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BelgianUSeconomy BelgianUSeconomy Document Transcript

  • Module 1 -Belgium and the U.S.: Trade and Investment RelationsModule 2- The E.U. and the U.S. Deep Economic IntegrationModule 3- The EU Economy and the Economic & Financial CrisisModule 4- Belgium: A Great Place to Do BusinessModule 5- Belgian Economic and Financial Stability 1
  • Module 1: Belgium and the U.S.-Trade & Investment Relations1. Introduction • Belgium is probably best known in the United States for its peerless “art-de-vivre”. And its chocolate, cookies, beer and mussels have no better ambassadors than the many Americans having visited or lived in Belgium. Others know Belgium for its diamonds, for its technology industry, or for its huge pharmaceutical and chemical sector. From waffles to (silicon) wafers, and from gems to polymers, these products all illustrate a genuine Belgian tradition of quality, reliability and innovation, also typical of Belgium’s ever growing services sector. • The Belgian-U.S. economic relationship itself is heavily focused on modern, high-end goods and services. Leading Belgian sectors for U.S. export and investment also include aerospace, automotive, energy, environmental technologies, biotechnology, information and communication technologies, green building, medical and dental equipment, safety and security, logistics. • Though only the size of Maryland, but with a population of well over 10 million inhabitants, Belgium is well in the top 20 of America’s trade partners, as well as one of the world’s 20 largest economies. • Location, location, location: Within a radius of 300 miles, 140 million EU consumers can be reached (almost 50% of the U.S. population) representing 60% of Europe’s purchasing power. About 75% of Belgium’s GDP is exported. Belgium’s location at the economic and logistical heart of wealthy Europe makes the country the ideal gateway for exports to Europe, as well as to Africa and the Middle East. As a result, Belgian-U.S. exchanges have always been well developed. The first bilateral “trade, commerce and navigation” treaty was signed in 1846, while the Belgian American Chamber of Commerce in the United States was formed as early as 1918, making it one of the oldest and most established such bodies in the country. • Belgium has over the years been a magnet for many North American companies eager to establish a presence in Europe. Currently, more than 1500 U.S. companies are located in Belgium, • Belgium is an excellent “test market” for U.S. companies. Small but yet diverse and competitive enough to offer a representative sample of sophisticated buyers, Belgium enjoys a cosmopolitan and multilingual nature making it an unmatched marketing laboratory for American products and services. • Another well-known feature of Belgium is its capital city of Brussels, and the significant role it plays as host to EU institutions, NATO and other international bodies. Brussels has indeed become the second city in the world for diplomats, behind New York, and the second city for foreign journalists, after Washington, DC. Most U.S. Federal Departments are represented in Brussels, with also a handful of States maintaining a permanent presence in the City. With also offices of the largest American and Pan- European trade entities (U.S. Chamber of Commerce, Business Europe, Eurochambres), law firms and business services companies, Brussels is the place to be in Europe for U.S. companies seeking to monitor and influence EU decisions and regulations. U.S. companies in Belgium will therefore have access to AmCham Belgium and to AmCham 2
  • EU, a separate entity specifically working with the European institutions on behalf of American companies.• This business, press, diplomatic and military U.S. presence in Belgium contributes to the country’s hosting of a resident American community in Belgium that is now in excess of 20,000 people, with an ever-growing number of clubs, sporting and cultural groups, schools and outlets answering specific needs of that community. Add to that countless U.S. political and business executives regularly visiting the country for short or less-short stays, and tens of thousands of American tourists, and you will easily understand why most U.S. citizens in Belgium do not only enjoy the quintessentially European “art-de-vivre” it offers, but at the same time the pleasure of feeling “home away from home”.• The history of Belgian-American bilateral trade relations is almost four centuries old, dating back to Pierre Minuit’s arrival in Manhattan in 1625, and his purchasing the island the next year. Later on, from the 1840’s onward, thousands of Belgians settled in the Midwest and founded new communities, which they often named after their Belgian hometowns like Antwerp, Ohio and Namur, Wisconsin. These new Americans also brought with them their skills and talents, and were for instance responsible for building the glass industry in the U.S.• The Belgian contribution to the U.S. economy also includes the invention by Solvay brothers Ernest and Alfred of a new process for producing sodium carbonate, which revolutionized how Americans with little access to yeast on the frontier made their bread. Sodium carbonate imported into the U.S. was turned into sodium bicarbonate, baking soda. Even more than baking soda, plastic is ubiquitous today in every American home, and can be traced back to a Belgian inventor. It is indeed in the United States that Leo Bakeland developed the first synthetic polymer Bakelite in 1907.• More recently, Belgian researchers received over the past months a series of prestigious American scientific awards, like the Ernesto Orlando Lawrence Award of the U.S. Department of Energy, the NIH Pioneer Award, and the Paul Janssen Award for Biomedical Research. Scientific ties between the U.S. and Belgium are enhanced by the Belgian American Educational Foundation (BAEF), the leading independent philanthropy in the support of exchanging university students, scientists and scholars between the United States and Belgium.• Belgian entrepreneurs, business executives and scientists continue to be very active on the U.S. market. For example, as of 2010, Belgian nationals held senior management positions at the highest levels with companies like Xerox, Johnson & Johnson, Boeing, Nike, Cargill and Procter & Gamble. From Bekaert to Solvay and InBev to Umicore, to name just a few, major Belgian corporations have also heavily invested in the U.S., where their goods and services have now often become part of the daily family or business environment in the United States.• Beyond beer and chocolates, some of the less directly identifiable products from Belgium playing a prominent role in the U.S. are: o Sports playing field surfaces for NFL teams like the Pittsburgh Steelers, the Denver Broncos, the Philadelphia Eagles and the Green Bay Packers o A free software package that allows an individual or a community of users to easily publish, manage and organize a wide variety of content on a website, used by the White House 3
  • o Non-polluting buses on fuel cells, providing public transportation buses for many US metropolitan areas transit systems, including Washington, DC and San Francisco o A variety of drugs, such as epilepsy, allergy and HIV medications o Miniaturized transmitters/receivers for patient motion tracking during radiotherapy o The cargo inspection system designed to automatically detect nuclear threats in the U.S. o The anti-anthrax processing method used for US mail o Audiovisual screens for American corporate jets, large display walls for the Command Centers of the US Coast Guard, large scoring boards and entertainment screens during US basketball games, and… o ”House of Anubis”, the popular series on the Nickelodeon Channel. • Economic links between the two countries are being forged at the state level as well. To name but a couple of recent examples, in 2010, the California High-Speed Rail Authority signed a memorandum of understanding (MOU) with Belgium to continue sharing high-speed rail planning and development information. And BioNJ, New Jersey’s biotech industry organization, signed a memorandum of understanding (MOU) with FlandersBio, the regional umbrella organization for the life sciences and biotechnology sector in Flanders, to solidify international ties between the clusters.2. Trade relations today • The trade relationship between Belgium and the United States is of prime importance for both countries, and it is by no means a one way street. • According to the U.S. Census Bureau, bilateral U.S.-Belgian trade was worth $ 41 billion in 2010. This makes Belgium a larger trading partner for the U.S. than India, Australia, Russia, or Spain. Container ships, carrying over 4,000 containers a day, make Antwerp the leading port in the world for transport of goods to and from the United States. Belgium is also one of the trading partners with which the U.S. has the largest bilateral surplus, in real terms. • The U.S. is the number one trading partner for Belgium outside the EU, and the 5th trading partner overall. It is also the 5th export market for Belgium. • Main Belgian exports to the U.S. include chemical products, machines and equipment, precious stones and metals, transport equipment, and mineral products. The U.S. has a particular strong position for trade in services. • According to the Belgian Agency for Foreign Trade, almost 3,000 Belgian companies currently export to the U.S. market. • Belgium is about the 18th trading partner for the United States. U.S. exports to Belgium equaled $25.5 billion in 2010, i.e. almost 30% of U.S. exports to China. • Through November 2010, Belgium ranked as the 14th largest market for the export of U.S. goods. Main exports from the U.S. to Belgium include chemical products, machines and equipment, optical instruments, plastics and minerals. In states like Texas, Pennsylvania, Georgia and South Carolina, Belgium is among the top 10 export destinations. Belgium is among the top 5 European export markets in more than half the U.S. states, including California, Texas, New York and Illinois. 4
  • 3. Bilateral Investment relations today • Foreign investment has contributed significantly to Belgian economic growth since the 1960s. • In particular, U.S. firms played a leading role in the expansion of light industrial and petrochemical industries in the 1960s and 1970s. A number of U.S. service industries followed in the wake of these investments, such as banks, law firms, public relations, accounting, and executive search firms. Overall, most of the U.S. investment has been in the finance and insurance sector, and in chemical manufacturing. But investment in the service industry, including law firms, accounting firms, advertising agencies, and computer and management services, has more than tripled since 2000. • Today, the value of foreign investment between the U.S. and Belgium exceeds $100 billion. In fact, U.S. investment stakes in Belgium at the end of 2009 (figure 5) were on par with the combined U.S. investment position in China and India. Over the last decade, Belgium has been the 11th overseas market for U.S. foreign investment. • U.S. companies in Belgium account for approximately 6% of the total work force. They are heavily represented in the chemical sector, automotive assembly, petroleum refining, and pharmaceutical sectors. • U.S. foreign direct investment (stock) in Belgium totaled about $ 70 billion (cumulative) in 2009, which is almost 50% more than U.S. investments in China. Since 2005, the U.S has consistently been the origin of the most foreign investment projects throughout the regions of Flanders, Brussels and Wallonia. US Direct Investment (USDI) flows to Belgium have increased rapidly after a steep decline during the economic crisis. Inflows into Belgium have been on the rise again since mid-2009 to reach $9.1 billion in 2010, compared to about $5 billion in 2008-2009. The 2010 level exceeded the pre-crisis level of $7.5 billion in 2007. U.S. firms invested more capital in Belgium ($7.9 billion) than either Brazil, China, or India in the first nine months of 2010. • As of 2008, U.S. companies employed 129,000 in Belgium, making the U.S. the second most important foreign employer in Belgium. Almost half the employment was in manufacturing, particularly in the chemical and transport industries. • Investment in R&D by Belgian affiliates of U.S. companies represented 19% of total R&D investment by businesses in Belgium. • For their part, Belgian companies have invested about $39 billion in the U.S. as of 2009. Overall, Belgium is the 15th investor in the United States. Belgian investment supports some 180.000 jobs in the U.S., which makes Belgium the 7th supporter of European jobs in the U.S. • Belgian companies are present in the U.S. in a wide range of industries from petrochemicals to quality food and textiles, from luxury buses and steel products to pharmaceuticals and energy production, and from diamond cutting tools and industrial machinery to graphic design and display systems and complex software products. • At the state level, Belgium is among the top 10 foreign investors in Georgia, Ohio, Pennsylvania and South Carolina. In Georgia alone, 76 Belgian companies are present, employing about 5800 people. In Ohio, Belgian-owned companies employ over 5
  • 6600 people. In Pennsylvania, there are 111 Belgian-owned companies. Even in the remote corners of Wyoming, the 4th largest foreign company is from Belgium.4. Importance of the new Belgian-U.S. tax treaty • Investment and mobility between the United States and Belgium will benefit from the new tax treaty between the two countries, in effect since 2008. Belgium has a very extensive network of double taxation treaties. Currently, more than 80 double taxation treaties are in effect, covering the most important jurisdictions. • The new tax treaty between the United States and Belgium went into effect on December 28, 2007. Together with the Notional Interest Deduction and the Patent Income Deduction, the treaty makes direct loans and direct investments between the U.S. and Belgium very attractive. • The Belgium-U.S. tax treaty contains some very interesting tax features for U.S. companies with business plans in Europe: o 0% withholding tax on dividend payments from a Belgian subsidiary to its U.S. parent provided the U.S. parent owns 10% or more of the Belgian company. This 10% ownership threshold is significantly lower than the threshold in other treaties recently concluded by the U.S. Combined with other general features of Belgium’s domestic tax system for holding companies, this is of interest to holding companies for holding the shares of U.S. affiliates o The exemption from withholding tax also applies to pension funds, provided the dividends are not the result of business activities by the fund o 0 % withholding tax on interest. Together with the Notional Interest Deduction, this makes direct loans between the U.S. and Belgian affiliated companies more attractive, and increases possibilities for companies in Belgium to finance U.S. affiliates. o New categories of taxpayers such as qualified charities or pension trusts will now be able to claim benefits, and strengthened anti-abuse provisions designed to deny inappropriate use of the treaty will bring them into closer conformity with current U.S. treaty policy o The Convention extends the benefits to companies owned by so-called “equivalent beneficiaries”, which may provide opportunities for multinational groups that are based in the EU, Switzerland or NAFTA Other changes in the new Treaty include a more tax friendly treatment of pension plan contributions and an extended information exchange provision between tax administrations. 6
  • Module 2- The EU and the U.S.: Deep Economic IntegrationGeneral Outlook 1. The EU and North America are more deeply integrated across more economically relevant areas than any other two regions of the world. Ties are particular strong in foreign direct investment, portfolio investment, banking claims, trade in goods and services, and flows of ideas in terms of mutual R&D investment; patent cooperation; technology flows; and sales of knowledge- intensive services. 2. The transatlantic economy generates close to $5 trillion in total commercial sales each year and employs up to 15 million workers on both sides of the Atlantic. Even following the financial crisis, US and EU financial markets account for well over two- thirds of global banking assets and three- quarters of global financial services 3. EU firms are the largest foreign employers of U.S. workers, and U.S. firms are the largest foreign employers of EU citizens, accounting together in the transatlantic economy for 15 million jobs. 4. In terms of capital flows, The two regions account for 65% of global banking assets, three- quarters of global financial services, 77% of equity- linked derivatives, more than 70% of all private and public debt securities, almost 80% of all interest- rate derivatives, almost three- quarters of all new international debt securities, 70% of all foreign exchange derivatives transactions 5. In terms of innovation, the U.S. and the EU host 65% of the top R&D companies and 56% of all global R&D, and 18 of the top 20 knowledge regions in the world.Investment Drives the Transatlantic Economy • The US and Europe are each other’s primary source and destination for foreign direct investment (FDI). • Between 2000 and 2010 US firms sunk roughly $1.3 trillion into Europe— over 60% of total US FDI for the entire decade. • In 2008, US affiliates sunk $24 billion on R&D in Europe, 65% of total R&D expenditures in the EU. • China is 12th as a destination of US FDI, behind Belgium, France, Germany, Switzerland, Ireland, the UK and the Netherlands. • The EU is the top destination of U.S. FDI around the world. In 2008 U.S. FDI in the EU totaled over €1 trillion, more than the next 20 investors combined. • The U.S. remains the principal source of FDI (44%) in the EU; it is the leading non-EU R&D investor in the EU; • The EU is the largest source of foreign direct investment in the U.S. (EU investment outlflows to the U.S. are more than the next 6 destinations combined). 32% of EU FDI went to the U.S. The EU accounted for over 75% of all foreign R&D investment in the U.S. in 2007. The US was the top recipient of EU FDI outflows again in 2010. 7
  • • The EU had a total of €1.25 trillion in FDI in North America in 2008, more than the next 6 destinations combinedTrade • The U.S. is the nr. 1 country market (19%) for EU goods • The US also imports most services from the EU— 43% of all US services imports in 2009. 8
  • Module 3- The EU Economy and the Economic & Financial CrisisKey Messages • The transatlantic economic partnership is essential to the prosperity of both the EU and the U.S., and is a major driver of global economic growth and trade, even in difficult times. • The euro has been a resounding success in terms of delivering low inflation and price transparency, and in eliminating transactions costs and exchange rate uncertainty. • Continued economic growth and jobs are high on both the EU and the U.S. agendas, especially in relation to future-oriented fields like clean energy and emerging technologies.Europe Has Made Enormous Progress in Addressing Deficiencies: • The Euro Plus Pact, adopted at the March 2011 European Council, provides for an unprecedented degree of policy economic coordination between euro area countries. • There will also be a substantial strengthening of the governance of the euro area, including a completely new surveillance of macroeconomic imbalances to complement fiscal surveillance. • In addition, brand-new instruments—the European Financial Stability Mechanism (EFSM), European Financial Stability Facility (EFSF), and European Stability Mechanism (ESM)—have been created to help countries facing financial difficulties. • Euro area countries that are in the spotlight have made huge strides towards restoring the sustainability of public finances and introducing growth-enhancing reforms. • European banks are now subject to an EU-wide stress test designed to assess their resilience to hypothetical external shocks. The stress test assesses what might happen to banks if external circumstances deteriorate markedly and helps to identify vulnerabilities and relevant remedial action. • Taken together, these measures serve to reinforce the economic component of the European economic and monetary union.Europe Is Continuing Its Recovery from the Economic and Financial Crisis: • A broad-based, albeit moderate, economic recovery is underway in Europe. Although the recovery is uneven across countries, it is arguably more sustainable than the recoveries in other advanced economies because it is less dependent on continued policy stimulus. • European leaders have underlined their determination to do whatever it takes to defend the euro. • Since the early days of the economic and financial crisis, Europe has acted rapidly to address economic and financial challenges, through the European Economic 9
  • Recovery Plan, the injection of liquidity into the financial system, and the injection of nearly €300 billion worth of capital into financial institutions and extension of €2.5 trillion worth of guarantees. • In May 2010, the euro area countries and the IMF jointly agreed to make available €110 billion in financing to Greece over the next three years. • In December 2010, the Council of the EU approved an €85 billion financial assistance package to Ireland. • In April 2011, Portugal announced its intention to ask for the activation of the financial support mechanisms. Portugals request will be processed in the swiftest possible manner, according to the applicable rules.Europe is Fostering Economic Growth and Jobs in the Medium and Long Term: • In 2010 the EU adopted the Europe 2020 strategy, which identifies country-specific prescriptions for reforming product and labor markets, for reforming pension and health care systems to ensure their fiscal sustainability, and for strengthening economic competitiveness. • The EU has identified three key drivers for growth, which will be supported through actions at both EU and national levels: smart growth (fostering knowledge, innovation, education and digital society), sustainable growth (making EU production greener and more resource efficient while boosting competitiveness), and inclusive growth (enhancing labor market participation, skills acquisition, and the fight against poverty). 10
  • Module 4- Belgium: A Great Place to do Business1. Belgium is one of the most dynamic and open economies both in Europe andworldwide. Foreign trade is the lifeblood of the Belgian economy. • With an area the size of Maryland and a population similar to Michigan, Belgium has the 18th economy in the world. • Export and imports account for more than 70% of GDP. According to the WTO, our country is the 8th largest exporter of goods worldwide and the 13th largest exporter of services in the world. Belgian trade focuses very much on the European market. A high percentage of the goods exported by Belgium are sold to other EU member states.2. Belgium is among the top 10 destinations for foreign direct investment worldwide. • Belgium attracted the 10th most FDI capital in 2009, is the 5th country in the world for FDI stock (UNCTAD, World Investment Report 2010)3. Location, location, location • Because of the European orientation of its economy, the Belgian business cycle serves as a leading indicator to extrapolate developments in the European economy • Politically, as the host of NATO and EU headquarters, and hundreds of other international organizations and international NGO’s, Belgium is right at the heart of the political and economic decision-making centers in Europe. • Brussels is the world’s second international meetings and conferences centre. Along with Washington DC, it has the highest number of diplomats, journalists and lobbyists in the world. Some 800 European trade and professional associations, 300 corporations with European public affairs offices, and 85 European think tanks, are all located in or around Brussels. • With a total EU population of 490 million and a total EU GDP of €12.00 trillion, Belgium is also at the center of one of the most developed and wealthiest areas in the world, with consumers with particularly high purchasing power. • Over 1,400 multinationals have established their European headquarters in Belgium. • Belgium is at the heart of an area with 60% of Europe’s purchasing power, 30% of EU consumers. Outside the Northeast US corridor, Belgium sits at the heart of the world’s 2nd largest concentration of wealth. 140 million consumers are located within a 300 mile radius of Brussels.4. A Productive and Highly Skilled Labor Force • Productivity: Belgium is consistently ranked among the productive nations (output per worker) in the world, for example in studies by The Conference Board in the U.S. Belgium is ranked 4th in the ranking of OECD countries (2007, GDP/hour worked). • Skills: because of its location and history, the educational system in Belgium is highly oriented towards the instruction of foreign languages. 11
  • • The World Competitiveness Yearbook ranks Belgium consistently among the top 10 countries worldwide for the productivity and the skills of its labor force, its scientific infrastructure, its educational system and the quality of education at university level.5. A Center of Knowledge • In an area the size of Maryland, Belgium offers 16 university centers and an extensive community of world-renowned scientific institutes such as IMEC, the Institute for Tropical Medicine, or the Institute for Cellular Pathology (ICP) at the University of Louvain-la-Neuve. • Belgium was voted ‘Best country in the world for academic research’. (The Scientist, November 2007) • Close to the leading university centers, innovation and incubation centers and science parks provide new innovative businesses, shared facilities, equipment and services. • Belgium is ranked 2nd for pharmaceutical exports per capita in Europe (European Federation of Pharmaceutical Industries Associations) o More than 5,000 researchers work in clinical testing, 80% financed by the pharma industry. o Belgium has the largest number of clinical trials per capita in Europe, evidence of the close interaction between research labs and medical schools • Many Belgian companies are market leaders in ecotechnologies, in six key areas: renewable energy, energy efficiency, waste management, air, water and soil. • Belgium is the best country in the OECD for innovation performance and biotech industry development (OECD Science & Technology Outlook, 2008)6. A Modern Infrastructure • Belgium has a highly developed transport infrastructure: o It has one of the highest density road & rail networks in the world o It has the 2nd largest seaport in Europe, Antwerp, which is also the 2nd largest petrochemical center in the world after Houston o It has the 5th largest cargo airport in Europe, Brussels’ Brucargo. • Belgium is the number one country in Europe for logistics and distribution. Belgium is a crucial link in the European transportation chain whether by air, sea or land. • Belgium offers the lowest cost and shortest distance to a large number of production centers and markets. • Belgium’s inland waterway network, the densest in the world, connects ports to industrial areas.7. Energy and real estate costs remain low compared to those in the neighboring countries: 12
  • • Brussels has been ranked 39th in the 2008 Cost of Living Survey from Mercer Consulting. European cities of London, Copenhagen, Oslo, Geneva, Zurich and Milan all appear in the top ten, as well as Tokyo, Seoul and Hong Kong • Brussels was ranked right behind Munich and Berlin, but also behind Paris (12th), Dublin (16), Amsterdam (25), and even Madrid (28), Prague (29) and Warsaw (35)..8. An intelligent tax system • The nominal corporate tax rate in Belgium was lowered in 2002 to 33.99%, about the EU average. • The Notional Interest Deduction (NID) of 2005 introduced a tax deduction for venture capital which alleviates the differences in tax treatment between finance raised through borrowed capital and finance raised through equity capital. The system allows companies to deduct from their tax base a notional interest charge (not stated in the accounts) corresponding to a specific percentage of their adjusted equity capital. • Estimates are that the NID has cut the effective corporate income tax rate on average to around 25%, but this figure could be even lower for highly capitalized corporations. • The NID is a viable alternative to the current Belgian coordination center regime, which was phased out between 2006 and 2010. • Belgium also abolished the 0.5% registration duty on capital contributions as of January 1, 2006. Therefore, the equity of companies in Belgium can be increased without any further tax burden. • Foreign executives assigned temporarily to Belgium within an international group of companies may qualify for a special ‘expat’ taxation regime. • Belgium has a very extensive network of tax treaties, including the new Double Taxation Convention between the United States and Belgium (2007). The new treaty went into effect on December 28, 2007. • Several tax measures to stimulate research, including a new ‘patent royalties deduction’ has recently come into effect, which allows Belgian companies, or Belgian branches of foreign companies, to deduct 80% of patent royalties from their taxable income. • A new tax regime for pension funds went into effect in 2007, making Belgium the first European country offering multinationals a complete and comprehensive framework for the creation of both pan-European and international pension funds. • Belgium’s regions offer an interesting range of non-fiscal investment stimuli • A ruling practice offering legal certainty: Belgium’s tax legislators are aware of the importance of upfront legal certainty for existing and potential investors. Accordingly, Belgian tax legislation provides economic players with a generally applicable advance ‘ruling’ practice. The procedure is simple, rapid, efficient and free of charge. The ruling is an advance decision that is issued within three months and is legally binding for up to five years. Within the Federal Public Service Finance, the Fiscal Department for Foreign Investments provides free, confidential advice and assistance on tax matters to potential foreign investors and those already established in Belgium. 13
  • • There are various tax incentives for research & development: o Partial exemption from payment of wage tax for researchers o Tax exemption on allowances and capital and interest subsidies awarded by regional institutions to support corporate R&D o Tax deduction on patent income o Increased investment deduction o Tax credit for R&D 14
  • Module 5- Belgian Economic and Financial StabilityBelgium most definitely does not belong in the company of countries whose internalfinancial situation might be a threat to the stability of the euro.The economic fundamentals in Belgium are sound: 1. First: Belgium as a whole is a rich and strong economy. The Belgians are creditors towards the rest of the world, not debtors. The Belgian Stability Programme aimed at reducing the budget deficit to 4.1% of the Gross Domestic Product this year. But the government decided to do better and approved measures to cut the deficit to 3.6 % of GDP in 2011, thereby doing more than the European Commission requested. The Government shall reach its target of a debt rate of 3% of the GDP next year, and balance the budget in 2015, without new taxes. Belgium as a whole is a rich and strong economy that enables the country to be a creditor towards the rest of the world. 2. Secondly, the strong financial position of Belgium is due to the traditional high savings rate of Belgian families. This rate is significantly higher than in the rest of the eurozone. The savings of our families largely exceed the public debt. To put it in graphic terms, the Belgians can buy back the public debt three times with their savings. 3. Thirdly, Belgium will be able to pay off the public debt more easily than other member states of the eurozone, because of the economic growth. The Belgian economy grows by more than 2%, above the eurozone average. Job creation amounted to 1.2% last year, compared to 0.3% in the Euro area and the EU. The unemployment rate declines to 8.3% this year and is far below the EU average of 9.5%. 4. Belgium is among the few EU member states with net foreign assets. They amount to 26% of our Gross Domestic Product, which puts Belgium in the company of Germany. Only The Netherlands and Cyprus do better. Net foreign assets are the most important indicator of the financial soundness of an economy. 5. The Belgian economy is widely open and integrated with its larger neighbors. It has a positive current account balance. On the back of good export performances in 2010, and of substantial increase in incoming FDI (€25 billion than in 2009), Belgium’s Current Account Balance surplus grew to 1.2% of GDP in 2010. 6. The excellent performance of the Belgian economy is based on good economic fundamentals. The Financial Times recently stressed the strength of the Belgian economy, pointing among others to the consistent current account surplus. Our economy can build on some stable features: - the education system, among the world top performers, guaranteeing a highly skilled and multilingual workforce; -labor productivity expressed per hour of work, which is the third highest in the world; 15
  • - Belgium’s position as a world leader for so-called ‘in-house product innovators’, this is innovation developed within the firm; -some very interesting tax measures such as the notional interest deduction scheme – which is a worthy successor to the much praised coordination centers, the tax ruling, and since 2009, the partial tax exemption of income from patents ; -Belgium’s central location in Europe, -Belgium is ranked amongst the top 10 countries worldwide in logistical efficiency and 8th in the quality of life index.7. Prior to the launch of the Euro, in July 1996, Belgium adopted the Law on Competitiveness. This law states that Belgian labor costs can not increase above those of its three major trading partners: Germany, France and the Netherlands. This keeps Belgian labor costs in line with the average of the Euro area and prevents our automatic wage indexation system from undermining our competitiveness and financial solidity. Belgium continues to abide by this law, also under this caretaker government. Early- 2011, in the framework of a broader package of labor market measures, we adopted a new wage agreement which limits real wage growth to 0.3% for the period 2011 -2012.8. The crisis of the euro was mainly a crisis of weak banks and excess borrowing. With Germany and other partners, Belgium has insisted to include financial stability in the Pact for the Euro. The upcoming bank stress test is a key feature of that Pact. Belgium is not afraid of this test. Its banks have been restructured and there is confidence that the EU stress test will prove their solvency and liquidity. Beginning of April, a new and effective supervisory authority, the Financial Services and Markets Authority (FSMA), will start its work. 16