Speech of the Prime Minister Yves Leterme at theLunch Belgian investors
30/01/2010
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Your Royal Highnesses, Excellencies, Mrs. Schwab, Ladies and Gentlemen,
Let me first thank you all for your presence today which is a clear indication of your interest for Belgium and of your willingness to strengthen your ties with our country. I would like to thank His Royal Highness Prince Philippe for his introduction and I join him in thanking you for your friendship.
Ladies and Gentlemen,
There were times that one could speak of ‘national economies’ in the strict sense of the word. Today, in a globalized world, every national economy is part of the global economy we live in. All national economies are more or less open. This openness is a driving force of welfare and progress. According to the so-called KOF index of globalization, Belgium is the most globalized economy in the world. Openness means prosperity. But openness also means that the worldwide financial and economic crisis of 2008 did not pass by Belgium unnoticed.
The Belgian banking sector was hit hard in the immediate slipstream of the fall of Lehman Brothers. A forceful reaction of the Belgian authorities ensured that our banks have been recapitalized or have gone up in larger structures, and reforms to the banking supervisory system have reaffirmed our Belgian banks as credit worthy institutions on which you can count.
The crisis of the financial system at the end of 2008 led to a crisis of confidence: consumers stopped buying, international trade stalled and production stopped. We have seen a sudden and dramatic standstill in economic activity.
Together with other governments, the Belgian authorities took action to revive confidence of consumers and companies alike:
- The government decided upon a structural general reduction in labor charges, a reduction of labor taxes for researchers and a generous reduction of taxes for night- and shift-work. These recent measures make the well-skilled Belgian worker really cost-effective.
- We reinforced our existing system for temporary unemployment for blue collar workers and expanded it to white collar workers. This allows companies to reduce fixed costs during periods of low demand in the coming months.
- Besides these measures for companies, the government also boosted the confidence of consumers by increasing their purchasing power and by temporary measures such as the reduction of VAT on construction.
These measures contributed to getting Belgium out of this first phase of the crisis relatively unscattered. GDP declined only with -2.9% versus -4% in the Eurozone. Unemployment only rose with 1.1 percentage point, only half the rise in the EU. The confidence of Belgian companies was in December back at its historic average. GDP turned positive with a healthy 0.5% on a quarterly basis in the third quarter and for next year the latest consensus forecast is 1.5% (according to the Belgium Prime News of January).
On public finances, our deficit is lower than the EU average in 2009. Moreover, all governments took measures so that the deficit fell from -5.9% to -4.8% in 2010. In doing so, we follow the suggestions from the European Commission to reduce our deficit on average by 0.75% per year in structural terms. In the new Stability Program, the Belgian authorities foresee to achieve the 3 percent threshold by 2012.
My ambition for 2010 is it to be the year of the recovery. I have invited all Belgian authorities and representatives of employers and trade unions to sit together in order to improve our collaboration around five themes in which Belgium already performs well but on which we should strive for excellence to increase our potential growth and boost our attractiveness to companies:
1) One, the labour market: labour productivity expressed per hour of work is the third highest in the world, it is even 10 percent higher in Belgium than in the USA. With reductions in taxation on labour and moderate wage agreements, Belgium aims to be competitive on wage and to remain better on productivity than it’s neighbouring countries.
2) Two, R&D and innovation: Belgium is a world leader for so-called ‘in-house product innovators’, this is innovation developed within the firm. An astonishing 55 percent of all large Belgian companies develop ‘in house innovations’. Belgium is also world class in chemicals and pharmaceuticals. To make research attractive the federal government offers a very generous tax system for researchers.
3) Three, education and training: a highly skilled, motivated and multilingual labour force is at the origin of our very high labour productivity. The education system, especially at secondary level, is among the world top performers, according to the OECD Pisa score.
4) Four, infrastructure: Belgian economy is centrally located. Approximately two thirds of Europe’s Gross Domestic Product is produced within 300 kilometer from Brussels and Antwerp. It is therefore no wonder that Belgium is a logistic country. We trade a significant share of imports and exports with the Eurozone, itself the largest trading block of the whole world. Because our ports, Antwerp, Ghent and Zeebrugge are so important, the government is now working to facilitate trade even further, by, for instance, reducing and streamlining formalities and by cutting red tape for ships harbouring our ports.
5) Five, attracting Foreign Direct Investment: Belgium is an attractive country for foreign investors. It is therefore no wonder that Belgium attracted, on average during the last years, FDI amounting to around 12% of GDP. Other top destinations for FDI in Europe, like Ireland and the Czech Republic, attract FDI around 4% of GDP. Apart from lowering the wage cost, the fiscal competitiveness of companies has also been boosted in recent years by well targeted measures such as the notional interest deduction scheme – which is a worthy successor to the much praised coordination centers, the tax ruling, and since last year, the partial tax exemption of income from patents. All these fiscal measures make Belgium an even more attractive location to invest!
Finally, allow me to end with a short remark on the Belgium Presidency of the Council in the second half of the year. That presidency is a great opportunity for Belgium to present itself to the economic world. But I assure you, it will be a priority of the Belgian EU presidency to contribute to further European integration and consolidation, now that de Lisbon Treaty has come into effect. The answer to the economic problems we are facing is the enactment of clear, strong and enforceable European rules for fair and open markets where access and competitivity go together with innovation and investment.
For the first time a European regional meeting of the World Economic Forum will take place soon in Brussels, on 10 and 11 May, 2010. I am particularly pleased that this event is scheduled at this very appropriate time and I would like to conclude by inviting you all to Brussels on this occasion.
