Author: Board of Economic Development
Affiliation: Chamber of Commerce
Date: 1990
Chapter 1. Economic and social conditions
[See Economic Statistics: Courtesy Embassy of Luxembourg, Washington DC.]
[See GNP Statistics: Courtesy Embassy of Luxembourg, Washington DC.]
If you are thinking of setting up a production unit or starting a
business in Luxembourg, this booklet will help answer the questions you will
want to ask.
It describes economic and social conditions in the Grand-Duchy and
devotes three of its chapters to detailed information on labour regulations,
the taxation system and the conditions in which you are free and encouraged to
move in, establish your base and begin operations.
It concludes by describing the wide range of Government aids available
to you in launching your new enterprise.
The Grand Duchy of Luxembourg is a good place in which to set up in
business because:
Production costs are competitive thanks to an energetic and highly
qualified labour force whose productivity and co-operativeness are
acknowledged by all industrial leaders
wage bills which tend to be lower than those in Germany, Belgium and the
Netherlands
cheap and adequate supplies of energy and water, and easy access, on
favourable terms, to the national and European money markets.
Favourable economic and social conditions are ensured by a liberal
policy on the right to set up in business and on the transfer of capital and
dividends
an economic and social climate which encourages private enterprise and a
solid tradition of industrial peace and conciliation between employers and
workers
accessible and co-operative government departments and a wide variety of
incentives to private investment and
living conditions which combine the advantages of a European capital with
the attractions of peaceful surroundings and a charming countryside.
Easy access to the European market is provided by a situation at the
heart of the European Communities an extensive network of international
connections by road, rail, air and waterway
a labour force fluent in French and German and often in English and
a key position as a financial and commercial centre where more than one
hundred foreign banks have established a branch.
The Grand Duchy of Luxembourg will help you carry out your investment
plans.
Luxembourg's pleasant surroundings are witnessed by the presence of a
number of European Community institutions, which also have the effect of
making Luxembourg one of the capitals of Europe.
The presence of a major international business community and of a large
foreign population simplifies contacts between people of many countries.
Cultural activities are wide-ranging, entertainment on a scale worthy
of a major european city.
The peaceful environment and delightful countryside attract many tourists
each year.
1.1 Competitiveness of production costs
Labour force
The labour force in Luxembourg is renowned for its efficiency: workers
are highly trained and able to perform complex tasks, and their frequent
participation in continuing education courses means that workers are able to
adapt easily to new production methods. Although unemployment is low there is
no real lack of manpower, mainly because of the policy of continued
immigration and the presence of a large number of frontier workers, and
because of the process of reconversion in the Luxembourg steel industry.
The following table of gross added value per person employed gives an
indication of the productivity of the Luxembourg work force.
[See Table 1.: Productivity of Labour Force]
Productivity = Gross added value at market prices/Active civilian population
The average working week of workers in the industrial sector was 40.5
hours in 1984.
These figures are amongst the highest in the European Community, and are
largely accounted for by the complete absence of stoppages and a very low rate
of absenteeism - less than 5%.
Wages bill
In working out the cost of labour in Luxembourg, account must be taken of
its high productivity and the remarkable absence of labour disputes.
Certainly, Luxembourg is not a country of cheap labour. On the whole, the
wages bill nevertheless compares favourably with other figures reached in
other european countries:
[See Table 2.: Cost per hour of labour]
Prices
The average rise in consumer prices over recent years has been 7.1%
compared with the European Community average of 9.0% for the years 1980-1985.
The inflation rate in Luxembourg compares favourably with those of the
country's main trading partners.
[See Table 3.: Rise in consumer prices]
Consumer prices tend generally to be lower in Luxembourg than in
neighbouring countries in fact Luxembourg has the lowest rates of VAT in the
European Community: 3%, 6% and 12%.
Energy
At the present time, Luxembourg electricity requirements are supplied by
the networks of the three adjacent countries (Germany, France and Belgium).
The present cost of electricity is about Lfrs 2.0 per kWh to the large
consumer.
Large supplies of natural gas have been available from the Netherlands
since 1972 as the result of a 20-year agreement concluded between Distrigaz
(a Belgian company), the Luxembourg Government and the Luxembourg steel
industry. The current cost of natural gas is about Lfrs 1000 per G cal for
the average consumer. Business customers using more than 2 million cubic
metres per year have special prices by the gas company.
Most petroleum products on sale in Luxembourg are imported by Luxembourg
subsidiaries of the international oil companies consequently, their prices
vary with movements on the international market.
Luxembourg has ample reserves of water for domestic and industrial
purposes. The charge for water to an industrial consumer is at present about
Lfrs 15 per cubic meter.
Money market
The Luxembourg money market is very flexible and an investor can without
difficulty obtain a loan from a Luxembourg bank at interest rates below those
applied in neighbouring countries.
As the Luxembourg stock exchange is a major quotation centre for
Euro-issues, Luxembourg provides ready access to the market in
Euro-currencies.
A firm can finance its investment in part through a subsidy from the
State or a credit approved by the Societe Nationale de Credit et d'
Investissement (National Credit and Investment Company) as well as a loan
approved by the European Communities.
1.2. Economic and social background
Under Luxembourg law, citizens of Luxembourg, of the European Community
and of countries which grant reciprocal rights to Luxembourgers are free to
establish a business or industry in the Grand Duchy.
Exchange
As the Luxembourg franc is freely convertible under the
Belgian-Luxembourg Economic Union, an investor can transfer capital and
dividends free from any exchange control. The dual currency exchange market
distinguishes between financial transactions, conducted on the open market,
and commercial transactions, which are regulated by the official market. As
the monetary authorities ensure that the movements of the franc in relation to
the other currencies in the European Monetary System are kept within the
narrowest limits, the dual exchange market enables trading operations to be
carried out more smoothly.
Industrial peace
Luxem