Belgium. GDP Per Capita, PPS 2001

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1 BELGIUM * 1. REGIONAL DISPARITIES AND PROBLEMS In Belgium, the regional problem is primarily associated with the impact of industrial restructuring and decline. This is especially so in Wallonia where economic activities were previously dominated by coal, steel and other traditional heavy industries; it is also true in parts of Flanders, notably Limburg, where the textile industry was particularly important. Figure 1: Belgium Source: Table 1: Socio-economic indicators in Belgium (NUTS II) Belgium Population (000) 2001 GDP Per Capita, PPS 2001 Employment by sector (% of total) 2002 Unemployment Rate (%) EU15=100 EU25=100 Agric. Ind. Services Regions Reg. Bruxelles- Cap Vlaams Gewest Antwerpen Limburg Oost-Vlaanderen Vlaams Brabant West-Vlaanderen Région Wallonne Brabant Wallon Hainaut Liège Luxembourg Namur Total Source: Eurostat (unemployment rates) and Third Report on Economic and Social Cohesion (European Commission, Brussels, 2004). 1

2 2. NATIONAL REGIONAL POLICY OBJECTIVES Regional policy is the responsibility of the regional level in Belgium the Flemish and Wallonian regional governments. Devolution of responsibility has resulted in different policy objectives being pursued by Flanders and Wallonia. In Flanders, the emphasis has increasingly been on attracting and developing investments deemed to be of strategic importance to the region. The aim is to secure projects that incorporate a development dynamic such as those involving significant R&D activity, substantial export growth or the introduction of new production methods. There is also an explicit emphasis on the attraction of inward investment. In Wallonia, the policy focus is on job creation. Policy is targeted at large firms generating significant employment. 3. INSTITUTIONAL ARRANGEMENTS Reflecting the federal institutional structure in Belgium, responsibility for regional policy lies with the sub-national tier, the Flanders, Walloon and Brussels regional governments. Historically, the legal basis for regional policy has been provided for under national framework legislation, the 1970 Economic Expansion Law, but the regional governments (until 2000, just Flanders and Wallonia) 1 have been responsible for the implementation of policy. The 1970 Law provided a framework for regional incentive policy within which the Flanders and Walloon governments passed appropriate secondary legislation to establish the main lines and conditions of policy within their jurisdictions. This approach is now breaking down. Framework legislation for regional aid has been established in Flanders and is under development in Wallonia. This reflects the fact that regional economic development is a regional responsibility under the Belgian federal structure. Table 2: Territorial Units in Belgium Unit Type Designation Number of Units Regions NUTS I 3 Provinces NUTS II 11 Arrondissements NUTS III NATIONAL REGIONAL POLICY INSTRUMENTS 4.1 Instruments While regional economic development is a regional responsibility in Belgium, a national framework for regional aid has been provided by the 1970 Economic Expansion Law. Under this legislation, a capital grant and interest subsidy are complemented by a variety of less 1 As noted, it is only since 2000 that eligible regional aid areas have been designated in the Brussels region. 2

3 important measures: a State guarantee; an accelerated depreciation allowance; and exemptions from capital registration duties and real estate income tax. Recently, the Flemish government has developed a new system of investment aid, which will gradually replace support under the 1970 Economic Expansion Law. A new framework Decree was adopted by the Flemish Parliament and sanctioned by the Flemish Government on 31 January It will be implemented via Decisions of the Flemish Government. The new framework distinguishes between tender-based aid for SMEs (available throughout the region) and discretionary large firm support (on offer only in designated aid areas). In Wallonia, a new framework decree is also in preparation but, at present, support continues to be provided under the 1970 Law. Aid takes the form of a capital grant, with rates of award determined by quantitative (automatic) and qualitative (discretionary) criteria. Complementing this general or classic aid scheme which is targeted at the designated aid areas, specific measures co-financed by the ERDF have been introduced for those firms whose new investments are located in areas eligible for Structural Fund support. 4.2 Spatial Coverage of National Regional Policy For , the population quota allocated to Belgium for aid area purposes was reduced from 35 percent to 30.9 percent. This created a major problem for the regions of Flanders, Wallonia and Brussels which had the responsibility for preparing a map within this reduced population ceilings. In the run-up to elections in June 1999, it proved impossible to agree reduced allocations at the regional level. As a consequence, the map submitted in May 1999 was simply the combination of non-coordinated regional designation exercises which exceeded the quota set. As a result, the map was rejected by the European Commission. Following prolonged negotiations, a revised map and associated aid maxima were approved on 20 September The new map involved not only the reduced population quota but also significantly lower aid ceilings. In Wallonia, they were 20, 17.5, 15 and 10 percent compared to 25, 20 and 15 percent previously, while in Flanders they were 15 and 10 percent compared with 20 and 15 percent previously. An overview of the population coverage of the different categories of aid area is provided in Table 3. A map of the designated aid areas can be found at Figure 2. Table 3: Population Coverage of Designated Aid Areas in Belgium (percent) Nge rate ceiling 20 percent 17.5 percent 15 percent 10 percent Total Wallonia Flanders Brussels Belgium

4 Figure 2: Belgian regional aid map Source: DG Competition website 5. EU PROGRAMMES For the period, almost EUR 2.34 billion have been allocated to Belgium from European Structural Funds. The country benefits from eight regional development programmes: one under Objective 1, at the phasing-out stage, regarding the Province of Hainaut (Walloon Region), and seven under Objective 2, six of which at the phasing-out stage. The Objective 2 programmes cover areas of different sizes spread over the three regions: the Region of Brussels -Capital, the Flanders (with the exclusion of Flemish Brabant) and Wallonia (with the exclusion of Hainaut and Walloon Brabant). Figure 3 shows the geographical distribution of Structural Funds for the period The allocation of funds among the various programmes is presented in Table 4. Table 4: Structural Funds to Belgium (millions of EUR) Obj. 1 Obj. 2 Obj. 3 INTERREG URBAN EQUAL LEADER+ Fisheries Total , Source: DG Regio, The European Structural Funds ( ): Belgium. 2 Inclusive of million allocated in March 2004 by the European Commission in the framework of the performance reserve designed for the most successful programmes. 4

5 Figure 3: Structural Funds for Belgium, Objective 1 Objective 2 Phasing-out (till 31/12/2005) Objective 2 Phasing-out (till 31/12/2006) Phasing-out (till 31/12/2005) Phasing-out (partly) (till 31/12/2005) Source: Reflecting the federal structure of Belgium, the management of Structural Funds is organised at regional level. In the Brussels -Capital Region the Managing Authority is the regional government. In the Walloon Region the Managing Authority is also the regional government. Programme implementation is coordinated by the European Programme Directorate at the Ministry for the Walloon Region. In Flanders Region, the Managing Authority is the Ministry of the Flemish Community. Programme implementation is managed by the provincial governments and overseen by the European Unit of the Ministry for the Flemish Community. * This paper has been prepared by the (EPRC) for the Second International Conference being held in Latvia on April