BELGIUM: 2005/2006 REPORT TO CONGRESS ON ALLIED

UNCLAS BRUSSELS 002203

SIPDIS

SIPDIS

E.O. 12958: N/A
TAGS: MARR MCAP MOPS PREL BE
SUBJECT: BELGIUM: 2005/2006 REPORT TO CONGRESS ON ALLIED
CONTRIBUTIONS TO THE COMMON DEFENSE

REF: 2005 STATE 223383


1. SUMMARY: Belgium continues to provide important
contributions to the common Transatlantic defense, by
assisting resident and transiting U.S. forces and with its
own forces supporting stability in Afghanistan, the Balkans
and the Congo. The Belgian military is hobbled by an aging
force structure and the fact that a dominant share of its
budget is consumed by personnel costs. It is also
constrained by a diminishing real budget. In 2005, the MoD
was authorized to keep the proceeds of asset sales. It used
these off-budget funds to supplement its transformation
procurement program. Deployment spending also increased a
bit, due to some efficiency in other areas, and to reduction
of training, which may hurt in the medium term. The Vision
2015 project aims to reduce the total personnel strength from
its current 44,000 to 39,500 by 2015. At the same time the
plan seeks to reverse the ratio of combat forces to support
personnel (currently estimated at 46%:54%),and reduce the
average age from 36 to 33.


2. In 2004, Belgium was the first ally to volunteer F-16
aircraft for the air policing mission over the Baltics. In
2005, it sent a limited contingent to the UAE to train Iraqi
troops alongside the Germans. It also participated for a time
in EU Operation Althea in Bosnia and made a maritime
deployment to Operation Enduring Freedom. For 2006, Belgium
planned limited increases in Afghanistan and Congo, and a
small reduction in Kosovo. Belgium continued to provide
crucial support for U.S. military transit through Europe to
Iraq, and made substantial contribution as host of both
allied and U.S. facilities. It has committed forces to the
NATO Response Force (NRF 6)and to the NRF live exercise in
Cape Verde. Belgium has tried to limit the growth of NATO
common funding, which must be paid by MOD out of its budget.
Although the Belgian contribution to NATO has grown in this
period, it will remain constrained by tight budgets. This
general survey of the Belgian Military also responds to
reftel -- paragraph references in parenthesis refer to paras.
reftel, reformatted for narrative consistency. End Summary.

THE ECONOMIC AND POLITICAL ENVIRONMENT (8.A)
--------------

3. Over 2004-5 Belgium renewed its Transatlantic commitment
on the political level, becoming more supportive of U.S.
policies, although some differences persist, particularly on
NATO. The landmark visit of President Bush in February 2005
was paralleled by other high level bilaterals, including both
Secretaries of Defense and State- the latter for multiple

SIPDIS
visits - and several Belgian ministers went to Washington.
The Belgians used these high level meetings to offer forces
for Afghanistan and to outline plans for participating in a
German-led training program for the Iraqi military and to
provide modest funding for the NATO Training Mission in Iraq.
The Belgians remained strong supporters of a European
Defense, which they believe can become a bulwark of a
"Two-Pillar" NATO. Marrying their transatlantic and European
orientations, the Belgians proposed and eventually hosted the
second of a series of informal meetings between all EU AND
NATO Foreign Ministers, sometimes called "Gymnichs".


4. Belgium is run by a left-right coalition of four parties,
Flemish and French-speaking Liberals (conservatives,
including Prime Minister Verhofstadt and Foreign Minister De
Gucht) and Socialists (including Minister of Defense
Flahaut),which harbor differing views on defense issues and
sometimes have difficulty coming to a decision, particularly
where resources are involved. These contradictions are
sometimes magnified by the historic strength of pacifist
sentiment in Flanders, dating back to the First World War.


5. Belgium continues to maintain a balanced budget. This
fiscal policy continues to constrain its military
expenditures and hinder modernization of its military force.
Fiscal austerity and innovative revenue sourcing to reduce
past excessive debt enabled Belgium to achieve a balanced
budget in 2005, its sixth in a row. Belgium's cumulative
public debt/GDP ratio fell to 94.3 percent by the end of 2005
from 134 percent in 1999, but is still one of the highest
among EU member states. The government's fiscal program aims
to reduce this ratio to the EMU Target of under 66 percent.
Belgium's external trade-oriented economy helped it survive
the 2002-2003 global economic downturn better than other EU
member states, and GDP growth in 2004 was a strong 2.4

percent.


6. Belgian GDP in 2005 was euro 267 billion, and real
economic growth, was 1.4 percent in 2005, just at the
Eurozone average rate. Inflation in Belgium remained low at
2 percent in 2005, and is not expected to rise in 2006.
Belgian GDP is projected to reach about euros 273 billion in
2006, a growth of about 2 percent measured at constant
prices. The exchange rate of the dollar against the euro
fell in 2004 and 2005, though recovered at the end of this
period. Average pooled exchange rate for 2005 used
throughout this report is: $1.20 = 1 euro All Belgian
figures are Calendar Year.

Military Transformation (8.C)
--------------

7. Belgium is slowly continuing to transform its military in
the face of very tight budget constraints. The MOD Strategic
Plan for Defense (2015 Plan),updated in 2005, is designed to
achieve a force that is smaller, more modern, flexible and
deployable although also less robust. The high average age
of Belgian service members continued to be the major
challenge to the reform. Personnel costs increased from
59.7% of total budget in 2003 to 61.7% in 2005. The Belgians
intend to address the personnel problems by recruiting more
young people while moving older personnel to less costly
civilian positions in the Defense Ministry, other
governmental agencies and the private sector, while retiring
a certain number of older soldiers. Full implementation of
this plan, negotiated with the military's unions, will not
occur before 2008. A reduction in force is projected to
continue through 2013-2015. The MoD maintains that its
reforms are working; both the age and personnel share, though
still far to high, began to turn around 2005 for the first
time in years. Annual budget allocations are shown below.

BUDGET FOR PERSONNEL, OPERATIONS, AND INVESTMENTS

2003 2004 2005 2006 Proj.2015 2006 EUROS(mn)

Personnel 59.7 60.9 61.7 60.4 52.8 1,651
Operations 28.4 26.9 25.4 25.0 25.4 683
Infrastr. 3.2 3.2 3.4 3.8 3.2 103
Investment 8.7 8.9 9.5 10.9 18.7 298
Total 2,735


8. The transformation of the military, refined in 2004, and
increasingly put into play in 2004 and 2005, is in accord
with NATO goals for a more deployable force, configured to
meet the challenges of new, frequently out of area missions.
For example, Belgium is giving up its tanks for a new
generation of lighter armored vehicles and reducing its
artillery to nothing larger than 105mm. In 2004, it
restructured some units for enhanced flexibility. The
transformation plan placed special emphasis on Humanitarian
missions and Chapter VI peacekeeping. One consequence has
been a diminution of capability in the high-end of combat,
for which it has preserved roles principally for its Air
Force's F-16's, land reconnaissance, and some naval
specialties.


9. The Belgians had already embraced jointness, by formally
abolishing their separate Army, Navy, and Air Force, although
the services retain much of their identity (including ranks
and uniforms) in the form of Land, Sea, and Air Components of
the single Armed Forces. Structures such as planning and
procurement are shared. Over the 2004-2005 period these
changes appeared better digested. As with other militaries,
many of these transformational changes have proved
controversial within the ranks and in the political arena.
Another result of the reorganization was the revelation of
scandals and other problems buried in the old system, such as
a 2004 discovery of widespread procurement fraud. Over the
2004-2005 period, internal controls appear to have increased.


BUDGET AND TRANSFORMATIONAL PROCUREMENT
--------------

10. The Belgian military budget continues to be 1% of the
GDP, in line with many other Western European countries. The
budget total was projected to increase from 2.59 billion
euros in 2003 to 2.73 billion euros in 2006, less than the
rate of inflation, but this understates their real
expenditure. The budget remains a domestically contentious

issue, with one of the socialist members of the governing
coalition calling for major additional cuts in military
spending and complete integration of Belgian forces in a
larger European force.


11. In 2005 the MoD got long term extension of a 2004
one-shot deal with the government and Parliament to keep the
proceeds of its asset sales, including surplus real estate on
the condition proceeds are used solely to buy equipment.
While precise figures are not available, estimates of net
proceeds for 2005 reach or exceed 30 millions, enough to
produce in effect a real net increase in the military budget.
The Belgian Ministry of Defense has predicated funding for
parts of its transformation on such sale of excess military
equipment and the conversion of property to civil uses.
Belgium,s creative approach to financing transformation has
also included saving money by decommissioning and selling
frigates, tanks, fighter aircraft and helicopters and by cuts
in personnel and administrative costs. For example, Belgium
is endeavoring to sell F-16s and F-16 parts, and has sold
three frigates and other older equipment. As some of this
equipment is U.S. origin, the asset transformation strategy
sometimes depends on USG concurrence and/or cooperation.


12. In June 2004, the Belgian Council of Ministers approved
761 million euros for defense investment. The majority of
the money was spent in transforming the land component. By
the end of 2004, a 350.7 million euro ($420 million) contract
was signed for the purchase of 352 DINGO II Multi Purpose
Protected Vehicles (MPPV) made by the German company
Krauss-Maffei-Wegmann. In addition, 41 million euros ($ 49
million) was spent on F-16 upgrades program. The upgrades
include the Operational Flight Program Update, purchase of
precision improvement sensors (JDAM,s) and the update of the
Operational Flight Trainer.


13. In July 2005, the Belgian Council of Ministers approved
a 1.2 billion euro ($1.44 billion) investment. The focus of
the investment is on armored vehicles, but also includes two
frigates and 10 NH-90 helicopters. The centerpiece of this
aggressive program is the acquisition of 242 Armored Infantry
Vehicles (AIVs) valued at 700 million euros or $840 million.
The Belgians expect to use the platform in several different
configurations as the United States Army plans to do with the
Stryker combat vehicle. On 27 January 2006, the Belgian
government awarded this contract to MOWAG, a Swiss company
that belongs to General Dynamics Corporation.


14. A second important piece of this program is the purchase
of two Dutch built, M-type frigates (valued at 260 million
euros $312 million). These will replace three Belgian
frigates, one of which has already been sold to Bulgaria
(note: Bulgaria has taken an option out on the other two, so
it's very likely they'll purchase those, also). While this
represents a reduction in the number of Belgian frigates, the
two Dutch built frigates are more modern, larger, and more
capable than the older Belgian ships. As the Belgian Navy
operates under a joint Belgian-Netherlands command, sharing
similar ships will enhance interoperability. The contract
between the Dutch and Belgian Ministers of Defense was signed
on 22 December 2005. The delivery of the first frigate is
projected for 2007; the second will follow in 2008. The
third major piece of the program is the purchase of 10 NH-90
multifunctional support helicopters valued at 300 million
euros or $360 million. These will replace the aging Sea King
and Alouette III helicopters.

Defense Policy Orientation and Operations
--------------

15. Already in 2004, Belgium had moved away from its earlier
efforts to focus attention and resources on duplicative EU
military structures and capabilities. It has nonetheless
continued to support ESDP. In 2005, Belgium provided a
building for EU Military Staff and its small planning core,
and sent a small number of personnel to the EU logistic
mission in support of AU peacekeeping in Darfur (not to the
parallel NATO effort). The focus was more as a complement to
NATO than, as previously, an alternative. It plans to supply
forces to the newly-organized EU battle groups, as well as
NRF.


GRANT AID, PKO, NONPROLIFERATION (12)
--------------


16. Nonproliferation: In 2004, Belgium sent a frigate to
join Operation Active Endeavor, a NATO counterterrorism
deployment in the Mediterranean, which has also acquired a
counterproliferation mission. Politically, Belgium has
worked in the IAEA Board of Governors to block proliferation
efforts of Iran, and has instituted tight export control
policies. It also agreed to support the Proliferation
Security Initiative and has participated in PSI exercises in
Northwest Europe. Military involvement has so far been
limited.

CONTINGENCY OPERATIONS (12.A)
--------------

17. Belgian forces, coordinated through the MFA-led
interagency Belgian First Aid and Support Team (B-FAST) take
an active role in disaster mitigation around the world. They
were deployed in 2004 to Morocco for Earthquake relief and in
2005 participated in Tsunami relief efforts, particularly in
Sri Lanka. Belgium was one of the first international
responders to Hurricane Katrina; they sent a small medical
and logistics team to the U.S. Gulf coast within days of the
disaster.

MILITARY ASSISTANCE (12 B)

PEACEKEEPING AND OTHER HUMANITARIAN ACTIVITIES (12.C)
-------------- --------------

18. Limited deployments in support of UN operations are
sometimes reimbursed. The Defense Ministry is striving to
keep out-of-country deployments, which are almost exclusively
for PHO or related training programs, below a total of 1,000
personnel, principally for budgetary reasons. The Minister
of Defense has stated that he has sufficient funding to
deploy 500 soldiers for a year or 1,000 for six months.
However, actual deployments during 2004-2005 have usually
ranged closer to 1,000 than 500. Post estimates average
deployment in 2005 may exceeded 800; slightly above 2004 and
a significant increase over 2002-2003, which were under 600.
Deployments of more costly assets such as ships or aircraft
must come from the total deployment budget. In 2005, Belgium
rationalized its former deployments, withdrawing a tiny
contingent from Cambodia and reducing participation in UN
Mideast missions.


19. Most costs for Peacekeeping Operations are covered in
the MOD budget. In the cases of deployments in support of UN
operations, operating costs are sometimes borne by the UN.
Other UN and multilateral operations and some others, such as
the Belgian First Aid Support Team (B-FAST) receive budget
support from other elements of the Belgian government, e.g.,
Ministry of Foreign Affairs. The MFA financed most of the
cost of deployment of the B-FAST for humanitarian assistance
following a earthquake in Morocco, and for the deployment o
New Orleans.


20. AFGHANISTAN: Belgian roops provided security at Kabul
Internationa Airport throughout the period. In addition,
when Eurocorps took over ISAF lead in 2005, Belgium doubled
its contingent to over 600 troops, providing additional
headquarters staffing, an 8-person Intelligence cell and a
maneuver company which patrolled Kabul North. In addition,
it deployed 4 F-16's to Kabul along with a C-130 transport
and support personnel, whose deployment was extended through
the period of the Parliamentary elections. These additional
deployments departed by the end of 2005, bringing the force
level back to about 300. Belgium provided up to 40 personnel
to the German-led PRT in Konduz, in Northern Afghanistan and
offered 2 personnel as part of ISAF command north, in
Mazar-i-Sharif. The Belgian government decided in December
2005 to provide at least an additional 40 troops and a C-130
in 2006, with the possibility of additional deployments up to
the level deployed for Eurocorps under study.


21. BALKANS: Belgium maintained, but reduced its presence
in the Balkans. At the end of 2005, the majority of
personnel (220) were assigned to BELMOKOS
(Belgium-Luxembourg-Mongolia) in Kosovo, part of KFOR. The
numbers were projected to drop to about 180 in 2006. The
Belgians also served in the EU mission in Macedonia, which
closed out in 2005. Belgium was represented in a number of
Balkan missions, including serving in KFOR/SFOR and joint
headquarters positions. Belgium also supported the European
Union Monitoring Mission (EUMM) with 4 personnel (funded
outside the defense budget). In 2005 Belgium participated in

the EU Operation ALTHEA with 4 helicopters and 47 personnel
as part of MNTF-N, along with 53 personnel in a UAV squadron.
These were withdrawn in November 2005, reflecting the
seasonal lull in operations, but were expected to at least
partially redeploy during 2006.


22. ASIA: The modest Belgian deployments in Asia changed
over this period. Small demining support elements of under a
dozen in total in Laos and Cambodia were phasing out.
Belgium deployed 4 personnel to the EU mission monitoring the
Aceh peace settlement. From much of 2005 there was a
detachment of some 75 personnel in Sri Lanka doing Tsunami
relief. Token participation in the India-Pakistan-Kashmir UN
observer mission (UNMOGIP) was due to terminate in 2006.


23. MIDDLE EAST: Belgium made a symbolically significant,
but modest 9-person deployment to train Iraqi military in the
UAE, under the aegis of a German training mission. In 2004,
Belgium offered to provide a C-130 to the UN for use in and
around Iraq. The U.N. did not respond to the offer until
late 2005, by which time maintenance shortfalls and other
deployment commitments forced the Belgians to temporarily
suspend the offer, a situation not expected to change at
least through 2006. Belgian reduced to two the number of
military personnel serving with the UN Truce Supervision
Organization (UNTSO),in which Belgium has been involved
since 1948.


24. AFRICA: Belgium remained active promoting peace and
stability, principally in its former colonies in Central
Africa. Belgium maintains a small contingent working with
the military in Burundi. Belgium has a token number of
personnel assigned to MONUC in the Democratic Republic of the
Congo (DRC) (see under training). Belgium also planned a
modest participation in the EU elections support mission in

2006.


25. A few Belgian peacekeepers have been deployed as
observers in Sudan's Nuba Mountains, while several Belgian
military logisticians are engaged in the EU 's effort to
support the AU mission in Darfur. Its long-term effort in
Benin paid off in increased peacekeeping activities by the
Benin forces, in Cote d'Ivoire and DRCongo. Belgium has
played a central supportive role in the African Crisis
Response Initiative and is examining its potential role in
the U.S. African Contingency Operations Training Assistance
program (ACOTA). Belgium has also set up a small detachment
of military security personnel for its diplomatic missions in
the region.

CURRENT CONTINGENCY OPERATIONS (12.D)
--------------

26. None.

CAPACITY BUILDING GRANT AID (12.D)
--------------

27. None outside the OECD guidelines.


TRAINING AND ASSISTANCE (12.E)
--------------

28. DRC: Belgium remained a leader in security sector reform
in the DRC through most of 2004-2005, in coordination with
the EU. Its priority was providing bilateral and mobilizing
multilateral support for training the DRC integrated
Brigades. In 2005, Belgium established a training center and
trained the first joint brigade, co-training the second with
South Africa and coordinating a third brigade trained by
Angola. In January and February Belgian military personnel
trained 250 additional Congolese cadre in Kinshasa. These
cadre were to become instructors for training additional
brigades. It also conducted a train-the-trainer program for
Congolese mostly NCO's in Belgium, and followed up in Congo.
Despite logistic and other problems, the first brigade has
performed relatively well and the other brigades have also
been a success. From February to May, in conjunction with
the South African Military, The Belgians conducted refresher
training for the 3rd Integrated Brigade in Kamina.
Throughout the year, the Belgians continued to work with the
Congolese military authorities on strategic planning,
personnel administration, budgeting and finance, training,
and force structure. The Belgians also provided significant
logistic support to the Congo Army, particularly in-kind
donations of military equipment. Belgium provided the DRC

military with an FSB bridge and associated training. The
bridge will be used by the DRC to support UN humanitarian
programs.


29. Benin: Belgium's long-term program of military
assistance and training with Benin began to yield payoffs.
Belgium supported the participation, including with logistics
of Beninois soldiers in the UN Ivory Coast peacekeeping
Mission (supported by two Belgian liaison officers). It also
trained and equipped a Benin battalion to participate in the
UN peacekeeping force in Congo, MONUC. Additionally, over
one hundred Benin soldiers were enrolled in Belgian schools,
along with numerous soldiers from other francophone African
counties. The bulk of program costs for the efforts in Benin
comes from Belgium's military budget. In 2005, Belgian
Engineers assisted the Benin military with several
humanitarian renovation and reconstruction projects.

NATO ISSUES (13)
--------------

30. Belgium has continued to place a priority on support of
NATO efforts. It launched the successful air policing of the
newly accessioned Baltic states in 2004, and was preparing
for a second deployment in 2006. It participated at end 2005
in a maritime mine clearance/exercise in the Baltic Sea. It
participated in Operation Active Endeavor, with 160 sailors
from October-December 2005. It continues to maintain
NATO-dedicated F-16 squadrons, although it has reduced the
number of aircraft. As noted above and has participated in
NATO's International Security Assistance Force (ISAF) in
Afghanistan throughout the period of this report. It has
also participated in NATO exercises. The Belgian Military
has committed a relatively substantial component (ground and
air) to the next rotation of the NATO Response Force
7(NRF7)with some forces also assigned for NRF8.


31. Belgium has also provided agreed common funding,
including for NATO Training Mission in Iraq, although budget
constraints have led it to seek wherever possible to minimize
such demands on its resources. As common funding now comes
directly from the military budget, increased NATO assessments
mean reduced transformational procurements or operations. In
addition, complicated political and budgetary decision-making
linked to the four-party left-center right coalition have
meant that responses on these issues sometimes require extra
time, on funding for Iraq, for example. Belgium, however,
ultimately always has agreed to and provided the required
funding.

PROSPECTIVE CONTRIBUTION TO PfP and NATO OUTREACH (13.A/B)
-------------- --

32. Belgium sold a used frigate to Bulgaria, which is
considering purchasing the other two Belgian frigates. It
has offered to sell excess F-16's to Jordan or Romania, and
was prepared to "mentor" any Air Force it supplies.
Belgium's limited means otherwise restrain any potential
contribution. Belgium's direct contribution to PfP has been
limited to its share of NATO costs. Belgium attempts to
maximize its impact and limited budget through bilateral
exercises conducted in the spirit of PfP with like-sized
states. By the end of 2005, it was moving to expand
considerably its engagement with partners in Ukraine,
Moldova, the Caucasus and Central Asia due to its 2006
Chairmanship of the OSCE. Belgium is not significantly
engaged in the Mediterranean Dialogue (but participates in
parallel EU efforts) or ICI.

CONTRIBUTIONS TO THE COMMON DEFENSE
--------------
Cost Sharing (Reftel Para 9).


33. The Government of Belgium does not provide direct
financial contribution to the United States. However, there
are a variety of in-kind contributions, as noted below.


34. Direct Cost Sharing (Para. 10)


A. Rents. Belgium continues to support the United States by
providing, free of charge, the land and facilities occupied
by the Supreme Headquarters Allied Powers Europe (SHAPE),
Chievres Air Base (SHAPE,s support base),the Daumerie
Caserne (Headquarters for the United States Army Garrison
BENELUX) and Chateau Gendebien, the residence of the
Commander of SHAPE and, finally, the support facilities for

the 52d (USAF) Munitions Squadron at Kleine Brogel Air Base.
In addition, Belgium provides the land for NATO Headquarters
in Brussels, and is supplying additional land for a new
Headquarters complex adjacent to the current site. The
Belgian military continued to provide a very low cost
solution for a life support area at a military installation
near Antwerp while the United States Army conducted logistics
movements to and from the Central Europe/Persian Gulf Region
through the port.

Non-leased building space provided by the Belgian government
for the use of US forces varied insignificantly from the FY
03 report. Total space provided amounted to 1,062,837 square
feet. The rate assumed to be in effect is still USD 8.50 per
square foot resulting in a savings to the USG of $9,034,114.
Non-leased land provided by the Belgian government amounted
to 1,342 acres at a rate of 0.2965 per square foot. This
equals an approximate cost of $95.19 per acre. Total
estimated savings for the USG government amounted to
$9,161,859. With real estate costs in Belgium escalating
rapidly (5-10%/year),actual savings may be much higher.


B. LABOR: Additionally the Belgian government provided
significant support throughout FY 04 and FY 05 to Operations
Iraqi Freedom and Enduring Freedom by providing security
support for Fort-to-Port operations at the Port of Antwerp.
This is in line with the support that Belgium has
consistently provided since 2002. The U.S. contracted and
reimbursed Belgium through military to military contracts for
the amount of 517,943 euros ($621,543). This support was
provided under the Acquisition and Servicing Agreement
between Belgium and the United States. The estimated average
hourly rate for this support comes to 6.25 euros However,
the U.S. (in line with previous years) received more support
than what was billed. The Belgian MOD often provided support
without charge ) when feasible. Examples include police and
fire support to U.S. port operations, relieving U.S. forces
of the requirement to do that vital mission.


C. KATUSA Labor. Not applicable.


D. The United States paid $2,161,061 for utilities to
support its activities in Brussels and at Chievres AB during
FY 05. This is an increase of $40,470 from FY 03. The total
increase in costs is less than two percent over the last two
fiscal years.


E. Facilities Planning and Design. No significant changes
since FY 03.


F. Facilities Improvement Program. Belgium does not
participate in the funding of maintenance, construction or
renovation projects. However, the Belgian government has had
a flexible requirement that the United States, for certain
high cost projects, conduct the contracting through their
offices, which charge a fee to do so.


G. Relocation and Construction. No significant changes
since FY 03.


H. Vicinity Improvement. Nothing significant to report.


35. Indirect Cost Sharing. (Para. 11)


A. Rents. The USG/DOD continues to pay for many
market rate leases both in Brussels and in Chievres in
support of SHAPE and the three embassies. The details of the
amount of square footage leased were not available for this
report. However, Operations and Maintenance funds and Army
Family Housing funds paid a total of $7,095,194 during FY 05
for these leases. This is a decrease of $271,768 from FY
03,s report.


B. TAX CONCESSIONS. Belgium applies an uneven approach to
tax relief, due in part to the competing goals of the various
Belgian government ministries. US personnel continue to pay
Value Added Tax on many services and utilities (electricity,
fuel oil),increasing the cost to the individual by 21
percent. Belgian tax authorities continue their attempts to
impose a tax on services provided by local vendors on
military bases, but have not done so. The previously
unlimited ability to purchase tax free vehicles has been
changed to allow service members to purchase only one vehicle
per tour. The Belgian Ministry of Defense continues to push

for an indirect contracting process for US construction
projects, under which their internal contracting division
would contract on the US Forces' behalf for all construction
needs, in return for a 3-5% administrative fee.

The above concerns are counterbalanced in large part by the
Belgian authorities' uniformly favorable response to US
requests for relief in certain areas. For example, the
Belgian government routinely waives visa, work permit, and
taxation requirements for US contractor personnel who work
solely for the US Forces on certain types of contracts. This
results in a substantial cost-savings for the US Forces,
since it keeps contract prices artificially low. In addition,
Belgium continues to provide VAT tax relief for military
operations on contracts for materials, supplies, services,
and for the purchase of petroleum, oil, and lubricants.
U.S. forces have full access to the APO postal services,
representing significant foregone revenue to the Belgian
government.


37. Additional information, including a map showing
worldwide deployment of Belgian forces is available on
Embassy Brussels SIPRNET website in the POL/MIL folder,
Reporting and Analysis portal--:
www.state.sgov.gov/p/eur/brussels/index.cfm

POC
---

38. POCs are Political-Military Officer Craig Karp; Col.
John Gagnon, Defense Attache; and LTC Andrew Johnson, Office
of Defense Cooperation. Karp email: karpcm@state.gov. All
can be reached via embassy switchboard: 322-508-2111.
KOROLOGOS
.