Throughout its history, Luxembourg has managed to set up a favourable business development policy, by means of a flexible, modern and innovative liberal legal framework.
A powerful iron and steel industry
The discovery of iron ore around the mid-19th century and the development of a giant global iron and steel industry made the wealth of the Grand Duchy. For long years, ARBED (Aciéries réunies de Burbach, Eich, Dudelange), the iron and steel company founded in 1911, was the Grand Duchy's most important employer, taxpayer and exporter. In the 1970s, the sudden impact of the global crisis in the steel industry hit the Luxembourg economy hard.
Aware of the danger inherent in monolithism related to the iron and steel industry, the political authorities had been working towards industrial diversification since the 1960s.
The initiatives taken to overcome the monolithic structure of Luxembourg’s industry revolved around three main concepts:
- the construction of European and economic cooperation;
- a voluntary policy of economic diversification through the implementation of measures to encourage investment;
- the development of an international financial centre.
These actions have been rewarded by a remarkable success: other industrial companies of various sizes have been added to the heavy industry, largely due to the inflow of foreign capital. They belong to a large variety of branches and are using advanced technologies.
The diversification of the Luxembourg economy is best illustrated by the presence of a multitude of economic activities, in particular in the field of chemistry, plastic and synthetic materials, mechanical engineering and processing of ferrous and non-ferrous metals, the automotive industry, precision instrument engineering, electronic delivery services, glass industry or wood industry.
Towards a service economy
The transformation from an industrial economy dominated by the iron and steel industry to a service economy dominated by financial services, was almost accomplished in one decade from the mid-1970s onwards. The biggest success was the development of an international financial centre.
Today, Luxembourg's financial centre is one of the top 10 financial centres worldwide. The approximately 150 highly competitive banking institutions, the high performing investment funds sector, the dynamic insurance sector and the multitude of professionals and specialised companies offer a comprehensive range of diverse and innovative financial services.
The desire to further diversification of services led, from the 1980s onwards, to the creation and development of activities in the field of insurance and reinsurance, transport, trade, tourism, telecommunications, e-commerce, broadcasting and business services.