BELGIAN STEWPOT: August 29, 2006

UNCLAS SECTION 01 OF 02 BRUSSELS 002926 SIPDIS SIPDIS STATE FOR EB/ESC, EUR/ERA AND EUR/UBI TREASURY FOR OASIA/ICN - ATUKORALA USDOC FOR 3133/USFCS/OIO/EUR E.O. 12958: N/A TAGS: ECON EFIN EINV ENRG EWWT EIND BE SUBJECT: BELGIAN STEWPOT: August 29, 2006 1-2. U.S. Investment in Belgium Rises ¶3. Energy Prices Hit Belgian Trade Surplus ¶4. Suez Spies Against Itself in Belgium? ¶5. Belgian Risk Capital Lags Behind EU Average 6-7. Delhaize (Food Lion) Expands Its U.S. Presence ¶8. Chinese Port Operator Interested in Belgium ¶9. No Ceiling for Wallonia's Glass Industry ¶10. Putting Money Where the Market Is -------------- Value of U.S. Investment Rises -------------- ¶1. (U) According to statistics issued in July by the Survey of Current Business, the value of the stock of U.S. Foreign Direct Investment in Belgium rose by over $6 billion in 2005. U.S. investment in Belgium reached $36.73 billion in value, ranking Belgium ninth within the EU-25. The increase is attributed both to new investment and to changes in the exchange rate that revalued existing investments. While statistics do not break out investment by sector, post credits the chemical, pharmaceutical and vehicle manufacturing sectors with the bulk of the increase. ¶2. (U) Luxembourg continues its tradition of outranking Belgium with a $61.61 billion stock of U.S. investment, a phenomenon that specialists ascribe to cross-border leasing and the preeminence of the Luxembourg banking system. -------------- Energy Prices Hit Belgian Trade Surplus -------------- ¶3. (U) The Belgian Institute for National Accounts published Belgian trade data for June, showing a 1.28 billion euro surplus for the month, the highest surplus figure since June 2003. Despite the June figures, Belgium's trade surplus for the first half of 2006 is only 770 million euro, compared to 3.3 billion euro for the same period one year ago. Higher energy prices are seen as the main reason for this deterioration in Belgium's trade balance. Although Belgian petroleum and gas consumption is marginally down, higher global prices for importing them resulted in a net trade deficit for the first third of 2006 (for which full data are available),and the Belgian National Bank reports a deterioration in the terms of trade for Belgian exports. -------------- Suez Spies Against Itself in Belgium? -------------- ¶4. (U) Belgium's criminal court accepted a case from the state prosecutor charging that Suez, the French utility giant, pursued industrial espionage against Belgium's major electricity supplier Electrabel. At the time of the alleged espionage in 2004, Suez was the majority shareholder of Electrabel; it merged with and took over the Belgian power company in 2005. At the time, Electrabel filed a complaint when it appeared that its computer and telephone systems integrity had been compromised. After two years of investigation, Suez finds itself defending itself against... itself. The Electrabel complaint cannot be withdrawn under Belgian law, even though the two companies are now one. (Comments: While the logical thing for the GOB to do is drop the case, the tacit lesson will be that only unsuccessful industrial spying gets punished. It appears likely that the insider knowledge gained by Suez via espionage probably contributed to its creation of an attractive takeover offer for Electrabel.) -------------- Belgian Risk Capital Lags EU Average -------------- ¶5. (U) Belgian business analysts asking why Belgium is not spawning more start-ups and job creation may have found part of the answer. Despite a level of capital investment on par with other EU advanced economies, Belgium lags in the percentage of risk capital invested in new enterprises. As a percent of GDP, the EU averages 0.113 percent invested in new technology, high risk ventures. The Belgian figure is one third that amount, 0.038 percent. EU leaders on this score are Denmark (0.401 percent) and the UK (0.292 percent of GDP) - both of which coincidentally have lower unemployment rates than Belgium. "Business angels" reportedly funded only 49 new companies in Belgium in 2005, for a total of 5 million euros. While clearly only one among many factors, weak venture capital resources undoubtedly hurt Belgian entrepreneurs and job creation potential. -------------- --- Delhaize (Food Lion) Expands Its U.S. Presence -------------- --- ¶6. (U) One of Belgium's more visible investments in the U.S. is having a banner year. Food retailer Delhaize recorded 3.4 percent growth in U.S. sales in the first quarter of 2006, and for the first half of 2006 saw its global turnover expand by 9 percent, to 9.7 BRUSSELS 00002926 002 OF 002 billion euros. Further Delhaize investment in the U.S. is assured, as American stores accounted for 80 percent of profits last year. Total Delhaize capital investment in the U.S. is expected to rise by $150 million, to $700 million over the coming year. ¶7. (U) Delhaize retails food in the U.S. through its Food Lion, Hannaford, Bloom, Harveys, Bottom Dollar, and Kash n'Karry supermarket chains. It opened the first U.S. Food Lion store in 1974, and now operates 1,537 stores covering the entire eastern seaboard, employing over 104,000 people. Belgium's biggest food retailer hopes to rival Wal-Mart in the Washington area. This year Delhaize will remodel 15 Food Lions in the Washington area into "Bottom Dollar" stores featuring lower prices through lower overhead and stocking costs, having customers bag their own groceries, selling packaged foods in bulk, replacing fresh bakery and deli products with prepackaged, and limiting fresh meats and vegetables to the most popular items. -------------- Chinese Port Operator Interested in Belgium -------------- ¶8. (U) China's largest port operator, Shanghai International Port Co., may invest in Belgium's port of Zeebruges. According to media reports, Shanghai Port wants to invest in European shipping terminals in the Mediterranean and on the Atlantic coast to further its network, and may take a stake in Zeebruges' Moeller-Maersk terminal. Reportedly, an investment by Shanghai Port would be the first by a Chinese port operator abroad. Zeebruges is already the world's largest roll-on, roll-off port for new cars, a major hub for LNG shipments, and a growing container handler (1.41 million in 2005). It remains a distant second port, however, compared to Antwerp's 4.48 million containers handled in 2005. -------------- No Ceiling for Wallonia's Glass Industry -------------- ¶9. (U) One of Wallonia's dominant economic sectors, the glass industry, appears to be recovering after several years of flat production and revenue. Belgium produces glassware, industrial glass, fiber optics, and fiberglass insulation, recording over 2.1 billion euros in sales last year. Hollow glass (bottles and stemware) and technical glass, in particular, increased in production by almost ten percent in 2005. This burst in productivity mainly comes from investment in the latest machinery and techniques, lowering costs and improving efficiency. The American glass producer Owens-Corning, and French giant Saint-Gobain, both make glass in Wallonia. There is, however, a fly in the wineglass; glassmakers' improved manufacturing methods have reduced their need for labor, allowing 450 jobs to be eliminated in ¶2005. -------------- Putting Money Where the Market Is -------------- ¶10. (U) Good news for visitors: Belgian banks will install the country's first stand-alone ATMs in high-traffic locations such as shopping malls, theme parks, train stations and airports. Fortis, Dexia, KBC and ING are all negotiating contracts to install stand-alone ATMs; Fortis alone plans to add 34 such "cash points" by the end of 2006. The banks hope to use the new ATMs to increase their visibility to banking customers, and also to increase revenues from fees levied on customers of other banks who use their cash machines. (Before now you could find ATMs only attached to full-service banks and often out of cash!) Imbrie