An official delegation from Monaco led by the Minister of State H.E. Mr Michel Roger, in the presence of the Economic Development Chamber, participated in this major economic forum in Moscow, on the theme : « Russia and the World : New Dimensions ». This working visit was also an opportunity for the Monegasque delegation to make contact with the Russian authorities and dignitaries.
Alongside H.E.Mr Michel Roger, Minister of State, Mr Jean Castellini, Government Counsellor for Finance and Economic Affairs, presented the Monaco economic model. Here is his speech.
Mr Rector,
Ladies and Gentlemen,
Allow me to express to you, my great pleasure in being a guest here today and my gratitude to be offered the honour to speak in this prestigious forum which not only commemorates a great economist, Prime Minister and Minister of Finance, but also continues a legacy which has sought, in challenging times, to provide long lasting and complete integration of Russia into the forefronts of modernity.
I would like to say a few words today about the "Monegasque economic model" that is inspired by the vision of our Princes for many decades and even centuries. It is based on a delicate balance, which is probably quite unique in the world, between a liberal view of our economy and entrepreneurship and a social approach to the protection of all employees who contribute daily to the prosperity of Monaco and, of course, the Monegasques nationals, who remain a minority in their own country.
As underlined by HSH the Sovereign Prince in His message of good wishes for the new year: "While the future remains uncertain for many countries and populations, the Principality prospers because we were able to be rigorous and cautious, creative and responsive in this context of international instability. "
Political stability as a result of our governance system is based on a monarchy that has been in place for more than seven centuries. This is likely to reassure investors and the business world because they know that the Government of Monaco, is not, and will never be dependent on political promises.
However, institutions, regardless of their stability and sustainability, are not enough to ensure the prosperity of a country if the underlying economic fundamentals are not secure.
On this point, a small country like Monaco, perhaps more so than any other, has always been cautious since our economic and financial situation secures our integration in the world and our sovereignty.
In other words, the Principality has always made sure not to depend on lenders, whether institutional or private, therefore not resorting to debt. This ensures that our future is not ‘mortgaged’ by public debt.
Our constitutional reserve fund, created in the 1960’s, is designed to incorporate, in accordance with the law, the accumulation of budget surpluses over the past several years and indeed, even the past decades. This assures the country’s financial independence and sovereignty, and helps us to confidently position ourselves to meet the challenges set before us by the ongoing financial crisis that started 2008.
I must draw your attention to the fact that, unlike your great and beautiful country, the Principality has no natural resources, that would otherwise constitute a nation’s financial reserves, and indeed which constitutes the basis for other international sovereign wealth funds. Therefore, our strict budgetary discipline focuses on the constant concern not to spend more than our income. This is actually what guarantees the country’s international reputation, independence and our prosperity.
Monaco's economic performance continues to position the Principality apart from many other countries in the euro zone. Indeed, many neighbouring countries have shown a flat growth rate or even a decrease, when Monaco has seen our GDP in 2013 grow by around 10%.
The 2014 financial year is likely to be the third year running with a budget surplus and the preliminary budget for 2015 was presented and passed by Parliament calculating in a surplus.
Although they are based on the foundations of a healthy and sustainable governance, these results were not achieved effortlessly. While the IMF, in its latest report questioned "Is It Time for an Infrastructure Push?”, the Principality has already made this choice, which has always proven to be an excellent choice for its development model for over past 50 years.
Thus, our country dedicates annually about 30% of its budget to its investment policy in order to secure its social development and towards the economic model that I described in my introduction.
These are the roads, tunnels, schools and homes that are planned and will be built to ensure the future of the country and its appeal to residents. Furthermore, a new hospital should see the light of day within the next ten years. This will bring Monaco’s healthcare services to the forefront of the highest international standards.
But to remain attractive in an increasingly competitive international environment, Monaco must also adapt and modernize constantly, including in the areas and activities that have made its historical reputation. This is why two iconic buildings in the heart of Monte Carlo, The Hotel de Paris and the Sporting d'Hiver, will undergo extensive works to provide a ‘second youth’ to the area.
One (Hotel de Paris) will be renovated to meet the requirements of international hospitality clients around the world, whilst the other (the Sporting d'Hiver) will make way for a number of homes of the highest standing, luxury shops and offices, designed by one of the greatest contemporary architects.
The real challenge that we are facing on a daily basis, but which nonetheless we have learned to deal with, is the physical territory limitations (as Monaco is only 2sq Km). That is why last year, the Government, after a public tender offer, entered into exclusive negotiations with a large group of international construction companies and a consortium of investors to launch an extension of the Monegasque territory onto the public maritime domain. This project will naturally continue Monaco’s strong global environmental efforts and account for all constraints and necessary protections required.
In this future extension delimited by two marine sanctuaries, a new district will arise within a decade. The district, when completed, will include luxury housing, parking, shops, offices, a marina with a docking capacity of forty moorings and an extension of our international congress centre, the Grimaldi Forum.
The strict discipline of our finances and our budget planning, of which I spoke, is also based our acute awareness and sensitivity to "globalization". All main sectors of Monaco's economy (tourism, industry, trade, real estate, banking and financial management) depend on our hard work to adapt to global changes and on our attractiveness to economic agents worldwide.
We have succeeded, despite the international crisis, in attracting new residents and an increasing number of investors, who bring their expertise and knowledge to Monaco. In exchange, dare I say, these residents enjoy a secure and stable living environment, and can enjoy a unique international hub (130 nationalities are represented and living in perfect harmony within the Principality).
The radiance of Monaco beyond its small territory is regularly and positively welcomed by its neighbouring countries which are France and Italy, to which the Monegasque economy provides tens of thousands of jobs while these countries are heavily affected by unemployment.
This establishes a "win-win" partnership between a striving and vibrant country whose employment needs cannot be entirely fulfilled by nationals and residents alone, with those border countries providing individuals able to fill the job requests that are mostly highly qualified jobs with high added value.
The last key to Monaco’s attractiveness is its sustainable tax system that emphasizes indirect taxes (property transfer tax, VAT, stamp duties) rather than direct taxes (taxes on personal income, tax on corporate profits). The later of which are less and less bearable for individuals and households alike and moreover often a negative effect, certainly in larger economies, on both growth and innovation.
This tax system choice did not appear with the passing of time but rather was and is conscious ‘societal’ choice. It was Prince Charles III who took the decision on the 8 February 1869 by a Sovereign Order to abolish all direct taxes levied by the Princely treasury, in order to revive the economy of the Principality, which had suffered at the time from being amputated from a large part of its territory. It is from this period that dates back to the creation of the “Société des Bains de Mer” and the birth of tourism, which ensured the reputation of the Principality, in particular, right from it’s inception, with Russian visitors.
Since then the country no longer suffers from any reduction of its territory and as discussed, it will even be extended further, over the sea. But our tax system is also, for both nationals and residents of Monaco, a marker of our identity as a country, as well as an expression of our international sovereignty.
That said, and according to the wishes of HSH the Sovereign Prince upheld in His enthronisation speech in July 2005, the Principality has always refused to establish its economic development on questionable tax practices, and the term "tax haven" today, more than ever, cannot and should not be associated to it’s practices. The status of Monaco in the fight against money laundering and financing terror and for transparency and international tax cooperation, is widely recognized, particularly within the OECD, and efforts consistently made in this area are an additional attractive factor for our country.
As you know, on the 19th of December was launched the “2015 Year of Russia”, which will take place in Monaco with no less than 140 events highlighting the artistic and cultural heritage of Russia and it’s people. I would like to end my remarks by echoing the words pronounced this morning by His Excellency the Minister of State and by making two confessions to you here today.
I have a personal reason to be pleased with the choice made by the Prince, as my taste for the arts, and that of the Monegasque public, will be gratified for almost a year. It is truly a beautiful and great opportunity that is offered to us in order to captivate our appetite and thirst for your great culture and of course, your gastronomy.
My participation in the Gaidar Forum in Moscow, will thus, in many ways, be the starting point and the opportunity to unite, on an economic front, that which will be gifted to us when Principality echoes and resonates with the voice of Anna Netrebko and the orchestra conducted by Yuri Bashmet.
Thank you for your attention.
