VZCZCXYZ0000
RR RUEHWEB

DE RUEHBS #1056/01 2121526
ZNR UUUUU ZZH
R 311526Z JUL 09
FM AMEMBASSY BRUSSELS
TO RUEHC/SECSTATE WASHDC 9286
INFO RUCPDOC/USDOC WASHDC
RUEHTC/AMEMBASSY THE HAGUE 8791
RUEHRL/AMEMBASSY BERLIN 1675
RUEHFR/AMEMBASSY PARIS 2214
RUEHLO/AMEMBASSY LONDON 1832

UNCLAS BRUSSELS 001056 
 
SIPDIS 
 
SENSITIVE 
 
COMMERCE FOR 4212/ITA/MCA/EUR/OECA/WNE/JLEVINE 
 
E.O. 12958: N/A 
TAGS: EINV ECON BE
SUBJECT: BELGIUM: THREE REGIONAL INVESTMENT AGENCIES WORK TO ATTRACT 
FOREIGN INVESTMENT 
 
¶1.  (U) THIS REPORT IS FOR U.S. GOVERNMENT USE ONLY, AND SHOULD NOT 
BE POSTED ON THE INTERNET. 
 
SUMMARY 
------- 
 
¶2.  (U) BelgiumQs three regions -- Flanders, Wallonia, and Brussels 
-- compete among each other and against neighboring countries for 
foreign direct investment (FDI) projects.  Emboff met with each 
regionQs professional regional trade investment agency to learn 
about the strategies used to encourage investment and to determine 
the affect the economic downturn has had on investment.  All three 
pitch a similar message to prospective investors, especially those 
from the United States: Invest in Europe by coming to Belgium. 
Flanders, the Dutch-speaking northern region, has had historical 
success enticing investors with its major port facilities and 
multilingual population, marketing itself as a cost effective 
version of the Netherlands.   Wallonia, the French-speaking southern 
region, continues to develop as an investment destination, 
aggressively selling itself as a cheaper version of Flanders. 
Brussels, the capital city region and host to both the European 
Union and NATO headquarters, promotes itself as the capital of 
Europe.  The economic downturn has adversely affected Belgium, with 
the number of FDI projects down 19 percent in 2008 from 2007 levels. 
 The United States had more than double the number of FDI projects 
in 2008 than the next closest country, France.  End summary. 
 
 
BelgiumQs FDI profile 
--------------------- 
 
¶3.  (U) The United States is the leader in the number of foreign 
direct investment (FDI) projects in Belgium, followed by France, 
Germany, the Netherlands, and the United Kingdom. 
 
Number of FDI Projects in Belgium by Investor Country (source: Ernst 
and Young) 
 
Country            2005  2006  2007  2008 
 
United States        49    45    49    38 
France               23    25    21    17 
Germany              15    15    13    13 
The Netherlands      23    11    14    13 
United Kingdom       16    16    16    11 
Other                53    73    62    50 
 
Total               179   185   175   142 
 
¶4.  (U) Belgium dropped to eighth place among Western European 
countries in terms of new investment projects in 2008, with 142, as 
opposed to 175 new projects in 2007, according to Ernst and Young. 
But even with that decline, Belgium has still consistently 
outperformed its closest peer, the Netherlands, in terms of the 
quantity of new investment projects for the last several years, 
likely due to its cost competitiveness. 
 
Number of FDI Projects in Europe (Ernst and Young) 
 
Country            2005   2006   2007   2008 
 
United States       559    686    713    686 
France              538    565    541    523 
Germany             182    286    305    390 
Spain               147    212    256    211 
Poland              180    152    146    176 
Romania              86    140    150    145 
Russia              111     87    139    143 
Belgium             179    185    175    142 
Switzerland          93    136    124    125 
The Netherlands      82     95    123    116 
 
¶5. (U) All three Belgian regions measure their success based on the 
number of realized FDI projects in the region as opposed to using 
the Euro or dollar value of FDI inflows.  Their logic is that FDI 
projects represent investments in new plants, equipment, and job 
creation, as opposed to FDI inflows, which the regions say can be 
inflated by mega deals and large portfolio investments, and can 
include equity capital, reinvested earnings and intra-company loans. 
 For example, BelgiumQs stock of U.S. direct investment (USDI) was 
USD 54 billion in 2007, by itself a respectable amount, but dwarfed 
by the USDI in the United Kingdom (USD 399 billion), the Netherlands 
(USD 370 billion), and Luxembourg (USD 114 billion).  Additionally, 
though project size obviously matters, the agenciesQ emphasis is not 
 
on trying to capture the Qone large dealQ but on bringing in any 
number of targeted investments. 
 
Welcome to Belgium, Gateway to Europe 
------------------------------------- 
 
¶6. (U) BelgiumQs three regional investment agencies use the same 
marketing message:  Invest in Europe by coming to Belgium.   All 
three have done their market research and understand that the name 
QBelgiumQ does not have strong brand recognition among potential 
American and non-European investors.  Each agency has 
representatives abroad that serve either in embassies or in 
dedicated trade offices.  Through a convention that determines where 
each agency is located, representatives in many instances work for 
the other agencies to reduce duplication and ensure that every 
country is covered.  Each recognizes that its region is an entry 
point for new and continued expansion into the western European 
market, especially to neighboring France, Germany, the Netherlands, 
and the United Kingdom--and emphasizes its central location for 
logistics combined with excellent infrastructure, low-cost real 
estate (compared to the main foreign competitor, the Netherlands), 
and an educated, multilingual population.  Additionally, the regions 
also tout a particular Belgian tax incentive, the notional interest 
deduction, that has the effect of creating lower actual tax 
obligations. 
 
FDI Snapshot for the Regions 
---------------------------- 
¶7. (U) The leading sectors for both Wallonia and Flanders are in 
logistics, automotive, the food and life sciences, and high 
technology.  Flanders also has a dynamic chemical industry clustered 
around its leading port, Antwerp.  Brussels also has some investment 
in the automotive, life sciences, and high technology sectors, and 
its function as the EU capital naturally also has helped it attract 
international organizations and others who desire to be close to EU 
government decision-makers.  Some important U.S. investors in 
Brussels are Baxter, GE, Oracle, FedEx, and the Bank of New York. 
Wallonia has U.S. companies Caterpillar, Johnson & Johnson, Google, 
and Microsoft, while Flanders counts Exxon-Mobil, DuPont, Ford, 
Nike, and Proctor and Gamble. 
 
Number of FDI Projects in Belgium, By Region (Ernst and Young) 
--------------------------------------------- ----- 
                    2005    2006    2007    2008 
Brussels              31      33      42      28 
Wallonia              38      47      44      40 
Flanders             110     105      89      74 
 
Total                179     185     175     142 
 
 
Wallonia -- Trying Harder to Overcome Its Past 
--------------------------------------------- - 
 
¶8.  (U) The Wallonia Export and Inestment Agency (AWEX) (45 
employees) has the job of trying to turn WalloniaQs economic 
fortunes around.  Wallonia is home to about 40 percent of BelgiumQs 
almost 11 million inhabitants, and was once a leading industrial 
region, but its fortunes began to fall in the middle of the 20th 
century, and now it is better known for antiquated steel mills and 
high unemployment.  To try to turn things around economically, the 
regional government of Wallonia launched in 2005 its economic 
recovery program, the QMarshall Plan,Q and funded it with 1.5 
billion Euros.  The Marshall Plan has five pillars: create 
competitive clusters, stimulate business start-ups, reduce corporate 
taxes, boost research and development in association with companies, 
and generate job skills.  The plan is geared to promote Qgreenfield 
knowledge, commercial and industrial parks outside the main cities 
of each of the regionQs five provinces.   AWEX, infused with a Qwe 
try harderQ mind-set, has had some success, as the regionQs share of 
the total number of FDI projects in Belgium has increased since 
¶2005.  High profile names include Google and Microsoft.  In 2008, 
AWEX calculated that Wallonia received new project investments 
totalling 535 million Euros, 201 million Euros of which from U.S. 
investors. 
 
¶9.  (SBU) Each province in Wallonia also has its own investment 
agency that coordinates with AWEX, and each is in charge of managing 
the local Marshall Plan-based business park and ensuring investors 
needs are being met.  Most of the business parks have been 
tailor-made to fit the needs of high-tech companies.  For example, 
Wallonia hosts one of the few life science research companies in the 
world that works on specialized pathogens.  In postQs opinion, AWEX 
comes across as having a well-thought out plan to attract investment 
 
that takes advantage of its logistical assets and lower costs.  On 
the negative side, Wallonia must work to overcome its reputation as 
an economic has-been, and while its university system is good, its 
younger students score below their Flemish counterparts on most 
international tests. 
 
Flanders Still Leads 
-------------------- 
 
¶10.  (SBU) The Flanders Investment and Trade (FIT) agency (168 
employees), seeks investments to flow to the region as a logical 
consequence of the Netherlands becoming prohibitively expensive and 
logistically congested.  In emboffQs discussions with FIT officials, 
the organization came off as a professional investment agency that 
appeared to lack the drive and clearly-defined plan of AWEX, which 
attempts to promote Wallonia as a lower-cost alternative to 
Flanders.  But nonetheless, Flanders continues to attract about half 
the FDI projects in the country, with 74 in 2008 at a value around 
945 million Euros, according to FIT.  The Flemish competitive 
advantage of a well-educated population that is fluent in English 
and other languages, combined with a world-class port in Antwerp and 
excellent location to service much of Europe, still entices 
investors who may feel more comfortable with the part of Belgium 
most similar to the Netherlands.  Flanders also has a strong 
entrepreneurial bent to go with its excellent universities and 
educational system.  Its main negative is its increasingly congested 
traffic around Antwerp. 
 
Brussels Region - Selling Itself as EuropeQs Capital 
--------------------------------------------- ------- 
 
¶11.  (U) The Brussels Enterprise Agency (BEA) (58 employees) pursues 
different investors then the other two regions, seeking to leverage 
the importance of Brussels as the home of the European Union and 
North Atlantic Treaty Organization to attract government lobbying 
entities and non-governmental organizations (NGO), in addition to 
high technology companies.  Thus while Wallonia and Flanders pursue 
large and very large companies in search of greenfield projects, BEA 
is content to reach out to small and medium-sized investors, and 
tries to locate the legal or government affairs departments of large 
corporations inside the city limits.  One unique incentive that 
Brussels has successfully used is an in-house incubator office 
space, allowing companies to set up shop rent-free for three months 
while they test the waters.  BEA considers the Flanders region as a 
rival because many neighborhoods that appear to be in Brussels 
actually lie outside of the cityQs (and the Brussels regionQs) legal 
boundaries.  Thus the Brussels airport and all of its adjacent 
office buildings are actually in Flanders, and any investments 
taking place there are counted as such in FDI project rankings. 
Outside of Belgium, the city of Amsterdam is considered by BEA to be 
BrusselsQ main rival.  BEA is confident about the future of 
Brussels, even though 2008 saw a large fall in FDI projects from 
2007 levels; the agency believes that the city/regionQs role as 
EuropeQs capital will continue to increase its importance for 
investors. 
 
Promoting Regions, Not Belgium 
------------------------------ 
 
¶12.  (SBU) In a country without a strong national identity to 
prospective outside investors, where regional differences are often 
sharp, it is not surprising that each region looks to promote 
investment on its own, much as U.S. states may compete against each 
other for FDI.  WalloniaQs AWEX appears to have a solid future, due 
to its Marshall Plan, which has been endorsed by the new regional 
government elected in June, 2009.  Its emphasis on business parks 
and competitive clusters, and a high level of service to ensure 
investorQs needs are met, appear to be working for Wallonia despite 
the economic downturn.  Flanders has many of the right features to 
attract investors, such a very educated, English-speaking population 
and a first-rate location and infrastructure base, but by competing 
on price against the Netherlands, it has set itself up to be 
potentially undercut by less expensive Wallonia.  Finally, Brussels 
appears to be in a decent position, but its investment agency will 
need to continue to convince potential investors that the Qcapital 
of Europe,Q with its central location and access to decision makers, 
is reason enough to set up a new office.  And while each region has 
its legitimate attractions selling themselves as the entry point for 
investing in Europe, each also has to try to overcome issues outside 
its control, especially BelgiumQs unenviable position as one of the 
highest-taxed and most indebted countries in the European Union. 
 
BUSH