As a dependent territory of The UK with a separate Constitution granted to it by the British Parliament, the Government of Gibraltar exercises self-government in all matters except defence, internal security and foreign affairs. These matters are reserved to the UK whilst its laws are promulgated by its own elected parliament, the House of Assembly. Other domestic matters such as trade, economic development, education, public works and services, and housing are the responsibility of the Council of Ministers, which consists of the Chief Minister and seven other Ministers.

Together with the United Kingdom Gibraltar entered the EU in 1973. It is a European territory for whose external relations a Member State (the United Kingdom) is responsible under Article 227(4) of the EC Treaty. Under article 28 of the UK Accession Act there are certain exceptions for Community measures with respect to Gibraltar, i.e. the Common Agricultural Policy, Value Added Tax and the Common Customs Tariff do not apply.

Since its membership derives as part of the Member State UK, Gibraltar is not a separate Member State. However, it is nonetheless a separate legal Jurisdiction for the purpose of Government legislation and judicial authority. Although British Dependent Territory Citizens (as opposed to British Citizens), the citizens of Gibraltar are recognised as UK Nationals for Community purposes with all consequential rights and entitlements. EU Treaty provisions with regard to the free movement of capital, services and persons apply to Gibraltar. However, the fourth relating to the movement of goods is restricted by Gibraltar's position outside the customs territory.

Whilst Spain's claim to sovereignty over Gibraltar rarely attains a high profile on the international stage, it is an ongoing issue for the inhabitants of Gibraltar. For example, in the 1987 negotiations regarding the liberalisation of air traffic capacity between EU Member States, Spain threatened to veto the proposed extension unless Gibraltar was excluded. A bilateral Agreement was then signed in early December of that year between the UK and Spain whereby excluding Gibraltar from the Right to participate in the Open Skies regime unless it agreed to implement the bilateral agreement for the joint use of the airport. Prior to and following signature of the Agreement Gibraltar objected to its terms given the implications for sovereignty over the territory. Gibraltar claims entitlement to participate in Air Liberalisation on the same basis as all other parts of the EU, without preconditions. Despite this, the Airport Agreement was concluded despite the expressed views of the people of Gibraltar and the airport has been similarly suspended from subsequent air liberalisation measures.

In a referendum in November 2002, the population of Gibraltar voted overwhelmingly against the possibility of shared sovereignty between Spain and the UK. 98.97per cent voted against the concept, expressing concerns that such an agreement would lead to Spain pushing for full control of Gibraltar.

Economy:
In recent years, Gibraltar has changed from a largely public sector to a private sector economy. However, changes in government spending still have a considerable impact on the level of employment.

In addition to benefiting from an extensive shipping trade including shipbuilding and repair, Gibraltar is also known for its offshore banking and finance, and its position as an international conference centre. Tourism is also plays a major part in the local economy.

With the enactment of the Companies (Taxation and Concessions) Ordinance in 1967, which made provision for a special tax regime for international business, Gibraltar's financial services sector was born. Since then the industry has developed considerably and now boasts a broad spectrum of professional services. These include private banking, captive insurance management, trustee and company management services. Today the financial sector accounts for around 20per cent of GDP.

Substantial growth in financial sector is largely thanks to a number of factors, which have created many opportunities for offshore investors. These include the absence of any exchange control restrictions; exemptions and concessions from domestic taxes for certain categories of companies and non-resident individuals; and trusts administered for non-residents.

Since joining the EU with the UK in 1973, Gibraltar has obtained certain derogations from European Law. In particular Gibraltar does not apply Value Added Tax or the Common Customs Tariff. In addition Gibraltar does not apply Capital Gains Tax, Sales Tax, or Estate Duty. Income from taxes in Gibraltar is in the main derived from Income/Corporation Tax and Withholding Tax. However, non-resident non-Gibraltarian individuals and commercial entities may take advantage of several opportunities to become tax exempt or to substantially reduce their exposure to these taxes.

Gibraltar's export activity is principally the re-export of goods. The majority of this is petroleum at around 50per cent closely followed by manufactured goods at around 40per cent . Export partners include the UK, Morocco, Portugal, Netherlands, Spain, Germany and the US. Import partners include the UK, Spain, Japan and the Netherlands.

Infrastructure:
In a location the size of Gibraltar, nothing is too far away.

Gibraltar Port offers cruise operators services as both homeport and a port of call. The recently completed Gibraltar Cruise Liner Terminal is located within 20 minutes walk from the city centre and accommodates most modern cruise ships, including Cunard's Queen Elizabeth II and P&O's Oriana. The Gibraltar Straits is the western entrance to the Mediterranean. This means that there is negligible diversion time with ships typically being able to berth in about an hour. Furthermore, there are no locks to negotiate or tidal restrictions.

A number of international shipping lines from North Europe also operate via Gibraltar providing regular international shipping line services to Northern Europe, North Africa and a number of Mediterranean Ports. There is also a fast sea crossing available to Tangier. The Port of Algeciras, some 15 kilometres away in Spain, is one of the major Container Ports in the Western Mediterranean providing services to virtually every continent.

The international airport is under 2km from the terminal and offers a number of frequent scheduled flights to Heathrow, Gatwick, Luton, Manchester, and Morocco airports.

Whilst Gibraltar is not directly connected to any rail system, San Roque in Spain, some seven km from the border, provides connections with the rest of Spain and the European network.

The border with Spain is open 24 hours a day to vehicles and pedestrians. Jerez or Ronda takes about two hours by road and Seville is around three hours away.

Gibraltar has a fully digitised international telecommunications network. The two main operators are Gibraltar Nynex Communications Ltd, a joint venture between the American Bell Atlantic Corporation and the Government of Gibraltar and Gibraltar Telecommunications Limited (Gibtel), another joint venture Company between the Government of Gibraltar and British Telecom, operating Gibraltar's international telecommunications. Together, they offer a full range of state of the art, digital, satellite, mobile and internet communications services.

Workforce:
Gibraltar has workforce of around 14,000 and the many non-Gibraltarians that work in the economy complement the variety of skills available.

The construction and the retail and wholesale trades, among others, operate a number of specific sector wide pay agreements between the trade unions and the Industry which are reviewed annually. On the whole, private sector wages are broadly in line with the UK.

The growth of the financial sector in recent years has seen many undergraduates concentrating in areas relating to financial services. Courses in law, accountancy, business studies and economics are also increasingly popular. Around 50 per cent of the school population are now benefiting from higher education in the United Kingdom.

A number of local schemes have been introduced in support of Gibraltar's objective to attract skills not readily available locally. These offer tax incentives and are designed to encourage individuals with specialised skills to establish themselves in Gibraltar.

Quality of Life:
Gibraltar's Mediterranean climate and lifestyle have long attracted British expatriates. With sunshine per year averaging around 300 days, and plenty to fill them with, it is becoming increasingly attractive to a much younger generation from much further afield.
World-class golf courses, tennis, polo, diving, shooting and horse riding are all within easy reach. Gibraltar also offers first class medical facilities to all residents.

Business Costs:
Office accommodation is readily available and a central location costs in the region of £140 to £200 per sq. m, pa.

Supply of vacant office space has decreased recently following the relocation of a large number of international firms into Gibraltar. Recent warehousing storage facility developments have seen significant up-take and further developments are planned. High tech manufacturing opportunities also exist with land available for development.

The range of residential accommodation in Gibraltar is limited. Most accommodation is apartment style and houses are rarely available to rent. Costs range from £600-£800 for a one bedroom flat and for a three bedroom flat, around £2,500. Property prices start at around £80,000 for a one bedroom flat to around £500,000 and upward for a four-bedroom house in a good location, and purchasing is a simple process.

Since there is a much wider range of accommodation on offer in Spain, many people choose to commute into Gibraltar daily. Prices much lower than those in Gibraltar can be found at international developments such as Sotogrande and Alcaidesa. These are within 30 minutes of Gibraltar and include town houses, villas and flats, for rent and sale.