Belgium has dropped one place in the World Economic Forum’s (WEF) 2019 Global Competitiveness Index, now ranked at 22 out of 141 global economies. While many of its competitors have maintained or even improved their rankings, Belgium is moving in the wrong direction. This year, the Netherlands climbed to number four and Germany sits comfortably at number seven. So why is Belgium performing so poorly and what can be done? Let’s examine further.
As a small open economy, Belgium has much to offer to foreign investors. You can count on Belgium for macro-economic stability, given top marks by the WEF, and for skills and infrastructure, both ranked in the top 20 for another year running.
However, the status quo is not enough to attract more investment, as the competition is fierce and not sitting still. In our 2019 Priorities for a Prosperous Belgium, released in February, the Chamber set the ambitious target for Belgium to reach the top 10 in the next 10 years. How can this be achieved? AmCham Belgium has identified five key areas to address.
1. LABOR MARKET
The Belgian labor market is one of the most sophisticated, yet most expensive in the world. This year, Belgium fell further from the 37th to the 43rd spot in the WEF’s labor market pillar. Improving the flexibility of work organization and remuneration and simplifying recruitment practices (also for foreign workers) would dramatically change Belgium’s poor record in this area.
2. CORPORATE AND EMPLOYMENT TAXATION
Labor tax rates are where Belgium receives its lowest ranking in the Global Competitiveness Index, placing second to last at 140 out of 141 economies. AmCham Belgium recommends lowering corporate tax rates to below 20%, capping social security contributions to reduce the financial burden on employers – and, more generally, to create a simple and stable fiscal framework through the use of digital technology and standardization. Enhanced collaboration with tax authorities based on mutual respect will be crucial in this regard.
3. COUNTRY GOVERNANCE
The different levels of governance in Belgium can massively complicate doing business. Belgium places 94 out of 141 countries for the burden of government regulation. Simplifying administrative procedures and better coordinating policymaking is in Belgium’s interest. More efficient country governance will also create the budgetary space for the necessary reforms in terms of labor costs, taxation or for investment in infrastructure.
4. MOBILITY AND INFRASTRUCTURE
Being able to move people, products and services, physically and digitally, creates investment opportunities. Belgium must invest in its ageing physical infrastructure and improve mobility. Road Infrastructure, train efficiency and airport connectivity in Belgium all place lower than 35 in the WEF rankings. As the crossroads of Western Europe, Belgium needs to be a seamlessly adaptable and well-functioning mobility hub. It must also better support digital infrastructure in order to attract new investments.
Healthcare today needs more support for fostering innovative methods and practices. Digital technologies can open new pathways to better patient care. Working towards a government program to anticipate future healthcare needs, combined with a new ‘value-based’ healthcare, would position Belgium as a leader in this area.
Now is the time for bold and future-looking reforms to improve Belgium’s competitiveness. At AmCham Belgium, our Committees are hard at work on all these issues to push Belgium into the top 10 of the WEF’s Global Competitiveness Index by 2030. Belgium’s potential is yet to be fully realized. Urgent action must be taken to turn the situation around and help Belgium climb to the top of the ranks.
The full World Economic Forum’s (WEF) 2019 Global Competitiveness Index Report is available here.