MONACO

Principality of Monaco

Principauté de Monaco

COUNTRY OVERVIEW

LOCATION AND SIZE.

Monaco, a small independent hereditary principality in Western Europe, is located on the Mediterranean Sea along the southern coast of France, which is also known as the French Riviera or Côte d'Azur. Monaco is 18 kilometers (11 miles) east of the French city of Nice, near the border with Italy. The second smallest independent state in the world (after Vatican City), and almost entirely urban, it forms an enclave in southeastern France, surrounded on the north, east, and west by the French département (administrative division, or region) of Alpes-Maritimes. The country is only 1.95 square kilometers (0.75 square miles) in area, or about 3 times the size of the Mall in Washington, D.C. The terrain is hilly, rugged, and rocky, but very highly urbanized. The principality, a famous maritime resort, is composed of 4 quartiers (quarters): Monaco-Ville, the capital (an ancient fortified town located on a rocky promontory extending into the Mediterranean); La Condamine (the section along the port); Monte Carlo (the principal residential and resort area); and Fontvieille (a newly constructed industrial park reclaimed from the sea). The name "Monaco," derived from the ancient Greek Monoikos (meaning "of the old town"), is usually associated with the mythical hero, Hercules.

POPULATION.

The population of Monaco was estimated at 31,693 in July 2000, with an average growth rate of 0.48 percent in the same year. The 2000 birth rate was estimated at 9.94 births per 1,000 population, the death rate at 13.06 deaths per 1,000 population, and the net migration rate was approximately 7.89 immigrants per 1,000 population.

With high life expectancy at birth, the Monegasque population is among the oldest populations in the world. The average life expectancy was 74.88 for men and 83 for women in 2000, indicating an overall life expectancy of 78.84. The total fertility rate in 2000 was 1.76 children born per woman. Approximately 15 percent of the population is younger than 15 years of age and 23 percent is age 65 or older. Monaco has also one of the highest population densities in the world, at 16,428 persons per square kilometer (42,549 per square mile).

Monegasques represented a mere 16 percent of the population in 2000. Other ethnic groups include the French (47 percent), Italian (16 percent), and other nationalities (21 percent). French is the official language; English, Italian, and Monegasque (a blend of French and Italian) are also widely spoken. The traditional Monegasque language is used by the older people and is taught in the schools. The economy of Monaco offers more than 30,000 jobs. Immigrant labor, especially from France and Italy, is heavily relied upon because the number of jobs available outnumbers the number of citizens in the labor force . Many affluent Americans, as well as French, Britons, Swiss, Belgians, and other Europeans, live in the principality. The prevailing religion is Roman Catholicism, accounting for 95 percent of the population. Roman Catholicism also is the official religion, though freedom of religion is guaranteed by the constitution. Education is free and compulsory for children ages 6 to 16.

OVERVIEW OF ECONOMY

Renowned as a tax haven for the rich, Monaco is thought to have one of the most affluent and liberal economies in the world, though the government does not publish economic figures or other relevant statistics. A tiny territory with few natural resources—in some places stretching no more than 180 meters (600 feet) inland from the Mediterranean—the Monegasque economy is primarily geared toward tourism, modern manufacturing, finance, and commerce. From the end of the 19th century, the government of Monaco has very actively encouraged economic growth and provided the framework for the development of private enterprise. It has successfully sought to diversify into services and small, high value-added , nonpolluting industries.

Low corporate taxes (and no personal income or other direct taxes ) have drawn many foreign "letter box" companies, which operate overseas but have established their head offices nominally in Monaco because of the more favorable tax treatment. These types of companies account for about 50 percent of the $586 million annual government revenue in 1997. The residential real estate market also provides some considerable income for the principality; many wealthy aliens are actively pursuing Monegasque permanent residence and/or citizenship for tax purposes and are in constant need of local property for that matter. Similarly, tourism accounts for close to 25 percent of the principality's annual income, and Monaco has been a major tourist center ever since its famed gambling casino was established in 1856. The tourist industry is still considered the economic foundation of the state. The sale of picturesque postage stamps and tobacco, the banking and insurance sectors, and the manufacture of pharmaceuticals, chemicals, electronic equipment, cosmetics, paper, textiles, and plastic goods are also of economic importance. Customs, postal services, telecommunications, and banking in Monaco are governed by the economic, monetary, and customs union with France and European Union (EU) rules. Although not an EU member, Monaco is closely associated with the economic structures of the EU. Some 1999 estimates placed the per capita gross domestic product (GDP) at about US$27,000, one of the highest in the world. The total turnover of the principality rose from the estimated 3.25 billion French francs in 1975 to 21.3 billion in 1988, 25.4 billion in 1989, 29 billion in 1990, 31 billion in 1991, 32.4 billion in 1992, and 33.2 billion in 1993.

POLITICS, GOVERNMENT, AND TAXATION

Monaco has been governed as a constitutional monarchy since 1911, with the hereditary prince (presently, Prince Rainier III) as the head of state. Unlike other European monarchies, the Monegasque sovereign is the actual, and not symbolic, head of state. In the constitution of 1962, it is clearly stated that the executive power is responsible to the supreme authority of the reigning prince. The succession to the throne passes to the direct descendants of the prince under the principle of primogeniture (inheritance of the first born), with male descendants taking precedence over female descendants of the same degree of kin. The sovereign represents Monaco in its relations with foreign powers and signs and ratifies treaties. In 1956, Rainier III married American film star Grace Kelly, who died in a car crash in 1982. They have 2 daughters and a son, who is the heir apparent to the throne.

The executive branch consists of a minister of state (head of government, presently Michel Leveque), who presides over a 4-member cabinet, the Council of Government. The minister is primarily responsible for foreign relations and is traditionally a French citizen appointed by the prince for a 3-year term from among several candidates proposed by the French government. As the prince's representative, the minister also directs the executive services, commands the police, and presides (with voting powers) over the Council of Government. The 3 other members of the Council are locals, responsible for financial and economic affairs, internal affairs, and public works and social affairs, respectively.

Monaco is a parliamentary monarchy ruled according to its 1962 constitution, which stipulates that the hereditary prince shares his power with the unicameral National Council. There are 18 members of this legislative body, elected by universal suffrage (by citizens over age 21) for 5-year terms. They usually meet twice annually to vote on the budget and endorse laws proposed by the prince. If the prince dissolves the National Council, new elections must be held within 3 months. Ordinances passed by the National Council are debated in the Council of Government, as are the ministerial decrees signed by the Minister of State. Once approved by the Council, the ordinances are submitted to the prince within 80 days for his approval. Once approved, the ordinances become legally valid. If no opposition is voiced on his behalf within 10 days of receipt, they become enforceable.

Legal power is also vested in the monarch, who delegates all legal procedures to the courts dispensing justice in his name. The independence of the judges, however, is guaranteed by the 1962 constitution. Monaco's legal system is closely related to the French system and is designed after the French Napoleonic Code. Local affairs—the administration of the 4 quarters—are directed by the Communal Council, which consists of 15 elected members and is presided over by a mayor. Monaco has its own local political groups that are not a part of the French political system and include the National and Democratic Union (UND), the Campora List, and the Medecin List.

The most crucial political issue in Monaco is, understandably, its bilateral relation with France. The geographical situation of Monaco as an enclave within France justifies the traditional customs and monetary union between the 2 countries, which dates back to 1861. Two major treaties in 1918 and 1919 established a reciprocal contractual basis for the relations between the 2 independent states (France recognized Monaco as a sovereign entity and undertook to build its relations on an equal footing with a limited protection over the principality). Under these arrangements, France is obligated to defend the independence and sovereignty of the principality and the integrity of Monegasque territory. In return, the government of Monaco is obligated to exercise its rights only in conformity with French interests. New bilateral agreements were signed in 1945, 1951, and 1963 with the aim of amending the earlier provisions in order to adapt them to the new economic and social conditions. Further changes and amendments arose from the development of European integration and the decision made by France in 1999 to adopt the single European currency, the euro.

Although small in size, Monaco actively participates in the United Nations (UN), which it joined in 1993, and maintains a permanent mission to the UN in New York. Monaco also is a member of many other international and intergovernmental organizations. The International Hydrographic Bureau (IHB) is headquartered in the principality. The country has 10 diplomatic missions in Europe and maintains honorary consulates in 106 cities in 45 countries. Sixty-one countries have consulates general, consulates, or honorary consulates in or accredited to Monaco.

The government's role in the economy has been traditionally one of active promotion of private enterprise and creating the necessary infrastructure for development. The state and the ruling Grimaldi family personally own considerable real estate assets and equity in the economy. Monaco's tax policies concerning its citizens are among the most liberal ones in the world, as there is no direct taxation for local residents. In 1869, land tax, personal and goods taxes, and the business tax were abolished. Since that time, Monegasque citizens or foreigners residing in the principality have not been subject to any tax on their personal income, whatever its origin. For French citizens moving to the principality after 1962, an exception was introduced in 1963 under pressure from the French government. Under the new arrangement, French nationals who moved their residence to Monaco, or who could not prove 5 years of residence in Monaco before October 1962, were subject to French taxes under the same conditions as if they had their residence in France. Since 1963, companies of any type are required to pay a corporate tax rate of 33.33 percent on profits when at least 25 percent of their turnover comes from operations outside Monegasque territory. A value-added tax (VAT) of 5.5 percent and a real estate added value tax of 20.6 percent were also introduced, along with some special arrangements concerning banking and financial activities and indirect taxes .

INFRASTRUCTURE, POWER, AND COMMUNICATIONS

Monaco, as a small, highly urbanized enclave in the French territory, is part of the well-developed French infrastructure. Electricity is provided almost entirely by France. There are 1.7 kilometers (1.1 miles) of railroads

and 50 kilometers (31 miles) of paved roads, including the highway and railroad connecting southern France with Italy along the Mediterranean. There are 2 ports, including a busy merchant harbor and several tourist marinas, although the principality has no merchant fleet of its own. There is also a helicopter shuttle line between the heliport at Fontvieille and the nearby international airport in Nice, France. Telecommunications are incorporated within the French telephone system, and there were 9 radio stations and 5 television stations in 1997, while 4 Internet service providers were offering customers their services in 1999. The access to cellular phones and to the Internet was similar in numbers and quality of service to that of French urban areas. The cable television services were comparable to the highest western European standards.

ECONOMIC SECTORS

The backbone of the Monegasque economy is formed by high-end tourism and the services related to it, construction and the real estate market, small-scale industrial and consumer products manufacturing (chemicals, food products, plastics, precision instruments, cosmetics, and ceramics), and international trade. Of the 32,691 employed, as estimated in 1999, the private sector was responsible for 29,311 and the public sector for 3,380. Approximately 46 percent of the labor force was in services (other than tourism), 7 percent in banking, 17 percent in tourism and hotels, 12 percent in retail , 7 percent in construction and public works, and 11 percent in industry. No official data as to the distribution of GDP were available.

AGRICULTURE

There are no arable lands or other agriculturally suited areas in the principality; virtually 100 percent of the Monaco territory is heavily urbanized. Accordingly, there is no commercial agriculture in the country. All foods are imported and some of them are further processed and exported.

INDUSTRY

Industrial activity, often little known in Monaco, is an area that has undergone considerable development over the past century. From 1906, when the state financed the construction of the first industrial platform in Fontvieille, industrial firms such as the Monaco Brewery and companies involved in flour milling and the manufacture of chocolate began to develop. Currently, the chemical-pharmaceutical-cosmetics manufacturing sector appears to be the most widespread, but companies working in the areas of plastic materials processing and the manufacture of electrical and electronic equipment are also present. Other sectors, while not on the same scale as these, are the manufactures of mechanical engineering, packaging, printing, and clothing. Since 1980, nearly 1,859 square meters (20,000 square feet) of new industrial floor-space has been built, mostly on areas reclaimed from the sea. The lack of space has led to the establishment of industrial premises in buildings that rise up to 13 floors. The government of the principality has adopted an industrial policy that operates in favor of the institution of enterprises having a high capital gain factor but that do not create any pollution. Industrial activity occupies about 4,000 members of the workforce. In 1993, they represented approximately 11.6 percent (excluding the construction and public works industry) of the total revenue in the principality.

SERVICES

The service sector has undergone spectacular growth in recent decades. It produced 49.1 percent of the total revenue of the country in 1993 and included banking, insurance, consulting agencies (technical, commercial, and financial), auxiliary services, and commercial middlemen. Banking and financial activities and business services, including those associated with the establishment of head offices and offices of non-financial companies of international size, are growing in importance in Monaco. The retail sector includes small, privately held stores, luxury boutiques, and international retail chains. Retail contributed approximately 21 percent to the principality's total revenue in 1993. The banking and retail sectors are closely integrated with the French economy through the monetary union between the 2 countries and the local branches of large French and international banks, insurance firms, and stock markets. Despite the increased competition resulting from the liberalization of financial services in the EU, the introduction of the single currency, and the revolution in information technology, the economic relationship between France and Monaco remains strong. Real estate activity plays a very important role in the economy, justifying the principality's extensive research and decision-making process in the field of city planning.

TOURISM.

Monaco is a popular world luxury resort, attracting affluent tourists to its casino, rich cultural schedule, and pleasant climate. Situated in the heart of the Riviera—the narrow coastal strip extending along the Mediterranean from Hyeres, France, to La Spezia, Italy— it benefits from the proximity of the renowned French resorts of Saint Tropez, Antibes, Cannes, Nice, and Menton. The latter 2 cities are connected by 3 scenic highways, which run through or near the Monaco territory and its chief tourist quarter of Monte Carlo along the sheer cliffs of the Maritime Alps. Both private and business tourism are thriving in the principality, and there are about 2,500 hotel rooms, most of which are in the 4-star category or higher. In 1993, 601,111 rooms were occupied overnight, resulting in an average annual occupation rate of 48.3 percent. For several years, the government has been making considerable efforts to attract more business tourists in order to increase hotel occupation, since occupation by the private clientele is essentially seasonal. Among the points of interest in Monaco are a cathedral, a palace in the medieval and Renaissance styles, and a world-renowned oceanographic museum established in 1910. A major source of revenue is the famous gambling casino. The Monte Carlo Opera and Philharmonic Orchestra offer ballet and music events, and the museums, spas, beaches, flower gardens, marinas, fine dining spots, luxury boutiques, and vistas all contribute to the attractions of the principality. The Monaco Grand Prix and the Rally Monte Carlo are popular annual automobile-racing events. The Societe des Bains de Mer, a company partly owned by the government, operates the casino and most of the hotels, clubs, beaches, and other places of entertainment. There are also notable foreign direct investments in the Monaco tourist industry.

INTERNATIONAL TRADE

Monaco is a hub of international commerce, importing and exporting products and services from all over the world. It is in full customs integration with France, which collects and rebates Monegasque trade duties . Monaco participates in the EU market system through France. No recent trade statistics for the principality have been made available.

MONEY

As an integral part of the French monetary and banking system, the country has a balanced budget with revenues of US$518 million and expenditures of US$531 million, including capital expenditures (1995 est.).

Recent exchange rates for the euro per US$1 are 1.1 (February 2001), 1.20 (November 2000), 0.99 (January 2000), and 0.94 (1999). French francs (F) were exchanged at a rate of F7.22 (August 1999), 6.16 (1999 average), 5.65 (January 1999), 5.8995 (1998), 5.8367 (1997), 5.1155 (1996), and 4.9915 (1995) per US$1.

POVERTY AND WEALTH

Living standards in Monaco are high, comparable to those in the most prosperous French urban areas. Since one of the principality's priorities is to attract wealthy individuals from all over the world to acquire real estate and live and spend in the country, the government constantly uses its economic advantages to improve the quality of life and to combine work and leisure. Indeed, many of the world's rich buy property in Monaco to take advantage of Monaco's tax regime, although they seldom abide by the legal requirement to live 6 months of every year in the country, and often hire locals to maintain their

property instead. There are many large local private fortunes in the principality as well and extreme poverty is virtually non-existent. The number of jobs in the country (32,691 in 1999; 29,311 in the private sector) outnumbers its total population (31,693 in 2000), and the majority of the workers, particularly in the lower-paying jobs, commute daily from neighboring France and Italy. Their scale of pay and benefits are commensurable with the ones in France, and the French workforce is reckoned to be among the most privileged in the world.

WORKING CONDITIONS

Economic prosperity and the proportionally large number of jobs available, along with the government's sensitivity to safety and environmental protection, create favorable working conditions in the principality. The unemployment rate, compared to French and EU standards, is very low at 3.1 percent in 1998. No major labor unrest has been reported recently.

COUNTRY HISTORY AND ECONOMIC DEVELOPMENT

1215. Monaco is founded as a colony of the Italian trade and seafaring city, Genoa.

1297. The Grimmaldi family of Genoa and their supporters establish their rule over Monaco. A thriving economy based on trade develops.

1489. King Charles VIII of France recognizes the independence of Monaco.

1789-1814. During the French Revolution, Monaco is attached to the territory of the French Republic under the name of Fort Hercules. It becomes the chief town of the canton of Alpes-Maritimes.

1815. Monaco is made a protectorate of the Italian Kingdom of Sardinia.

1861. Monaco's sovereignty is recognized by a Franco-Monegasque Treaty.

1863. The Seabath Company is founded, which establishes a casino and several hotels in the quarter of the Spelugues, known as Monte-Carlo since 1866. Economic development is boosted in the late 19th century with a railroad link to France.

1911. Absolute monarchy gives way to the first constitution.

1918. A new treaty with France provides for limited French protection over Monaco. New agreements with France are signed in 1945, 1951, and 1963.

1962. Adoption of the current, more liberal constitution.

1993. Monaco joins the United Nations.

1999. Monaco and France both join the Euro Monetary Zone (EMZ).

FUTURE TRENDS

The Monegasque economy is closely related to that of the French, and therefore is dependent on the development trends of the EU. The liberalization of commerce, financial, and other services in the EU, the introduction of the single European currency, and the revolution in information technology will gradually increase competition, but the increasing wealth and dynamism of the EU economies will also boost demand for Monaco's unique services. Due to its size, the country is limited in its opportunities for extensive growth, but its strong ties to high-class tourism, services, and modern technology make it unlikely to endure any major negative changes in the near future. It is likely that the principality will preserve its sound economy, particularly in the areas of tourism, services, commerce, and modern manufacturing. The maintenance of its high living standards will continue to attract foreign companies, investment, and affluent tourists and residents in the foreseeable future.

DEPENDENCIES

Monaco has no territories or colonies.

BIBLIOGRAPHY

Global Investment Business Center, Inc. Monaco: A Country Study Guide. USA International Business Publications, February 2000.

U.S. Central Intelligence Agency. World Factbook 2000. <http://www.odci.gov/cia/publications/factbook/index.html>. Accessed January 2001.

U.S. Department of State. Background Notes: Europe: Monaco. <http://www.state.gov/www/background_notes/eurbgnhp.html>. Accessed January 2001.

—Valentin Hadjiyski

CAPITAL:

Monaco-Ville.

MONETARY UNIT:

French franc (F). One French franc equals 100 centimes. The franc comes in bank notes of 20, 50, 100, 200, and 500-franc denominations. There are coins of 1, 2, 5, 10, and 20 francs and 5, 10, 20, and 50 centimes. Monegasque coins, having the same value as the French coins, are also minted and circulated. Monaco is scheduled to switch to the new European currency, the euro, in January 2002.

CHIEF EXPORTS:

Cosmetics, pharmaceuticals, glassware, precision instruments, fine processed foods, cards and postal stamps, and various re-exported commodities (estimate, no official statistics are published).

CHIEF IMPORTS:

Energy, automobiles, equipment, and consumer goods (estimate, no official statistics are published).

GROSS DOMESTIC PRODUCT:

US$870 million (1999 est., no official statistics are published).

BALANCE OF TRADE:

Exports: US$415,272 (1999 est.). Imports: US$415,272 (1999 est.). [Estimate by Monegasque government sources; no official statistics are published.]