Identifier
Created
Classification
Origin
07BRUSSELS51
2007-01-09 17:33:00
UNCLASSIFIED
Embassy Brussels
Cable title:  

BELGIAN STEWPOT: JANUARY 8, 2007

Tags:  ECON EFIN EINV EIND SOCI BE 
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VZCZCXRO3387
OO RUEHAG RUEHDF RUEHIK RUEHLZ RUEHROV
DE RUEHBS #0051/01 0091733
ZNR UUUUU ZZH
O 091733Z JAN 07
FM AMEMBASSY BRUSSELS
TO RUEHC/SECSTATE WASHDC IMMEDIATE 3977
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE
RUCPDOC/USDOC WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
UNCLAS SECTION 01 OF 03 BRUSSELS 000051 

SIPDIS

SIPDIS

STATE FOR EB/OIA, 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 EIND SOCI BE
SUBJECT: BELGIAN STEWPOT: JANUARY 8, 2007

REF: A. 05 BRUSSELS 3964


B. 05 BRUSSELS 536

C. 06 BRUSSELS 4130

1-2. Investment on the Rise

3. Real Estate Deal Saves Federal Budget

4. Wage Increases Capped for 2007

5. Another Banner Year for Belgian Stocks

6. Belgian Population Growing

7. Wallonia Ups Investment in Aviation
Parts Maker SONACA

8. Food Retailer Delhaize Expanding

9. Belgian Sax Appeal

------------------------
Investment on the Rise
------------------------
UNCLAS SECTION 01 OF 03 BRUSSELS 000051

SIPDIS

SIPDIS

STATE FOR EB/OIA, 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 EIND SOCI BE
SUBJECT: BELGIAN STEWPOT: JANUARY 8, 2007

REF: A. 05 BRUSSELS 3964


B. 05 BRUSSELS 536

C. 06 BRUSSELS 4130

1-2. Investment on the Rise

3. Real Estate Deal Saves Federal Budget

4. Wage Increases Capped for 2007

5. Another Banner Year for Belgian Stocks

6. Belgian Population Growing

7. Wallonia Ups Investment in Aviation
Parts Maker SONACA

8. Food Retailer Delhaize Expanding

9. Belgian Sax Appeal

--------------
Investment on the Rise
--------------

1. (U) Both foreign and domestic investment in Belgium rose
strongly in 2006. Preliminary data show that domestic
investment in fixed capital in Belgium rose 3.2 percent in
2006, after declining marginally in each of the past five
years. Surveyed industrial firms expected final 2006 data
would show a 17 percent increase in investment budgets; only
automobile and textiles firms expected a net drop in their
investments in Belgium. Prospects for 2007 are stronger
still, with expectations of 19.6 percent growth in investment
budgets among firms.


2. (U) Foreign direct investment (FDI) in Belgium in 2006
reflected the cresting global economic cycle, and rose also.
With final data yet to be reported, financial analysts expect
FDI to surpass easily
the $24 billion of 2005, perhaps reaching $40 billion.
Belgium's newly implemented notional interest deduction,
effective January 1, 2007, is credited with attracting some
of the foreign investment.
The deduction effectively reduces a company's marginal tax
rate from 34 percent to 26 percent on profits (detailed
further ref A). Additions to US investment in Belgium came
chiefly in the pharmaceutical and chemical sectors. Mohawk's
purchase of a large Belgian flooring company, Unilin, for
some 2 billion Euros skewed the figures for 2005-2006.

--------------
Real Estate Deal Saves Federal Budget
--------------

4. (U) Another piece of good news for the Belgian government:
the massive real estate sale/leaseback deal of government

properties was finalized on December 22. This permited the
Belgian government to sell 63 government-held properties to a
real estate property management company Befimmo in exchange
for an immediate 575.6 million euro payment (US$ 760
million). A previous effort to carry out this transaction
was overturned by the Council of State (Belgium's
Constitutional Court) on grounds it lacked transparency
for other potential bidders. The final deal netted the
government 10 million euro more than the previous bid
procedure, yielding enough cash to tip the federal budget
deficit, foreseen as 0.6 percent of GDP, into a positive
balance (0.1 percent of GDP, or 200 million euros).


--------------
Wage Increases Capped for 2007
--------------

3. (U) After weeks of fruitless discussion, at 5 am on
December 21, labor union representatives and the Belgian
Employers Federation, mediated by the federal government,
reached agreement on the level
of wage increases to be allowed in the coming two-year
period, 5 percent in total. This is a notch below the
previous agreement of 6.2 percent over the 2005-2006 period.
Even if projected inflation remains modest at 2 percent
annually, that will leave scarcely half a percent for real
wage growth in each of the two coming years. Employers and
government believe the agreement on modest wage growth is
anti-inflationary, and will help maintain Belgium's
competitiveness as an investment venue. The wage agreement
will apply to most of Belgium's 2.4 million private sector
employees.

--------------
Another Banner Year for Belgian Stocks
--------------

5. (U) The Bel-20 stock index of Belgian stocks listed on the
Euronext exchange in Brussels, Amsterdam and Madrid rose
strongly in 2006. Over the past year the basket of

BRUSSELS 00000051 002 OF 003


representative stocks rose
by 22.84 percent, beating out other exchanges such as London
(FTSE up 11.47),Paris (CAC-40 up 17.5),and even Germany
(22.2). Growth of the Bel-20 surpassed analysts'
expectations, as had previous years gains of 30.7 percent in
2004 and 21 percent in 2005 (Ref B). A well-invested Belgian
may have seen his or her portfolio rise by 75 percent in the
past three years. The explanation for the strong performance
of the Belgian market is (1) the recovery from the internet
bubble collapse had been delayed in Belgium compared to other
markets, and (2) the Bel-20 is a narrowly based index, where
a few strong stocks made major contributions, such as Suez
(which bought Electrabel and rose 44 percent in 2006),Inbev
(rose 34
percent),food retailer Colruyt (rose 28 percent) and UCB
Pharma (rose 37 percent).

--------------
Belgian Population Growing
--------------

6. (U) Belgium is bucking the trend of many European
countries towards declining population. The National
Statistics Institute's official census recorded 10,511,382
Belgian inhabitants on January
1, 2006, 65,530 more than on Janury 1, 2005. Regional
weights in terms of population: Flanders counted 6,078,600
people (57.8 percent of all Belgians),Wallonia 3,413,978
(32.5 percent),and Brussels 1,018,804 (9.7 percent).
870,862 foreigners were counted, down from almost 900,000 in
2000, mainly due to the "Quick Belgian law" (snel-Belgwet)
that facilitated the naturalization of thousands of
foreign-born residents. In Brussels, hub of the European
Union, NATO and other international organizations, trade
associations and corporations, 26% of the population is
non-Belgian.

--------------
Walloon Government Ups Investment in Aviation Parts Maker
SONACA
--------------

7. (U) The Walloon regional government, already the major
shareholder in Sonaca, has increased its investment. The
company, known for aviation components such as wing front
edges and fuselage
panels for Airbus and Embraer, is undertaking a restructuring
program to trim 63 million euros from its budget and cut 100
employees (to 1550) from its payroll. Wallonia will spend 20
million euros to acquire another 5 percent of the company,
bringing regional government participation to 89 percent, and
lowering the shares of Techspace Aero and SFI. Sonaca plans
installation of new machinery to further automate production.
Techspace was recently cited by the EU Competition
Commission for receiving excessive
Belgian government state aid. (ref C).

--------------
Food Retailer Celebrates Triple Anniversary
--------------

8. (U) In 2007, Belgian based Delhaize Group will mark 140
years of existence, 50 years of supermarkets in Belgium, and
50 years of Food Lion, its largest subsidiary in the U.S.
The retailer is also
expanding its presence in Belgium by opening 44 new stores,
including 20 Tom & Co, stores that specialize in food and
products for domestic animals. Delhaize already has a 40
percent market share in the pet sector. In 2005, the company
acquired Antwerp-based Cash Fresh and is in the process of
converting these
into Delhaize outlets. Delhaize also has outlets in
Luxembourg and Germany and will open in France in 2007. In
2005, Delhaize Group's net sales exceeded 18 billion euros,
and net profit was 364 million
euros. The United States looms large in Delhaize plans,
currently accounting for 700 million in direct investment, a
majority of profits, and 104,000 of its 136,000 worldwide
employees.

--------------
Belgian Sax Appeal
--------------

9. (U) In an homage to Adolphe Sax, the inventor of the
saxophone, over 1400 saxophonists gathered in Dinant on
November for a giant concert on the musician's birthday. The
event has taken place every
four years since 1994 to honor Sax, who was born in Dinant,
Wallonia, in 1814. Many of the performers came from abroad,
dedicated to fostering awareness and love of their

BRUSSELS 00000051 003 OF 003


instrument. Who says Belgians don't have international sax
appeal?

IMBRIE
.