Countries of the World/COUNTRYS.BIN/dp/0035/00353.txt

Text File | 1991-06-24 | 29KB | 451 lines

$Unique_ID{COW00353}
$Pretitle{370}
$Title{Belgium
Chapter 3B.   Planning and Industrial Policy}
$Subtitle{}
$Author{Millicent H. Schwenk}
$Affiliation{HQ, Department of the Army}
$Subject{percent
economic
regional
employment
government
labor
unemployment
national
industry
investment}
$Date{1984}
$Log{Flanders*0035301.scf
}
Country:     Belgium
Book:        Belgium, A Country Study
Author:      Millicent H. Schwenk
Affiliation: HQ, Department of the Army
Date:        1984

Chapter 3B.   Planning and Industrial Policy

     The first step toward a greater government role in the economy, beyond
staving off disequilibrium, was the establishment of an economic planning
bureau within the Ministry of Economic Affairs in 1959. The function of the
Planning Bureau has been to formulate, after appropriate study, broad
guidelines for economic expansion, including public investment, in the form of
five-year plans. In 1962 its responsibilities were expanded to encompass
regional planning, but since the late 1970s, this responsibility has fully
devolved to the regions (see Regionalization, this ch.). Nevertheless, the
Planning Bureau, composed of representatives from the public administration,
private industry, scientific circles, and trade unions, still makes important
medium- and long-term economic forecasts.

     Planning originally imposed no obligations on enterprises, but a 1967
royal decree included private holding companies in the planning process. Each
year they have been required to submit to the Planning Bureau details of their
planned investments, including those of their affiliates in Belgium and
abroad. Implementation of the plan has, however been indicative for most of
the private sector, merely providing a summary of market conditions and an
indication of the trend of economic and social development promoted by the
government. In actuality, private economic decisions have not been greatly
influenced by the plan.

     Industrial policy and planning objectives in 1984 basically rested on the
tenets of the Claes Plan, submitted to parliament by the minister of economic
affairs, Willy Claes, in 1978. The paper called for the restoration and
modernization of declining sectors, specialization and diversification in
products with higher value added (see Glossary), stimulation of technological
research, and export promotion. Special attention was to be given to
small- and medium-sized enterprises to develop new products aimed at export
markets. Such a program would require a long and sustained effort, but the
government had numerous tools to draw on.

     To promote industrial and commercial investment in line with planning
objectives, the government has relied extensively on fiscal and financial
incentives. Aid has taken the form of interest rate subsidies, capital or
employment grants, tax relief, and government guarantees on commercial loans.
The scope of the first investment incentive law, the General Expansion Act of
1959, still in effect in 1984, was broad. It provided for government aid to
firms whose establishment would stimulate economic expansion or introduce
productive industries anywhere in Belgium. The Regional Expansion Act of 1970
provided for broader incentives in specified development zones where economic
problems are the most acute, as well as regional aid in new, dynamic sectors
outside the development zones. Depending on the project location, grant
incentives in development zones (which in 1983 covered areas holding over
one-third of the population) could not exceed 15 or 20 percent of investment
after tax. In July 1982 the Commission of the European Communities granted
approval for most of Wallonia to be covered by these zones, but only the
Kempenland coal mining area and the Westhoek area of West-Vlaanderen in the
Flemish region qualified. For implementing the incentives legislation, the
Fund for Economic Expansion and Regional Reconversion was established,
capitalized through the budgets of various ministries and by certain tax
receipts.

     Since late 1982 the government, guided by a more market-oriented
approach, has gradually been replacing subsidies and other incentives to
stimulate investment in new industries by fiscal measures. These included a
reduction of corporate taxes from 48 to 45 percent and increased deductions
for investment outlays. In addition, employment zones-T-zones-and coordination
centers were developed to encourage foreign investment. T-zones were to be
created in geographically delimited areas reserved for the establishment of
new industrial or service facilities engaged in advanced data processing,
software technology, microelectronics, office automation, robotics,
telecommunications, and biotechnology. Those that had their headquarters and
facilities inside these zones could be exempted from corporate income taxation
for a period of 10 years. Coordination centers offered a similar exemption,
but their purpose was to encourage the development and centralization of
corporate research, management, and auxiliary activities in Belgium. Both
employment zones and coordination centers extended benefits on a
nondiscriminatory basis to domestic and foreign firms that met specified size
and employment conditions. In addition, foreign executives and researchers
would be exempt from work permit requirements and contributions to Belgian
social security. Twenty-two coordination centers had been established by the
end of March 1984, over half involved in some form of global treasury
management.

     Beyond investment incentives, the government's main instrument for
implementing its industrial policy and providing financial aid to high-risk
and ailing enterprises is the National Investment Company (NIM/SNI), created
in 1962 (see National Sectors, this ch.). In addition to providing public
venture capital for the setting up, reorganization, or expansion of both
Belgian and foreign companies, the NIM/SNI can conduct all operations in
financing and real estate, buy stock in private companies, and even create
public companies when the private sector fails to take certain initiatives the
NIM/SNI considers desirable. The NIM/SNI is assisted in its operation by many
specialized affiliates, including the Belgian Company for International
Investments, which deals with financing overseas investments, and the Office
for Industrial Promotion, which provides research support to the private
sector. NIM/SNI activities are also supplemented by three regional investment
companies, constituted by the Law of Economic Reorientation of 1978. The
activities of the regional investment companies mirror those of the NIM/SNI,
except that they are focused on the regions and are capitalized through the
regional budgets.

     The NIM/SNI has grown rapidly; between October 1979 and September 1982,
the value of its investments and public initiatives totaled approximately
BFl5.5 billion. Restructuring operations on the part of the state are not
included in this total but are much more costly. By 1983 the NIM/SNI had a
significant, ongoing stake in more than 120 commercial, industrial, and
service firms, employing 22,000 persons. More than three-fifths of the
companies that the NIM/SNI aided were export-oriented in recognition of the
vital role trade plays in Belgian economic growth, while some 85 percent were
small- to medium-sized companies unable to obtain bank capital. Slightly more
than one-half were new companies. In choosing candidates for financial
assistance, emphasis was laid on productive investments in sectors like energy
and high technology. In July 1984 it was reported that the Belgian cabinet
intended to raise NIM/SNI resources, despite continuous pleas from Liberals
for greater privatization in industry.

[See Flanders: Well-tended fields, industry, and historic towns characterize
the coastal lowlands of Flanders. Courtesy Belgium Information and
Documentation Institute]

Regionalization

     Under political pressure the application of the investment incentive
laws and planning