DISCOURS IOD

MARDI 24 OCTOBRE 2006

                        I’d like to extend my warm thanks for your attendance and for affording me the opportunity of introducing to you a few aspects of the Principality, as it truly exists now, at the beginning of the twenty-first century, as opposed to those old stereotypes that too often continue to shape our image. Indeed, between frequently held popular images of Monaco and the actual facts, there is a sharp gap that is often quite striking. I would like now to attempt to fully bridge this difference.

                        In fact, Monaco has a full-fledged economy that is well-known for :

a) its banking market, which is poised to become a financial market ;

b) its ambitious and aggressive infrastructure projects ;

c) its unflinching resolve to support the hosting and development of cutting-edge and innovative industries, geared towards research and development, and the expansion of services, in order to turn our country into a model in the area of new technologies.

                        Yes, Monaco truly has a vision for the future.

                        Monaco is the only country in the world in which the labour force exceeds the total population. On its territory, the Principality intends to develop the economic activities that will ensure the prosperity of its nationals and create a virtuous cycle of sustainable development for the region as a whole.

                        Tourism is naturally one of the main activities that we target. However, the Principality has long since outgrown its slot machines. Our country is equipping itself with the physical and human resources required in order to truly become a European arts and cultural centre, able to keep pace with the largest capital cities : we want to host art and cultural works, along with those creators who actually design them.

                        The time has come to toss modesty aside and to stop playing down our strong points. Monaco deserves to be better known – as a Sovereign State and as a Member of the UN and the Council of Europe. Backed by history and dynastic stability of more than seven centuries, the Principality would like to contribute to building a fairer world, protecting the environment, and supporting international cooperation. However, our commitment to the environment and social justice should not lead us to disregard economic vitality, which is essential for ensuring ongoing prosperity. Yes, we certainly want to maintain this envied prosperity, which is one of the building blocks of the Principality’s identity and is a vital component of its international reputation.

                        But, how can we reach this goal ? I would like now to sketch out below the main lines that we have approved for our action programme.

                        1 – First, we must pursue the effort aimed at diversifying our economy (in order to avoid those jolts that could result from concentrating on excessively narrow sectors).

                        This diversification, which was already initiated several decades ago, has transformed the Principality – of course in respect to its size – into a State with a highly modern economic structure.

                        The results are convincing : through its royalties, SBM accounts only for 4 % of the Principality’s revenues (as compared with 95 % after World War II), with the rest of its resources consisting – up to three quarters – in the proceeds of VAT and a moderate corporate tax – the remainder being generated by public property.   

                        Our dynamism is shown by the existence today of more than 4200 enterprises reflecting the vitality of Monaco’s economy, which is largely due to its ability to diversify. For information the total turnover of the private sector in 2005 is 10.983.177.169 euros   (+ 11,9 % compared to 2004).                

                        Many areas now play leading roles in our economy. By far, the first-ranking economic sector is commerce, which now represents nearly 40 % of economic activity (local retail with 1,100 trade names, but also, for more than one half of total revenues, wholesale and international trade). Next comes the banking and financial sector, which accounts for nearly 15 % of the economy, with nearly 70 institutions. In third place comes the tourism sector, which hosts nearly 6 million visitors each year, with 700,000 overnight stays and 700 conferences. Such a quantity of conferences provides striking evidence of this sector’s diversification, with ever stronger vitality in the business tourism sector.

                        The fourth area is the industrial sector, which accounts for nearly 8 % of the economy. Our industry is strongly focused on high technology – due to existing constraints related to the availability of space and labour.

                        We are now concentrating on targeting the development of new information technologies that are very well suited to Monaco’s specific characteristics – since information technologies require little space and labour, do not pollute, and create high added value.

                        To that end, the Government has created a venture capital risk company, intended to support any innovative project. Two projects were completed over the last few months in the medical and telecommunications sectors. Monaco is ready to develop Venture Capital, in order to group investors willing to participate in the development of enterprises offering genuine prospects.        

                        The rest of our economy includes operations such as construction and property, transportation, and miscellaneous services, with shipping, which is poised to grow with the current extension of the principal port. Therefore, we are now paying special attention to this area.

                        2 – Converting the banking market into a genuine financial market

                        a) The current situation

- The banking/finance sector is playing an important role in the economy in terms of employment, VAT, contribution to social security funds, property, etc.

- USD 70 billion in assets are under management.

- There is an increasing internationalisation and expertise, with links and group synergies, in particular through Switzerland, Luxembourg and England, with ever greater openness and dynamism aimed at new markets.

                        b) How do we see the future

                        Future development must be based on the following principles : excellence, security and transparency, through active involvement in international regulatory and supervisory bodies (FATF, Egmont Group, Moneyval, IMF, Stability Forum).

* Excellence is also a key feature of the services offered, which cover a very extensive range and meet the requirements of a sophisticated international customer base. To that end, financial institutions call on the best professionals, managers and compliance officers, who are attracted by the high-quality living conditions available in Monaco.

* Financial transactions are secure, as a direct result of measures taken by credit institutions, in order to ensure prudential controls and comply with know-your-client (KYC) requirements (SICCFIN, agreements).

* Finally, transparency is indispensable in order to ensure proper functioning of the system; transparency is essential for clients who must receive appropriate advice and information on risks incurred, but also for authorities and international supervisors which must be able to obtain all necessary information in accordance with signed treaties and in particular the French AMF, Italy, Belgium and all authorities concerned with securities law violations.

                        * Changes in the regulatory framework

As regards the products, the new regulations will allow for the creation of funds that may be coordinated, i.e. that may potentially be marketed throughout Europe. But also, and most importantly, specific funds may be created for a sophisticated customer base. Subject to the transparency requirements, indispensable in order to inform investors and authorities, such funds might have very flexible investment rules, responding to their promoters’ intent, and allowing for the development of private equity.     

                        * Confidentiality

                        Monaco is not a judicial haven. Although, international cooperation exists, it is restricted to precise and limited cases. While KYC rules are strict, privacy is fully protected.

                        3 – International recognition of the Principality

                        Negotiations for the revision of our agreements with France were completed on 8 November 2005, with the execution of new instruments, which are of utmost importance, since they determine the general framework and spirit of our relationships. The parties did not intend to question the bases of a historically strong relationship, but merely to update its terms in a spirit of equality and mutual respect, which is now the hallmark of relationships between sovereign States.

                        In particular, this agreement has enabled the Prince to freely make appointments in respect of any public office.

                        Of course, the Principality’s international policy does not merely cover such negotiations. Recent economic and financial developments and in particular the suppression of money-laundering and all forms of financial crime, the changeover to the euro, along with efforts made in order to ensure the necessary approximation in certain tax matters, have led us to conduct, in various European or global fora, highly sensitive negotiations, taking into account certain of our specific features, in particular as regards the OECD, the EU and the Council of Europe.

                        Our general approach has been that we cannot alter our defining features unless other members of the international community also accept the same constraints; we intend to enforce a level playing field among the countries concerned. We intend to lay down these principles with great vigilance and determination.

                        4 – Urban development projects : a driver of economic growth 

                        All of the projects discussed here need space, if only to accommodate an ever-growing number of residents and offer them high-quality products. We are aware of this external demand, and apartments shall be offered for sale in the next two or three years.

                        In addition, and in a more ambitious manner, we shall launch an international request for proposals for the urbanisation of the sea-front area. This project, covering approximately ten hectares, shall set an example for land planning, the environment and architecture. Resorts, villas, modern shopping centres and a museum shall be the key components of this project covering more than 250,000 square metres which, we are sure, shall mark the reign of Prince Albert II and his resolve to make Monaco an outstanding country because of its living environment and situation.

                        5 – Monaco : a unique life experience at the heart of Europe

- Mild and pleasant Mediterranean weather (over          300 days of sunshine a year) and a zero personal income tax are not the only reasons why one should consider Monaco as a permanent residence. Its location in the centre of Europe is one of the biggest attractions to the business community. France and Italy are on either side of the Principality and Nice International Airport is only a 25-minutes drive away – or 6 minutes by helicopter.

- With the world’s largest police force and police presence, both per capita and per square metre, guaranteeing safety and security, Monaco meets the requirements of the most demanding residents. Security is unparalleled in Monaco, with the highest police per population ratio, with a security staff of 500 for a total population of approximately 32,000. This ratio will of course be maintained.

- Cleanliness

In addition, cleanliness is a top priority in Monaco, thanks to hundreds of gardeners and street cleaning teams, with a focus on nicely designed public gardens and year-round flower displays. Monaco is clean, well-manicured, secure and efficient.

All it takes to become a Monaco resident, as an EU citizen, is to buy or rent a property and not have a criminal record.

- Excellent range of private and state schools

Families willing to move to Monaco will find an excellent range of private and state schools. It is necessary to note, in this respect, that 80 % of students of public-sector schools are not Monaco nationals, and even one student out of three is not domiciled in Monaco.  Although the official language is French, the high number of international students means that Monaco schools are well equipped to deal with international children.

- Monaco ranks among the world’s best cities

In terms of health, Monaco ranks among the world’s best cities. The Princess Grace Hospital, together with the Heart Surgery Clinic (Centre Cardio Vasculaire) and the brand-new Sports Clinic offer a wide range of top-level care by highly trained and renowned physicians.

The high quality of life in Monaco is attracting a new type of resident. Monaco can be considered a cultural capital – like London, Paris – with its own Philharmonic Orchestra, Opera and Ballet – along with a year-round calendar of world-class events.

As my presentation draws to a close, I hope that I have shown you certain aspects of our work that you might have been less aware of but have convinced you to remain in Monaco as long as possible and to invest with high security.

I would be pleased to answer your questions and remain at your disposal in any circumstances.

Thank you so much for your attention.