Kingdom of Belgium Business Guide
Introduction
The Kingdom of Belgium (Dutch: Koninkrijk België; French: Royaume de Belgique; German: Königreich Belgien) is a country in northwest Europe bordered by the Netherlands, Germany, Luxembourg, France and for a short stretch by the North Sea. It is one of the founding and core members of the European Union, hosting its headquarters, as well as those of many other major international organizations, such as NATO. Belgium has a population of over ten-and-a-half million people, in an area of around 30,000 square kilometres (11,700 square miles).
Straddling the cultural boundary between Germanic and Latin Europe, Belgium is linguistically divided. The Dutch-speaking northern region, Flanders, houses 58% of the population. Another 10% inhabits the officially bilingual Brussels-Capital Region, for approximately 85% using French. In this enclave within the Flemish Region however, neither language is the primary one for roughly half of the residents. French is the language in the southern region Wallonia apart from most of the 73,000 inhabitants of its German-speaking Community. This linguistic diversity often leads to political and cultural conflict and is reflected in Belgium's complex system of government and political history.
Economy
This modern, private-enterprise economy has capitalized on its central geographic location, highly developed transport network, and diversified industrial and commercial base. Industry is concentrated mainly in the populous Flemish area in the north. With few natural resources, Belgium must import substantial quantities of raw materials and export a large volume of manufactures, making its economy unusually dependent on the state of world markets. Roughly three-quarters of its trade is with other EU countries. Public debt is more than 90% of GDP. On the positive side, the government has succeeded in balancing its budget, and income distribution is relatively equal. Belgium began circulating the euro currency in January 2002. Economic growth in 2001-03 dropped sharply because of the global economic slowdown, with moderate recovery in 2004-06.
Market Overview
Belgium is a federal state composed of a central government, three regional governments (Flemish, Walloon and Brussels) and three different language communities (Dutch, French and German). The federal government is responsible for foreign affairs, national security, defense, taxes, and issues relating to the European economic and monetary union, while the regions manage a wide variety of socio-economic matters. Under the evolving federal system, the responsibility for areas of interest to American business such as foreign trade, environment, investment regimes and incentives will increasingly become the responsibility of the regional governments.
Belgium is an outward looking country heavily reliant on trade. The country boasts tremendous infrastructure and is regarded as an ideal transit and distribution headquarters. The cosmopolitan and international nature of Belgium makes it an ideal European test market for American products and services. The domestic market is small enough that a huge commitment to a new product in Europe is not necessary, yet it is so diverse and competitive that it gives a representative sample of potential European and major international competitors. Both the Belgium government and its citizens support international commercial industries. Its capital, Brussels, is home to the headquarters of the European Union (EU) and NATO, as well as hundreds of international institutions, associations and multinational corporations.
Market Challenges
From the inception of the EU's single market, Belgium has implemented most, but not all, trade and investment rules necessary to harmonize with the rules of the other EU member countries. Thus, the potential for U.S. exporters to take advantage of the vastly expanded EU market through investments or sales in Belgium has grown significantly. However, some barriers to services and commodity trade still exist.
Although Belgium fully liberalized its telecommunications services in accordance with the EU directive on January 1, 1998, some barriers to entry still persist. New entrants to the Belgian market complain that the interconnect charges they pay to Belgacom remain high and that BIPT, the Belgian Telecom Regulator, is not truly independent. Belgacom, the former state operator, has been listed since March 2004 on Euronext, the European stock exchange. Belgacom is still 50 percent government-owned and is the leading telecommunications company in Belgium and a market leader in a number of areas, including retail and wholesale fixed-line telephony services, mobile communications services and broadband data and Internet services. Nine years of liberalization notwithstanding, Belgacom remains the main telephone operator with a much-fragmented array of competitors such as MCI, COLT and Telenet. BT is the second largest supplier of data services after the takeover of Infonet and expects to grow another 15% in 2006. Belgacom and Telindus announced a partnership in the beginning of 2006.
BELTUG or the Belgian Telecommunication Users Group complains that the complex Belgian regulatory environment cannot keep up with the technological evolution and threatens to become a real hindrance. For instance, if the BIPT is regionalized, how will the relationship between the regional governments on media and telecom be regulated, and how will this relate to the opposite EU movement of convergence instead of divergence? Also, in October 2005, the EU censured Belgium for failing to provide a telecom market analysis; a concept that according to the EU telecom directives approved in 2002 is an essential instrument in watching competition in the national telecom markets.
Another grievance is that Belgian mobile operators are among the most expensive in the world, according to a report by Merrill Lynch Telecoms Research. Though those high margins should attract additional operators, in practice they are facing numerous obstacles. For instance, BASE is up to now the only operator to work with Virtual Network Operators. In August 2004, the BIPT hinted that termination rates would be adjusted in 2005, but this has not happened. Yet another challenge is the WiMAX-enabled licenses. Whereas BIPT plans one or two WiMAX-enabled licences for wireless broadband traffic. the frequency spectrum has already been taken by Mac Telecom and ClearWire and by the VRT for its microwave radio links via helicopters. For the applications on campuses and industrial estates, BIPT also needs to clear another part of the spectrum and have an international agreement. The regulatory framework will have to be amended.
The latest evolution is the breakthrough of Voice over Internet Protocol telephone exchanges in 2005, while 2006 should bring a future for PABX suppliers. Telindus at its HQs already used a full Cisco solution over the past two years. Siemens has an 18% market share of VoIP telephone exchanges and 30% in the corporate segment. However, companies as MCI, COLT and BT still take great pains over introducing their VoIP products, with an estimated 10 to 15 years for a true breakthrough predicted by experts. Proximus remains the number one in the mobile telecom market, with Mobistar rapidly increasing its market share with a steady growth in the SME segment. Both Proximus and Mobistar say their door is wide open to MVNOs (Mobile Virtual Network Operators). Also with regards to new trends, BELTUG members stated to give highest priority to security and mobile data in 2006.
The Belgian environmental taxes on pollution are mainly incentive charges for the producers to establish a recycling scheme. Ecotaxes support environmental agreements in which government and producers have defined targets for the Belgian recycling scheme. Ecotaxes can be levied on drink packaging, disposable cameras, batteries, packaging for certain industrial use (such as glues, inks, paints, oils, pesticides and solvents), pesticides and paper and cardboard (applicability is mostly dependent on the non-attainment of certain collection or recycling targets). Environmental taxes exist at the regional level on waterways, manure, gravel extraction, water effluent, and waste.
Some U.S. retailers, including Toys ’R’ Us and McDonalds, have experienced considerable difficulties in obtaining permits for outlets in Belgium. Current zoning legislation is designed to protect small shopkeepers, and its application is not transparent. Belgian retailers suffer from the same restrictions, but their existing sites give them strong market share and power in local markets.
Belgium traditionally has been a very attractive location for pharmaceutical manufacturing, research and development. Nonetheless, in recent years, the investment climate has eroded due to red tape in the product approvals process, artificially low prices for brand-name drugs, high taxes, and the tendency by government to require pharmaceutical firms to cover shortfalls in the Federal Belgian healthcare budget. Discussions on these subjects have been going on between industry representatives, the U.S. Embassy, and the Belgian Government for several years.
Belgian public procurement still manifests instances of poor public notification and procedural enforcement, requirements for offsets in military procurement and no transparency in all stages of the procurement process. Within the European Union, the European Commission has authority for developing most aspects of EU-wide external trade policy, and most trade barriers faced by U.S. exporters in EU member states are the result of common EU policies. Such trade barriers include: the import, sale and distribution of bananas; restrictions on wine exports; local (EU) content requirements in the audiovisual sector; standards and certification requirements (including those related to aircraft and consumer products); product approvals and other restrictions on GMO’s; sanitary and phytosanitary restrictions (including a ban on import of hormone-treated beef); export subsidies in the aerospace and shipbuilding industries; and trade preferences granted by the EU to various third countries. A more detailed discussion of these and other barriers can be found in the country report for the European Union.
Market Opportunities
Sectoral growth in the Belgian economy reflects macroeconomic trends. Industry sectors that are oriented towards foreign markets, in particular those in the semi-finished goods sector such as iron and steel, non-ferrous metals and chemicals are very sensitive to foreign business cycle developments. Sectors that are expected to perform relatively well in 2006 are energy, pharmaceuticals, and distribution.
