Already two years ago, AmCham Belgium set the challenge and ambition for Belgium to achieve a top ten position in the World Economic Forum’s (WEF) Global Competitiveness Index (GCI) by 2030, up from 22nd today.
However, as 2020 was a turbulent year for economies around the world, the comparative Global Competitiveness Index was paused for the first time since 1979 and replaced by a Special Edition, published in December 2020. For this edition, the World Economic Forum took a fundamental look at how countries should think about revival and transformation as they recover and redesign their economic systems, with a particular focus on productivity, people and planet.
As a result, the GCI was replaced by a Transformation Readiness Performance Index for which countries received a score based on the following eleven priorities that are relevant in an economic transformation:
The Eleven Priorities
- Ensure public institutions embed strong governance principles, build a long-term vision and establish trust by serving their citizens
- Upgrade infrastructure to accelerate the energy transition and broaden access to electricity and ICT
- Shift to more progressive taxation, rethinking how corporations, wealth and labor are taxed, nationally and in an international cooperative framework
- Update education curricula and expand investment in the skills needed for jobs and “markets of tomorrow”
- Rethink labor laws and social protection for the new economy and the new needs of the workforce
- Expand eldercare, childcare and healthcare infrastructure and innovation for the benefit of people and the economy
- Increase incentives to direct financial resources towards long-term investments, strengthen stability and expand inclusion
- Rethink competition and anti-trust frameworks needed in the Fourth Industrial Revolution, ensuring market access, both locally and internationally
- Facilitate the creation of “markets of tomorrow”, especially in areas that require public-private collaboration
- Incentivize and expand patient investments in research, innovation and invention that can create new “markets of tomorrow”
- Incentivize firms to embrace diversity, equity and inclusion to enhance creativity
The good news is that Belgium performs second best amongst its neighbors, with a score of 63.6 of 100, in the aggregated 2020 Economic Transformation Readiness Performance table. Germany (62.9), France (62.7) and the UK (61.4) score lower, while the Netherlands comes out on top with 66.3.
Let’s take a closer look at the five WEF priorities, which roughly correspond to the five themes identified in our 2020 Priorities for a Prosperous Belgium: institutions (1), infrastructure (2), taxation (3), labor laws (5) and healthcare infrastructure (6).
On institutions (1), which relates to our recommendations on country governance, Belgium has a lower score than all of our neighboring countries, and thus a lot of potential to develop a long-term vision, enhance its responsiveness to change and build more trust in its institutions. To manage upcoming challenges and put the state at the service of citizens and companies, Belgium needs to simplify the way the country is organized and governed. Simplicity is key to attract and retain foreign investment and achieve sustainable economic growth, which is needed even more to successfully cope with the economic aftermath of the COVID-19 pandemic. AmCham Belgium urges policymakers to manage the country more efficiently – for instance by avoiding the fragmentation of competencies between different levels of government.
Concerning infrastructure (2), which is based on transport, energy and digital networks, only the Netherlands scores better but with a significant difference. AmCham Belgium recommends investing in public transport and promoting multimodality between private and public transport modes as well as implementing smart mobility solutions. Additionally, Belgium will need to incentivize investments in low-carbon technologies, such as carbon capture and storage, and build out the long-awaited 5G network as quickly as possible, to make sure we do not experience competitive disadvantages.
On taxation (3), Belgium has the second worst score but follows very closely behind Germany and the UK. Important here is to note that the assessment of the countries’ transformation readiness does not measure the competitiveness of the (corporate) taxation system, but is an aggregate of many tax-related factors. AmCham Belgium recommends the Belgian governments to focus, through taxation, on making sure the right incentives for innovation and investment are set, which can prepare the country for the future. This can be done by adjusting the tax framework to today’s realities, by following international taxation standards and by reducing the cost of labor through increasing flexibility, granting tax-friendly incentives to highly skilled employees and re-introducing a cap on employer social security contributions. Above all, trust, stability and future orientation are essential factors for companies looking to invest – all of which have zero or limited impact on the budget.
On labor laws (5), Belgium has again the second worst score, with only France scoring lower. AmCham Belgium recommends improving the flexibility of work organization and remuneration to promote job creation and talent acquisition. A flexible law on teleworking, which is here to stay after the pandemic, is just one example we advocate for. To improve its attractiveness to foreign investors, Belgium needs to further reduce the cost of labor and encourage the development of STEM and digital skills.
On healthcare infrastructure (6), Belgium takes the silver medal, behind only the Netherlands. The score is measured by proxies like public expenditure on healthcare, childcare and education as well as the ratio of care workers to the elder population. Although Belgium performs well here compared to its neighbors, to enable sustainable growth in this sector and to attract more substantial investments, the government needs to invest in a long-term sustainable and innovative healthcare ecosystem: research & development, early and broad access to healthcare innovation, and ultimately to move to lifelong value-based healthcare for all. We are currently advancing these goals through our Year of Healthcare.
Even in this Special Edition of the Global Competitiveness Report, the priorities of the World Economic Forum closely reflect our own priorities for a prosperous Belgium. Our recommendations on country governance, labor market, taxation, mobility & infrastructure and healthcare are aimed at helping Belgium to climb the ranks of international competitiveness. This will ultimately depend on better collaboration between the international business community and local policymakers, who need to move forward together to put Belgium on the road to recovery and long-term economic growth.
About the author
Optimistic and always willing to discuss legal and economic developments, Gauthier translates expertise from our members to new policy opportunities for the Chamber. He gets his energy from either sports or breakfast.