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Country Commercial Guides
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CHAPTER VII. INVESTMENT CLIMATE
Introduction
Belgium has a number of location-bound factors that have been at the basis of its attractiveness for foreign investors. The country has enjoyed competitive advantages such as excellent transport infrastructure, a geographic position as center of the European Union, high-quality industrial sites, and a skilled and productive workforce. Belgium is not only the political center of Europe, but is a commercial center as well. It is home to some twelve hundred U.S. companies. Geographically, Brussels lies within a 600-kilometer radius of 70 percent of the European Union; Belgium therefore provides an excellent base for reaching the increasingly integrated European market.
In the past year, however, information obtained by the Embassy from U.S. Investors and a foreign investment study commissioned by the American Chamber of Commerce (AmCham) indicate concern that a number of factors are eroding Belgium's attractiveness for American companies. Major concerns to U.S. subsidiaries in Belgium have been articulated in a "Foreign Investor's Agenda" prepared by the AmCham. High labor costs and social contributions, inflexible labor regulations, high taxation levels, costly work hiring practices and a perceived lack of consistency in the government's tax policies are cited as key issues.
Openness to Foreign Investment
Belgium has traditionally maintained an open economy, highly dependent on imports and international trade for its wellbeing. Since World War II, foreign investment has played a vital part in the Belgian economy, providing much technology and employment. Both the federal and the regional governments encourage foreign investment on a national treatment basis. Foreign corporations in Belgium account for about one-third of the top 3,000 corporations.
Takeover Legislation
Belgium, like the United States, has a takeover law which requires all owners of five percent or more of a corporation's total voting stock to notify both the Ministry of Economic Affairs and the Banking and Finance Commission (Belgium's equivalent of the U.S. Securities and Exchange Commission). For each additional ownership increment of five percentage points, further disclosures are required. In exchange for this enhanced protection against raiders (who can no longer operate anonymously), all companies listed on the Brussels Stock Exchange are required to provide detailed information on their corporate ownership structure to the banking and finance commission. In a takeover bid or public offer, the bidder must file with the banking and finance commission a statement revealing its own financial credentials in combination with the details of the deal. Under European Union (EU) law, very large mergers ($3 billion or more in combined turnover) must be approved by the EU commission (Directorate General for Competition Policy). Belgian corporate legislation was changed in 1990 to prevent golden parachutes as well as poison pills and other techniques used to block corporate raiders. In 1997, the federal government introduced legislation regarding "corporate governance." This legislation aims to provide some autonomy to corporate boards of companies whose controlling shareholder is itself taken over by a foreign firm which is a competitor. However, in the June 1998 case of the hostile takeover bid by ABN AMRO bank of the Belgian Generale de Banque, the Commission for Banking and Finance was characterized by the Belgian financial press as not being impartial, with principles of corporate governance having been set aside in favor of certain controlling shareholders.
Screening
Belgium has no foreign investment screening mechanism, although the government, as majority shareholder, controls investment in public-sector firms. Investment restrictions that do exist, such as the law requiring local approval for large-scale retail outlets, do not discriminate between Belgian and non-Belgian firms. However, several American companies have been frustrated in their investment plans in Belgium because of this law.
National Treatment
Belgium generally provides national treatment to foreign investors. However, the establishment of an insurance company or travel agency is subject to reciprocity. A few sectors require majority Belgian (or EU) ownership: aviation, inland shipping, and the ownership of Belgian-registered ships. Public works (when at least 25 percent of the cost is paid by Belgian public authorities) are restricted to Belgian and EU firms. Private or public monopolies exist in the following sectors: postal services, the national railways, airport operation, and local public transport.
Privatization In 1998, the federal government raised approximately BF 50 billion ($1.4 billion) from the sale of public sector assets, against BF 35 billion ($1 billion) in 1997. Both in the preparatory and in the final stages of privatization operations, foreign investors have been allowed to participate. In the telecommunications sector, however, U.S. companies have complained about a lack of legislative transparency, interconnect rates that favor the former government-owned monopoly and lack of independence of the regulator.
Conversion and Transfer Policies
Payments and transfers within the Belgian-Luxembourg economic union (BLEU) and with foreign countries require no prior authorization. Transactions may be executed in Belgian or Luxembourg francs as well as in other currencies.
The Belgian franc is fully convertible, with no restrictions on either inward or outward current and capital account transactions. On May 1, 1998, Belgium became one of the 11 EU member states that agreed to form a de facto currency union (European Monetary Union) with a single currency, the Euro. On January 1, 1999, exchange rates were irrevocably fixed among Euro zone currencies, with 1 Euro equal to BF 40.3399. Gradually, all transactions will be transformed into Euro-denominated operations, a process that will be completed by January 1, 2002. Euro coins and bank notes will be introduced in early 2002. The Belgian government will seek to minimize the period during which both Euros and Belgian francs will be in circulation jointly.
Belgium has no debt-to-equity requirements. Dividends may be remitted freely, except in cases in which distribution would reduce net assets to less than paid-up capital. No further withholding tax or other tax is due on repatriation of the original investment or of the profits of a branch, either during its operations or upon the closing thereof.
Expropriation and Compensation
There are no outstanding expropriation or nationalization cases in Belgium with U.S. investors. There is no pattern of discrimination against foreign investment in Belgian.
When the Belgian government does use its eminent domain powers to compulsorily acquire property for a public purpose, adequate compensation is paid to the property owners. Recourse to the courts is available if necessary. The only expropriations that occurred during the last decade were related to infrastructure projects such as port expansion, roads and railroads. In the future, expropriations to make place for nuclear waste storage are also expected, but the sites will not be near areas of existing economic activity.
Dispute Settlement
Only one recent investment dispute involved an American company. A U.S. chemical firm opened a plant in Belgium dependent on a neighboring non-U.S. plant for inputs and as a customer for a major by-product. When the neighboring plant's environmental permit was not renewed, the U.S. company had no option but to close its own plant. It has since been involved in a lawsuit with the Flemish administration over investment incentives and the losses connected with the plant closure.
Belgium's legal system is independent of the government and is an effective means for resolving commercial disputes or protecting property rights. As in many countries, the Belgian courts labor under a growing caseload. Backlogs in the Belgian court system seem to make delays almost inevitable. There are several levels of appeal.
Bankruptcy in Belgium is covered by a law of 1851 and is under the supervision of the commercial courts. Bankruptcy applies only to businesses, not to individuals, and may be initiated by a creditor or the company. The commercial court appoints both a judge-auditor to preside over the bankruptcy proceeding and a receiver responsible for realizing the available assets to pay creditors. Belgian bankruptcy law recognizes several classes of preferred or secured creditors. Judgments in commercial cases, including bankruptcy cases, are generally made in Belgian currency. Belgium has a system under which firms in difficulty can restructure their debts through agreement with their creditors. This system is in some respects similar to chapter 11 in the U.S.
The government accepts binding international arbitration of disputes between foreign investors and the state; the most recent example being the international arbitration between the Belgian government and Sonatrach, the Algerian gas company.
Belgium is a member of the International Center for the Settlement of Investment Disputes (ICSID) and regularly includes provision for ICSID arbitration in investment agreements.
Performance Requirements and Incentives
Since the law of August 1980 on regional devolution in Belgium, investment incentives are the responsibility of Belgium's three regions: Brussels, Flanders, and Wallonia. Most tax measures designed to attract new investment, however, remain under the control of the federal government. In general, all incentives, regional or national, are available to foreign and domestic investors alike. Belgian investment incentive programs at all levels of government are limited by EU regulations and thus are kept in line with those of the other EU member states. The European Commission has tended to discourage investment incentives, in the belief that they distort the single market, impair structural change, and threaten EU convergence and social and economic cohesion. Belgium has historically been ranked near the top of the EU in industrial subsidies, including investment incentives.
In their investment policies, the regions have put new emphasis on meeting general objectives such as promoting innovation, research and development, energy saving, environmental cleanliness, exports, and most of all, employment. In order to provide coordinated service to foreign investors, the Belgian government established a Federal Agency for Foreign Investors (FAFI) in 1996 at the Ministry of Economic Affairs. This agency is very controversial with the regions, however, who have their own investment agencies and prefer that FAFI keep a low profile. In addition, the Finance Ministry has established a foreign investment tax unit to provide assistance to foreign investors in dealing with Belgian tax laws and to make the tax administration more "user friendly" for foreign investors.
Performance requirements in Belgium usually relate to the number of jobs created. There are no known cases where export targets or local purchase requirements were imposed. The government may reclaim incentives if the investor fails to meet his employment commitments. Enforcement, however, is rare. In one case, the Flemish administration sued an American firm to recover incentives after the firm was forced by environmental regulations to close its plant. The case remains before the courts.
Notwithstanding the devolution of investment subsidies to the three regions, the federal government still controls tax policy, including special tax deductions for certain types of investment: development zones, new venture capital companies, coordination centers, distribution centers, and, most recently, service centers.
Coordination Centers
Coordination centers serve companies of an international group and can perform various financial and other services such as financing, leasing, netting, re-invoicing and factoring, as well as administrative and support services. A center consists of affiliated companies maintaining at least a 20 percent direct or indirect participation in one or more other companies under common agreement. Coordination centers are granted special tax status for a period of 10 years. They can be established as branches of foreign companies or as Belgian stockholding companies and can be located anywhere in Belgium. During the 10-year period, recognized coordination centers are taxed on national income calculated as between 8 and 12 percent of a center's incurred expenses. Salary costs and financing expenses are disregarded when determining the amount of expenses to which the percentage is applied. Coordination centers are also exempt from real estate taxes, withholding taxes on dividends, withholding taxes on interest, and registration taxes. Foreign employees of a recognized coordination center do not need a work permit or professional card in Belgium. There is one employment condition, however, the center should employ in Belgium at least ten employees within two years from the beginning of its activities. There are almost 400 recognized coordination centers in Belgium, many of them American-owned.
Development Zones
High-tech investments in depressed areas of the country are eligible for a 10-year tax holiday and certain exemptions concerning the personal income taxation of their foreign executives. High-technology investment is specifically defined to include advanced data processing, software technology, microelectronics including opto-electronics, office automation, robotics, telecommunications and bioengineering. An enterprise qualifying under this scheme must employ between 20 and 200 people and have its entire operation within the development zone. Furthermore, for a maximum of three tax years and for certain assets, companies can be authorized to apply a depreciation rate that is twice the straight-line depreciation.
Distribution Centers
Belgian tax authorities have also established a special tax regime applicable to Belgian distribution centers of foreign multinational enterprises, which meet certain conditions. Recognized Belgian distribution centers pay taxes on a fixed percentage (five- percent) of their operating costs. The newly established distribution center may operate as a branch of a foreign company or a Belgian subsidiary. No specific rules apply to minimum employment or turnover, in contrast with such rules for coordination centers. Qualifying distribution centers can realize significant tax savings.
Service Centers
New tax incentives, similar to those for distribution centers, were approved for service centers by the Belgian parliament in July 1996. The Belgian government issued a tax circular designed to extend the scope of the existing incentives to intra-group service centers, including call centers, which are perceived as a major source of recent foreign investment. To qualify for the advantages of the new service center status, a number of conditions under the "corporate structure," the "intra-group condition" and the "authorized activities" must be met. Qualifying service centers must be established as Belgian resident companies. The definition of service centers only includes intra-group service centers. Interested parties will be able to obtain a tax ruling on transfer pricing for a five-year renewable period before the establishment of the service center. With respect to authorized activities, the center must be a purely operational, non-decision-making entity. Its role must be that of a mere "interface" between customers of the company and the companies of the group, or between companies of the group themselves. Any operation which, by nature, would tend to increase the turnover of companies in the group is automatically excluded.
General Tax Measures
A company may deduct from its taxable income a certain percentage of the amounts invested in new fixed assets used for business purposes in Belgium. The investment deductions only exist for R&D or energy-saving investments and for investments made by small and medium-sized enterprises. The percentage varies between 3 and 3.5 percent of all investments made. Furthermore, all companies are granted tax relief of BF 400,000 for each additional person employed in Belgium in scientific research, the development of technological potential, responsible for exports or for quality management. The American chamber of commerce has cited the level of taxation as a major concern to business. It has proposed a reduction of the corporate rate of income tax to 35 percent, a limit on the personal marginal tax rate of 50 percent and the abolition of a 3 percent crisis tax.
Non-Tariff Barriers
In Belgium, there are significant delays in providing market authorization and approval of pricing and reimbursement for new pharmaceutical products. U.S. companies are disproportionately affected by the procedural delays since they are among the most active in developing and bringing to market innovative new products.
Right to Private Ownership and Establishment
Both domestic and foreign private entities have the right to establish business enterprises. This right is well established in Belgium's constitution and in law. The right to acquire or sell interests in business enterprises is similarly protected by law.
No restrictions in Belgium apply specifically to foreign investors. Foreign interests may enter into joint ventures and partnerships on the same basis as domestic parties, except for certain professions such as doctors, lawyers, accountants and architects. All investors, Belgian or foreign, must obtain special permission to open department stores, provide transportation services, produce and sell certain food items, cut and polish diamonds, or sell firearms and ammunition.
There is competitive equality between public and private enterprises with respect to market access, credit and other business operations such as licenses and supplies.
Protection of Property Rights
Property rights in Belgium are well protected in law. The courts are independent and effective in enforcing property rights. Belgium generally meets very high standards in the protection of intellectual property rights. Rights granted under American patent, trademark, or copyright law can be enforced in the United States, its territories and possessions only. The EU, for its part, has taken a number of initiatives to provide intellectual property protection, but not all measures have been implemented. In cases of non-implementation, national laws still prevail.
Patents
Belgium is a member of the World Intellectual Property Organization (WIPO) and the European Patent Convention (EPC). Under Belgian law, national authorities automatically grant a patent for a period of six years upon application. Applicants desiring protection for twenty years must request a novelty and non-obviousness search together with their application. However, the Belgian patent office cannot refuse to issue a patent. A single European patent, valid throughout the EU, does not yet exist since the community patent convention has not yet come into force. In the meantime, the patent applicant can choose between a national and a multiple-country patent. In the latter case, a single application to the European patent office in Munich is required for obtaining patents valid in a number of countries within the EU, as well as Liechtenstein, Monaco and Switzerland. A patent thus granted will not be valid in Belgium unless a copy of the grant in one of Belgium's three official languages is filed with the Belgian office of industrial property described below.
Trademarks
An EU trademark office has been established in Alicante, Spain. Applications for EU trademarks should be directed to this office. Trademarks in Belgium are regulated by the uniform Benelux law of 1962, which offers protection in Belgium, the Netherlands and Luxembourg. An application for a trademark can be filed either with the Belgian national office in the ministry of economic affairs or with the Benelux trademark bureau located in the Netherlands (Bankastraat 51, The Hague). A search is required to ascertain the existence of a similar trademark for the same category of product. If granted, protection lasts for ten years from the date of application and can be renewed for further periods of ten years. Trademarks must generally be used within three years of registration.
Trademark Exhaustion
An EU directive regarding trademarks applies the principle of community exhaustion, under which parallel imports into the European community are prohibited without the approval of the trademark holder or his authorized distributor. Belgium and its Benelux partners previously applied the principle of universal exhaustion under which parallel imports were allowed. A few cases have reached the Belgian commercial courts, which have returned divergent opinions as to whether community exhaustion has replaced universal exhaustion in Belgium. Copyrights
Belgium is a member of the Bern convention and the Universal Copyright Convention of Geneva (UCC). As a member of the UCC, to which the United States and 50 other countries belong, Belgium accords automatic copyright protection to works produced in other UCC countries. Protection exists for the life of the author, plus 70 years after death. In addition, Belgium has passed a revised copyright law in 1994, which brings Belgian practice into conformity with existing EU directives. EU directives, however, permit some variation among member states, and U.S. firms wishing to protect their copyrights in Belgium should consult local legal counsel. Neither the U.S. nor Belgium are parties to the Rome convention. National treatment of foreign rightholders is a basic principle, defined in the 1994 Belgian copyright law. However, if Belgian rightholders benefit from less generous protection in a foreign country, the principle of reciprocity applies to the citizens of that country. This is the case for the U.S., which does not grant protection of neighboring rights to Belgian artists or performers, nor to Belgian producers of records and movies. As a consequence, U.S. citizens in Belgium are subject to the same restrictions. According to the Business Software Alliance (BSA), about 36 percent of all software circulating in Belgium is used in violation of copyright laws; this is about average for the EU. Designs
Applications for the registration of a design are filed with the Benelux office for designs and models or with the Ministry of Economic Affairs. The inherent validity of the design or model is not examined. This will only be decided by a court in the event of a dispute. Protection is granted for five years and is renewable twice.
TRIPS
Belgium has fully implemented the World Trade Organization (WTO) agreement on Trade Related aspects of Intellectual Property Rights (TRIPS).
Transparency of the Regulatory System
The Belgian government has adopted a generally transparent policy and effective laws to foster competition. Tax, labor, health, safety and other laws and policies to avoid distortions or impediments to the efficient mobilization and allocation of investment exist comparable to those in other European Union member states. Nevertheless, foreign and domestic investors in some sectors face stringent regulations designed to protect small and medium-sized enterprises. Many companies in Belgium also try to limit their number of employees to 49 -- the threshold above which a number of employee committees such as one for safety, and another one regarding trade union interests, have to be set up.
Furthermore, the federal government, recognizing there was a need to streamline administrative procedures in many areas, in 1998 set up a special task force to simplify official procedures. It also agreed to reorganize the numerous new laws regarding the telecommunications sector into one comprehensive volume, after new entrants in this sector had complained about a lack of transparency. The Belgian employers' Federation estimates the extra costs related to the latter at BF 5 billion per year. The American Chamber of Commerce has called attention to the adverse impact of cumbersome procedures and unnecessary red tape on foreign investors, although foreign companies do not necessarily suffer more from this than Belgian firms.
Efficient Capital Markets and Portfolio Investment
Belgium has in place policies to facilitate the free flow of financial resources. Credit is allocated at market rates and is sufficient available to foreign and domestic investors without discrimination. Belgium is fully served by the international banking community and is implementing all relevant EU financial directives.
Because the Belgian economy is directed towards international trade, more than half of its banking activities involve foreign countries. Belgium's major banks are represented in the financial and commercial centers of dozens of countries by subsidiaries, branch offices, and representative offices. There are 83 banks in Belgium, including 18 branches of foreign banks. Belgium is one of the most heavily banked countries in the world. Mergers and acquisitions have been a prominent feature in the Belgian banking sector throughout the nineties. Belgium's three largest banks have combined assets of $370 billion. The total assets of the banking system are approximately $668 billion. The banking system is considered sound. The country's banks use modern, automated systems for domestic and international transactions. The Society for Worldwide Interbank Financial Telecommunications (SWIFT) has its headquarters in Brussels. Euroclear, a clearing entity for transactions in stocks and other securities, is also located in Brussels.
Belgium also has a well-established stock market, in fact, the first stock market ever was organized in Antwerp in the 14th century. A company may increase its capital either by capitalizing reserves or by issuing new shares. An increase in capital requires a legal registration procedure. New shares may be offered either to the public or to existing shareholders. Public notice is not required if the offer is to existing shareholders, who may subscribe to the new shares directly. An issue of bonds to the public is subject to the same requirements as those for a public issue of shares. The company's capital must be entirely paid up, and existing shareholders must be given preferential subscription rights.
Belgium is also home to the European Association of Securities Dealers Automated Quotation Exchange (EASDAQ), opened in 1996. Patterned after the American NASDAQ electronic exchange, EASDAQ is designed as a market for young, dynamic, fast growing European companies with international ambitions. As of mid-1999, EASDAQ had attracted 44 listings.
Inward portfolio investment is not impeded by any regulation or laws. Bonds exist in both bearer and registered form. The shares of Belgian listed companies may be bought and sold freely by foreign investors through the Brussels Stock Exchange (BSE) or through other European exchanges (notably London) which make a market in Belgian shares.
In Belgium, there are many cases of cross-shareholding and stable shareholder arrangements, but never with the intent to keep out foreign investors. Likewise, anti-takeover defenses are designed to protect against all potential hostile takeovers and not primarily foreign hostile takeovers.
Political Violence
There have been nine incidents of politically motivated damage to fast food chains (Belgian and others) in Belgium in the last three years. The perpetrators claimed to act on behalf of the Animal Liberation Front (ALF). Corruption
On March 23, 1999, new anti-bribery legislation came into force in Belgium. The new law represents a complete revision of Belgian criminal law in the field of corruption, also extending the competence of Belgian courts to extraterritorial bribery. Henceforth, bribing international officials is a criminal offense in Belgium, even if done abroad. In the law, the definition of corruption is extended considerably. In the future, it will count as passive bribery if a government official or employer requests or accepts a benefit for himself or somebody else in exchange for behaving in a certain way. Active bribery is defined as the proposal of a promise or benefit in exchange for behaving in a certain way. In the past, anti-corruption law did not cover attempts at passive bribery. The most controversial innovation is the introduction of the concept of 'private corruption', i.e., corruption among private individuals. Corruption by public officials carries heavy fines and/or imprisonment between 5 and 10 years. Private individuals face similar fines and slightly shorter prison terms (between six months and 2 years). The new law is fully consistent with the EU convention criminalizing corruption within the EU territory signed in may 1997 and the OECD anti-bribery convention of December 1997. The new law not only holds individuals accountable, but also the company they are working for. Contrary to earlier legislation, payment of bribes to secure or maintain public procurement or administrative authorization through bribery in foreign countries is no longer tax deductible. Recent court cases in Belgium suggest that corruption is most serious in government procurement, defense contracting, and public works contracting. American companies have not, however, identified corruption as a barrier to investment.
The responsibility for enforcing corruption laws is shared by the Ministry of Justice through investigating magistrates of the courts and the Ministry of the Interior through the Gendarmerie, which has jurisdiction in all criminal cases. A special unit, the Central Service for Combating Corruption, has been created for enforcement purposes, but still lacks the necessary staff.
In a recent corruption case, eight persons were convicted, including a former defense minister. The court found that the minister's immediate staff (called the cabinet in Belgium) had ordered surveys and research projects from a research institute. The institute refunded part of its fees to the minister's staff, which used the money to pay the salaries of certain ministerial aides, and for campaign funds. The former minister was given a suspended two-year prison sentence, a BF 200,000 fine, and a five-year suspension of his civil and political rights.
The Court of Cassation (Belgium's highest court) has conducted an investigation into corruption cases regarding the 1988 Agusta helicopter contract and contracts won by the French Dassault enterprise in 1988 for the update of mirage fighters and for supplying electronic counter measures (ECM) equipment for Belgium's F-16 fighters. The investigation resulted in the conviction of ten high-ranking Belgian officials, the highest one being the former secretary general of NATO.
Criminality continues to be on the rise in Belgium: in 1997 (the last year for which official statistics are available), 2,816 burglaries (an increase by 12 percent over 1996) were reported, as well as 38,851 car thefts (up 3.5 percent), 15,885 shoplifting cases (up 13.7 percent), 7,086 muggings (up 2.3 percent) and 845 hold-ups (up 34.9 percent). Although most of the above-mentioned crimes were non-violent, this trend, particularly the stark increase in hold-ups (violent by definition), has been a serious cause of concern to the Belgian authorities. Many American companies are factoring in the crime rate in their assessments to invest in Belgium.
Bilateral Investment Agreements
Belgium has bilateral investment treaties in force with Tunisia, Morocco, Indonesia, the Republic of Korea, Congo, Egypt, Romania, Singapore, Malaysia, Cameroon, Bangladesh, Sri Lanka, Rwanda, China, Hungary, Turkey, Malta, Poland, Bulgaria, Russia, Burundi, the Czech Republic, the Slovak Republic, Argentina, Vietnam, Cyprus, Uruguay, Chili and Latvia. Additionally, Belgium and Luxembourg have jointly signed (as the BLEU) as-yet-unimplemented agreements with Cuba, Bulgaria, Liberia, Mauritania, and Thailand. Belgium and Luxembourg also have joint investment treaties with Poland and Russia, but these are not BLEU agreements. All these agreements provide for mutual protection of investments.
OPIC and Other Investment Insurance Programs
Belgium, as a developed country, does not qualify for OPIC programs. Apparently no investment insurance programs for Belgium are operated by other countries.
Labor
The Belgian labor force is well trained, highly motivated and very productive. Workers have an excellent command of foreign languages, particularly in Flanders and the Brussels region. There is a low unemployment rate among skilled workers, such as local managers. Employers may hire Belgian or EU nationals. Non-EU nationals must first apply for work permits. Minimum wages vary according to the age and responsibility level of the employee and are cost-of-living adjusted.
Belgian workers are highly unionized (63 percent of the work force), and usually enjoy good salaries and benefits. According to a recent study, Belgian wage and social contributions, together with those in Germany, are among the highest in Western Europe. In recent years the unemployment rate as measured according to the EU's definition has gone down slowly (in early 1999 it was 8 percent, one percent below the EU average). High wage levels and pockets of high unemployment coexist because most of Belgium's long-term unemployed are virtually unemployable without major retraining -- their overall educational level is significantly lower than that of the general population. As a consequence of the high wage costs, over the years, employers have tended to invest more in capital than in labor. At the same time, a shortage exists for workers with training in computer hardware and software, automation and marketing. The resulting bottlenecks cause wage pressures.
Belgium's comprehensive social security package is composed of five major elements: family allowance, unemployment insurance, retirement, medical benefits and a sick leave program which guarantees salary in event of illness. Currently, average employer payments to the social security system stand at 35 percent of salary, while employee contributions comprise 13 percent. In addition, many private companies offer supplemental programs for medical benefits and retirement.
Belgian labor unions, while maintaining a national superstructure, are, in effect, divided along linguistic lines. The two main confederations, the Confederation of Christian Unions and the General Labor Federation of Belgium, maintain close relationships with the Christian Democratic and Socialist political parties, respectively. They exert a strong influence in the country -- politically and socially. A national bargaining process covers inter-professional agreements, which the trade union confederations negotiate biennially with the government and the employers' associations. In addition to these negotiations, bargaining on wages and working conditions takes place in the various industrial sectors and at the plant level.
Foreign firms, which generally pay well, usually enjoy harmonious labor relations. Nonetheless, problems can occur, particularly in connection with the shutting down or restructuring of operations. Many strikes are one-day symbolic actions, but longer industrial actions have occurred. Firing a Belgian employee can be very expensive. An employee may be dismissed immediately for cause, such as embezzlement or other illegal activity; but when a reduction in force occurs, the procedure is far more complicated. For white-collar workers, the minimum standard is three months' notice or severance pay, or a combination of the two, for each five-year period or fraction thereof the employee has worked for the company. In the case of blue-collar workers, the minimum is four weeks' notice or the wage equivalent. Belgium is a strict adherent to ILO labor conventions.
In those instances where the employer and employee cannot agree on the amount of severance pay or indemnity, the case is referred to the courts for a decision. To avoid these complications, some firms consider providing for a "trial period" (of up to one year) in any employer-employee contract.
Belgium was one of the first countries in the EU to harmonize its legislation with the EU Works Council Directive of December 1994. Its flexible approach to the consultation and information requirements specified in the directive is more advantageous to foreign companies than that of other EU member states.
Foreign Trade Zones/Free Ports
There are no foreign trade zones or free ports as such in Belgium. However, the country utilizes the concept of customs warehouse. A customs warehouse is a warehouse approved by the customs authorities, where imported goods may be stored without payment of customs duties and vat. Only non-European Union goods can be placed under a customs warehouse regime. In principle, non-EU goods of any kind may be admitted regardless of their nature, quantity, and country of origin or destination.
Individuals and companies wishing to operate a customs warehouse must be established in the EU and obtain authorization from the customs authorities. Authorization may be obtained by filing a written request and by demonstrating an economic need for the warehouse.
FOREIGN DIRECT INVESTMENT STATISTICS
TABLE I
Belgian Direct Investment Position In the U.S.
1994 - 1997
(Millions of Dollars)1994 1995 1996 1997 PETROLEUM NA NA NA 1265 MANUFACTURING 2293 2828 2219 2690 WHOLESALING 322 356 482 812 RETAIL TRADE 683 730 806 882 BANKING NA NA NA NA FINANCE NA 77 NA NA INSURANCE NA NA NA NA REAL ESTATE 60 58 57 56 SERVICES 44 13 129 122 OTHER 190 329 423 433 TOTAL 4331 4397 4838 6771 SOURCE: United States Department of Commerce, Survey of Current Business, September 1998 TABLE II U.S. DIRECT INVESTMENT POSITION IN BELGIUM 1994 - 1997 (Millions of Dollars) 1994 1995 1996 1997 PETROLEUM 165 155 224 237 MANUFACTURING 7470 9026 8251 8788 WHOLESALING 1866 2168 2221 2102 BANKING 245 NA 280 252 FINANCE 3426 5121 4814 4066 SERVICES 1470 1934 1329 1364 OTHER 63 NA 865 594 TOTAL 14714 18706 17984 17403 SOURCE: United States Department of Commerce, Survey of Current Business, October 1998 TABLE III FOREIGN DIRECT INVESTMENT IN THE BLEU (Billions of BF) 1989-1998 Total foreign direct investments: 2,470 (68.1 billion U.S. dollars) Total U.S. investments 1989-1998: 271 (7.5 billion U.S. dollars) Principal sources of foreign investment in Belgium 1989-1998: Netherlands: 21.9 percent GERMANY: 17.1 percent France: 16.0 percent U.S.: 11.0 percent Source: National Bank of Belgium - Direct Investment Flows in the BLEU (Belgian-Luxembourg Economic Union) - 1998
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[end of document] Note* International Copyright, United States Government, 1998 (or other year of first publication). All rights under foreign copyright laws are reserved. All portions of this publication are protected against any type or form of reproduction, communications to the public and the preparation of adaptations, arrangement and alterations outside the United States. U. S. copyright is not asserted under the U.S. Copyright Law, Title17, United States Code.
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