FT SPECIAL REPORT Doing Business in

Tuesday November 13 2012 www.ft.com/reports | twitter.com/ftreports

2011, and unemployment levels of around 20 per cent, continues to be substantially behind , the Inside » Dutch-speaking region that comprises the northern half of . Driving to be However, although the Flemish region is considered to be better run, Liège with an economy 30 per cent larger than that of Wallonia, the gap is Continental rail and shrinking, especially when it comes to road connections attracting business and foreign direct Europe’s investment. are reviving the “The gap is still there and the [Wal- city’s fortunes loon] government has not always been great,” says Marcel Claes, head Page 2 of the American Chamber of Com- merce (AmCham) in Belgium, which represents 9,000 US companies. “Hav- Economy heartland of ing said that, one has to recognise that they have been increasingly The clusters that lie proactive in trying to attract new at the heart of the business.” Mr Claes says that despite Wallonia region’s grand being governed by the Socialist party recovery plan ever since greater autonomy was innovation Page 3

‘We have given companies Taxation concrete aid that has Belgium has high The region’s assets are being deployed to create helped them cut their taxes but also many an international hub and efforts are starting to capital expenditure costs’ loopholes for those Jean-Claude Marcourt, prepared to look pay off, says James Fontanella-Khan Wallonian minister of economy and trade Page 3

allonia, once the heart of bear scars from the 1970s and 1980s, the industrial revolution such as certain battered neighbour- given to the Belgian regions in the Politics in continental Europe, is hoods of – which suffered 1970s, in recent years they have desperate to be relevant the most when hundreds of busi- actively promoted more pro-business The spectre of a in the 21st century. The nesses shut as they became obsolete – measures than their centre-right federal break-up WFrench-speaking southern half of the others are clearly flourishing. counterparts in Flanders. country, the poorest region in Bel- Liège, with an impressive new train “A good support environment from is undermining gium, has been working hard to boost station, a revamped opera house and the regional government, the creation investor confidence productivity after 30 years of ups and several new museums, is testament to of several innovation-focused clusters, downs following the collapse of its such rejuvenation. Like many subsec- strong ties between business and local Page 4 steelmaking industry. Its efforts are tions of Wallonia it has invested heav- universities, and financial incentives beginning to pay off. ily in creating high-value sectors, have all helped make Wallonia an The so-called “Marshall Plan” – with emphasis on education, network interesting destination to do busi- Brewing which has provided investments of creation and innovation. ness,” says Mr Claes. more than €4.5bn since its introduc- This transformation has turned the Tax exemptions for companies in The world’s tion in 2006 by the socialist-led city into a frontrunner to host the innovative sectors such as green tech- growing taste for regional government – as well as a World Expo in 2017, placing it in the nology, pharmaceuticals, biotechnol- new era of more market-oriented local same league as emerging cities such ogy and logistics have led several Trappist ales is leftwing political leaders, have helped as Astana, its Kazakh rival for the research-focused multinationals to set creating jobs revive the flagging economy for the event, and China’s Shanghai, which up shop in Wallonia. first time in a generation. hosted the expo in 2010. Google, the internet search group, Page 4 Although parts of Wallonia still Wallonia, with a GDP of €73bn in Modern outlook: Liège station is one of many urban renewal projects Alamy Continued on Page 2 2 ★ FINANCIAL TIMES TUESDAY NOVEMBER 13 2012 Doing Business in Wallonia Continental Network of connections talent fosters prompt revival research challenging global environ- Life sciences ment, says Pascal Lizin, ‘Marshall Plan’ is head of public affairs at in city fortunes GSK Vaccines. producing results, In addition, the consensus is the Marshall Plan is a big writes Nicholas Hirst attraction for the biochemi- cal and biotech sectors. Launched by the Walloon Of the six sectors selected government in 2006, the by the second Marshall plan focused resources of Plan, life sciences is one €4.7bn on innovation and where Wallonia has long growth in sectors, includ- excelled and whose good ing life sciences. health has not diminished These sectors are organ- Liège A prime location and a financially savvy with age, accounting for ised into “clusters” through some 15 per cent of the which funding is chan- mayor have been crucial, writes Nicholas Hirst region’s economy. nelled for R&D, education GlaxoSmithKline and and new businesses. Baxter have long had signif- BioWin, the cluster dedi- ith a breathtaking new ing how this well-connected mayor icant R&D presences in cated to biotechnologies, railway station, a with limited powers is most effective Wallonia, surrounded by counts among its 500 mem- revamped opera house operating as a “facilitator” within Bel- homegrown forces such as bers some 100 companies, 50 and several new muse- gium’s myriad federal structures. UCB, a biopharma company research centres and 11,000 ums, green shoots are “You need to battle at all levels,” that focuses on diseases researchers. It brings uni- Wsprouting in this bustling city on the says Mr Demeyer. “This allowed us to affecting the nervous and versities and companies river Meuse that was at the heart of put the city’s finances in order and at immune systems and gener- together for applied Wallonia’s industrial rise and fall. the same time re-equip it.” ated revenues in 2011 of research projects supported After the near-complete collapse of Indeed, in addition to the sleek San- €3.2bn across 40 countries. by funding from the govern- steel production in Wallonia, public tiago Calatrava-designed station, Morgan Stanley rated its ment, says Mr Lizin. authorities at all levels have striven which hooks Liège into the European shares as one of 20 to hold “This is the first time that to reorient Liège’s economy. This high-speed rail network, several new for 2015, while Goldman industry people are respon- effort appears to be paying off as mul- retail centres have sprung up and the Sachs described a UCB pipe- sible for orientating new tinationals arrive to take advantage of city’s cultural sights have been line drug as a top 10 most research,” he says. The aim the city’s natural strength in logistics. revamped. Tourism has increased and likely to transform the is to ensure research is Small and medium-sized businesses a tram line through the city centre is pharmaceutical industry. market-driven. are carving a niche in fields such as planned for 2017. Fast track: Technical expertise in the area, This includes making decent commer- Smaller companies The cluster is also respon- space technology and broadcasting. As Liège’s major steelworks closed, a new station including research emanating from cial real estate available to them. include Eurogentec, a sup- sible for recruiting talent to The province of Liège’s gross leaving unemployment at close to 20 has linked the the University of Liège, has been a “There is enormous demand for plier of reagents and diag- the industry and scouting domestic product is €24bn with more per cent, some jobs migrated to the city to the powerful incubator for small compa- commercial property in and around nostic kits, and Mithra out international markets than 23,000 companies and rising, growing logistics sector. Liège’s river high-speed nies, including several specialist pro- Liège,” says Christophe Nihon, Phamaceuticals, focused on for its members. according to official estimates. port is Europe’s third largest, han- network Alamy viders in the space sector. founder of ImmoQuest, a commercial female healthcare. Both are In a typical example of a Some credit for this revival must go dling 21m tonnes of cargo a year and Spacebel, for example, designed soft- property agency. Multinationals are spin-offs from Liège Univer- BioWin investment, Mithra to Willy Demeyer, the socialist mayor catering for 25,000 jobs. It has direct ware for the Pléiades project, an earth taking advantage of the location, while sity and export to more lead an early project devel- re-elected in October for another term connections to the sea ports of Ant- observation satellite programme led small businesses have been moving than 40 countries. oping a treatment for cervix after 13 years in charge of Wallonia’s werp and Rotterdam. by France. out of the historic centre, he explains. The biochemical sector cancer resulting from HPV, economic capital. Its attractiveness will increase In parallel, Liège’s expansion into More business parks are on their has solid foundations in done in collaboration with Foremost among his achievements when work is finished in 2015 on the the audio-visual sector has been led way, as Liège pushes to host the 2017 Belgium, says Pierre another SME and the uni- has been the shedding of Liège’s Trilogiport, a multi-modal port facility by EVS Broadcast Equipment, which International Exposition. Liège hosted Hauser, head of external versities of Brussels and colossal debt, which stood at €5bn in that will better integrate the city’s has become the world’s leading pro- the 1939 Expo, although this was scup- research at GSK Vaccines. Liège. The project received the late 1980s and was finally paid off road, rail and waterway networks. vider of digital recording technologies pered by the outbreak of the second Eleven “world first” vac- €4.9m in Marshall Plan in 2010. “Liège regained its freedom Liège is home to Europe’s eighth- for live sporting events, including the world war. Judges will decide this cines have been developed funding. The research was that year,” he says, sitting in his largest freight airport, where night Olympic Games. month between Liège and Astana in at GSK’s global vaccination successful and the treat- office in the Belgian senate, of which flying helps to attract operators such This strength in broadcasting coin- Kazakhstan for 2017. centre, including the first ment is now in phase 2b of he is vice-president. as TNT Express, whose European hub cides with the emergence of Liège as Hosting the expo would be a boon genetically engineered vac- the validation process, Liège, with a metropolitan popula- is based there. Belgium’s cinema capital. The film- for local businesses, with 6m visitors cine against hepatitis B. according to Mr Fornieri. tion of more than 500,000, lived Citing the excellent connections and making Dardenne brothers have twice predicted. Michel Hermans, professor As a small country with through two decades of austerity proximity to customers in Germany, brought the Palme d’Or from Cannes of economics at the University of 16 universities, Belgium has while it balanced the books, as 5,000 the Netherlands and France, several back to their native city, which also Liège, says Wallonia has long suffered a “very dense” academic jobs in the city bureaucracy were cut, multinationals have also located their plays host to a growing number of from being seen as provincial, network which helps inno- Interest for larger local taxes were raised and several European distribution centres in film productions. blighted and cronyistic. vation, Mr Hauser says. In companies lies in hundred property sites were sold off. Liège or the surrounding region. Public authorities have pulled “Certain politicians and business- addition, the biochemical Assistance was prised from Belgium’s Prominent examples include together, Mr Demeyer says, to ease men have changed this image. Expo sector has a great reputa- building relations regional and federal governments as Skechers, the US shoe company and the administrative burden and costs 2017 would be a great advert for the tion and so no shortage of well as EU structural funds, illustrat- Lyreco, the office equipment supplier. for companies arriving in the region. new Liège,” he says. students aspiring to join it. with universities Roch Doliveux, UCB chief and SMEs executive, says Belgium has “been successful at building bridges between academia The Marshall Plan also and industry and creating a helped UCB in opening a very favourable environ- plant in Wallonia, which The culmination of a magnificent adventure ment for innovative busi- will focus on developing nesses”. UCB says between biotechnology drugs for the innovation by compa- severe diseases. nies and universities and According to UCB, 10 per joined this élite group of is located at the heart of a market of almost 500m Participating in this talent attracted by big com- cent of the €65m cost was Willy Demeyer candidacies within an conurbation totalling consumers and an International Expo will be panies, an “ecosystem” has provided by Wallonia. This GUEST COLUMN organisation that brings 600,000 inhabitants, and a extremely open economy. a remarkable opportunity developed that makes Wal- may reflect that, according together no less than 161 province with a population Being remarkably well- to establish contacts with lonia quite special. to EU research figures for member states. of 1m. situated and accessible at the economic forces – This virtuous ecosystem 2010, UCB was the largest There are fewer than 10 Together we have put Over the past 20 years the heart of Europe, we industrial federations, explains Wallonia’s unusu- Belgian investor in research days before the crucial this city back on the world it has witnessed are also a multi-modal national and multinational ally high number of spin- and development across all vote. On November 22, the map as a result of renewed innovation, diversification communications crossroad. businesses, and scientific offs. Liège University, for industries, and the 40th Member States of the and shared ambition. More and globalisation. In addition to having and academic players. example, has sprouted more largest across the EU with International Exhibitions than 150,000 citizens have The Expo will be the its own airport, Liège Having been at the than 130 spin-offs, says €700m invested. Bureau (BIE) will vote – declared their support for ideal opportunity to is surrounded by 11 cutting edge of the Francois Fornieri, founder As for GSK, it has been with one vote per country the candidacy, and celebrate this international airports country’s industrial of Mithra Pharmaceuticals. closely involved with Bio- – to make a final choice hundreds of companies accomplishment, taking which, in only two hours revolution at the start He says the university is Win from the start. Its CEO between the candidacies of have given their backing. advantage of the by car or by high-speed of the last century, our known worldwide for its was the first to chair the Liège in Belgium and In addition, dozens of infrastructure already in rail link, connect us with region suffered a decline in biotech research, but also cluster and GSK was Astana in Kazakhstan to diplomats and civil place – the high-speed rail- 280 cities throughout the traditional sectors, leading manages to maintain good involved in the first Wal- organise the International servants in both the link station, development world. us to implement this relations with the private loon public-private partner- Expo in 2017. federal and Walloon of the river port and the It is also at the hub of exceptional restoration sector: on trips to Turkey ship in the biotech sector. But will this be a governments have travelled airport, as well as the one of the world’s most programme. and the Netherlands politi- However, says Mr Lizin, genuinely “crucial” date? the world or crammed university and cutting-edge Willy Demeyer dense rail networks, and The Expo will cians there have quizzed the main focus of BioWin I do not think so. their correspondence full of hospital centre. hosts many international demonstrate that we are him on how Belgium has are SMEs, which generally Whatever the outcome, information about Liège; Liège boasts an high-speed train lines that again able to welcome the achieved such inter-reac- receive two-thirds of the it will certainly be the all the leading economic, innovative urban mobility Liège will guarantee Expo’s link it to the other major world and invite it to tions. funding with the rest going culmination of a cultural, academic and programme as well as international success, and European cities: Brussels is rediscover us at the The federal and regional mostly to the universities. magnificent adventure, political players have also ambitious schemes to we anticipate welcoming 39 minutes away, magnificent site, which governments do much to The interest for larger which has brought played their part, by renovate its cultural more than 8m visits over Frankfurt and Paris are will be fully redeployed make Wallonia attractive to companies lies in the oppor- together many people in promoting this project to centres, including its the three-month period – two and a quarter hours once the Expo is over. biotech companies. tunity to build relationships Belgium and throughout their own audiences. Opera House, museums or 90,000 visits per day. away, and London three This is the first time Employment costs for with others in the sector, the world over the past The wheels that have and theatres. Whatever the outcome, and a quarter hours. since Expo ’58 in Brussels researchers are waived up such as universities and three years. been set in motion are Belgium will be proud in choosing Liège and Belgium Liège is one of the major that Belgium has been a to a total of 75 per cent SMEs. Expos are inspiring irreversible, and this 2017 to incorporate its will be a guarantee of motorway hubs in Europe, candidate. while revenues on patents The Walloon chemical events with a global dynamic must be added value to the time- success for any business or at the intersection of six Liège will do its utmost registered in Belgium are and pharmaceutical sector influence. The countries prolonged. Liège is forging honoured tradition of individual planning to set international routes. to ensure that Expo 2017 taxed only at 7 per cent as generated revenues of that are candidates to ahead to the future and is International Expos, and up or relocate here. Within a 400km radius of becomes an Expo to be opposed to the usual 30 per approximately €10bn in organise the World Expo in letting the rest of the the success built up over a We are located in one of our trans-border city, there talked about for the 21st cent. Companies can also 2010, with solid year on 2020 are Russia, Brazil, the world know about it. period of more than 80 the most attractive regions are no less than 100m century. deduct “notional interest”. year growth despite the cri- United Arab Emirates, The third largest city in years by the International in Europe, and Belgium inhabitants from six These measures make for sis, and employed 21,000 Thailand and Turkey. Now Belgium, and the economic Exhibitions Bureau (BIE). boasts many advantages countries, speaking four Willy Demeyer is the strong incentives to invest people, according Le Belgium and Liège have capital of Wallonia, Liège Choosing Belgium and such as direct access to a languages. Mayor of Liege in a very competitive and Forum, a regional agency. Driving to be Europe’s heartland of innovation

Continued from Page 1 “boosting business and job tives, Belgium’s overall tax companies in emerging nies concrete aid that has ation is far from perfect and ing near Spanish levels, has region, with the help of the Johnson & Johnson, the creation, developing human system offers almost infi- markets looking to expand helped them cut their capi- more reforms are needed – managed to pull the itself EU and the federal govern- world’s largest healthcare capital, knowledge, know- nite incentives that can in Europe. Whibi, a Chinese tal expenditure costs,” says in particular to ease the out of the danger zone. ment, has been moving in company, and the pharma- how and research, and bring a company’s tax expo- company that helps develop Mr Marcourt. “Everything cost of labour, among the But Carl Devos, professor the right direction. ceutical group Pfizer ensuring balanced and sus- sure to virtually zero. This technology start-ups, has is centralised, making it highest in Europe because of political science at Ghent Its position, sandwiched are among the foreign com- tainable territorial develop- is not always obvious, as at signed a deal with the Uni- easier for companies to get of steep income and welfare University, fears that between Europe’s two larg- panies that have estab- ment”. face value the country’s versité catholique de Lou- started as soon as they taxes. unless the current Di Rupo- est markets of Germany lished a solid presence in The Walloon province of corporate tax stands at 34 vain (UCL) that could gen- decide to move here.” Another concern is the led coalition government, and France, as well as being Wallonia on the back of Hainaut, one the poorest in per cent – among the high- erate thousands of jobs on Indeed, part of Wallonia’s recent rise in local elections which includes socialists, closely linked to Britain such incentives. the country, with unem- est in the EU. the back of an investment recent success is in having of ’s NVA, liberals and Christian Dem- with maritime routes, means Wallonia has also bene- ployment levels hovering For example, companies worth up to €250m. a stable government for the the largest Flemish separa- ocrats, can increase struc- geography has always been fited from a series of EU around 30 per cent, has working closely with uni- Jean-Claude Marcourt, past two decades. Moreover, tist party, which could rock tural reforms, the NVA is on Wallonia’s side. structural funds, designed benefited the most from versities and their research- the Wallonia minister of the appointment of a Wal- the political stability of the likely to win further sup- But politics and a clear to help more economically such measures, which have ers are aided by the govern- economy and trade, says loon, , as past 11 months. port in the 2014 federal elec- industrial strategy are the backward regions in Europe attracted large groups such ment in setting up a plant Whibi’s investment and the national prime minister Under the new national tions. Back in the 2010 elec- main drivers of the state’s to stimulate growth. as Caterpillar, the US earth- in the region – from buying decision by Johnson & indicates that the region’s government Belgium, which tions, the strong result for move to become Europe’s KPMG, the global consul- moving equipment maker, land to finding talent and Johnson to set up in Wallo- political leaders are ready was on the verge of a crisis the NVA led to political heartland for innovation. tancy, says these EU funds, to set their European head- reducing taxation. nia proved the government to play an influential role at following the collapse of the paralysis and 541 days with- But it needs to escape per- which translate into subsi- quarters in the region. This attitude is starting was doing what it took to local and national level. Franco-Belgian lender out a government – setting manently from the cycle of dies to attract investment, In addition to favourable to see success with increas- attract business. Mr Claes, however, says and benchmark 10- a world record. economic decline that have played a key role in regional financial incen- ingly rich investors and “We have given compa- that on the ground the situ- year sovereign bonds hover- What is clear is that the began 30 years ago. FINANCIAL TIMES TUESDAY NOVEMBER 13 2012 ★ 3 Doing Business in Wallonia Innovation clusters form heart of grand revival plan

Economy A focus on high-value sectors has been stimulating growth and reducing unemployment, writes Nicholas Hirst

ince 2006 Wallonia has emergence from post-industrial gloom, of an ever less solid Flanders, in 2005 research and development, education, the Itinera Institute, a Belgian think- Built with implemented an ambitious he continues. Indeed, Mr Marcourt is the Wallonian government sought to start-ups and spin-offs. tank, is not persuaded of the Marshall Marshall Plan and experimental economic just back from China, where he adopt radical measures. One condition of funding is that Plan’s success. funding: UCB’s stimulus policy that is secured a promise to create a business Yet the scale of the Marshall Plan companies must be involved in the Mr Hindriks does not dispute cluster- pharmaceutical aimed at returning prosper- incubator linked to the Catholic Uni- surprised many, even in a region used R&D process from the start. Officials ing can have positive effects. But the plant in Braine- Sity to a region where the industrial versity of Louvain. to economic dirigisme. are also on hand via the clusters to central question, he says, is “how to l’Alleud revolution flowered in continental The term “Marshall Plan” was It also broke with earlier broad- co-ordinate research, draw up business pick the winner – the choice of clusters Europe. coined by a journalist and adopted by brush economic policy, concentrating plans and conduct market studies. can be right and then it is the jackpot, The so-called “Marshall Plan” has Elio di Rupo, then head of the Wallon- on only five sectors – life sciences, Wallonia has also created AWEX, or it can be wrong and then it is a flop”. provided investments exceeding ian government and now prime minis- aerospace, logistics, agribusiness and an agency with a dual aim of promot- “The bottom line is not that Wallo- €4.5bn, in addition to existing funds, ter of Belgium. It evokes the vast aid mechanical engineering – and exter- ing Walloon companies internation- nia has caught up, but that Flanders’ for the period 2006-2014. Yet rather given by the US to a Europe ravaged nalising much decision-making. ally and of attracting foreign invest- economy has been slowing down.” than being used to prop up heavy by the second world war. The arrival of the Greens in the ment to the region. Mr Marcourt disputes this. “Wallo- industry, the funds have focused on The fortunes of the smaller, franco- regional coalition in 2009 introduced a Much of that role involves helping nia has been catching up with Flan- certain high-value sectors, with an phone part of Belgium, which has a sixth priority sector, the “eco-econ- foreign companies to navigate the Bel- ders, including in terms of per capita emphasis on education, network crea- population of 3.3m, have declined omy”, and a rebranding of the eco- gian administration and understand income,” he says tion and innovation. since the 1970s as heavy industry has nomic stimulus policy as “Marshall what assistance is available, in partic- Wallonia, he says, has come The policy has proved a success. petered out, leaving the once booming Plan 2.Green”. ular through the Marshall Plan. through several “tests of credibility”, Jean-Claude Marcourt, a socialist and mines and steelworks of Charleroi and The plan is novel in the way it The Marshall A report assessing the first Marshall beating off competition from several Wallonia’s minister of the economy, Liège silent. mixes top-down and bottom-up Plan is novel Plan in 2010 trumpeted the creation of regions to attract distribution centres points to above-average growth in the Regional unemployment has long approaches, says Marcus Dejardin, 27,000 direct jobs and 1,250 new on two occasions from Johnson & sectors favoured by the plan. “The cri- hovered in double digits. With a 2011 professor of economics at the Univer- in the way it researchers, as well as the training of Johnson, the healthcare company, sis has affected us, but we have done gross domestic product of €73bn and sity of Namur. It preselects certain 115,000 people. and Google’s €250m investment in better than our EU neighbours in terms perennially weak growth, Wallonia broad sectors but then leaves mixes top- In addition, although incubating 2007 in a European data centre. of growth and employment,” he adds. compares starkly with Flanders. The companies and university research down and innovation is a lengthy process, the “Wallonia is very favourable for Wallonia’s attractiveness for logis- latter has enjoyed impressive growth centres to devise the commercial first Marshall Plan-sponsored products investors,” he continues. Between Bel- tics as well as the arrival of Google, and GDP per capita is more than 30 projects. bottom-up are being rolled out. These include gium’s “notional interest” tax rate, the internet company, which has set per cent higher than in Wallonia. Indeed, each sector has its own clus- approaches security software for supply chains the fiscal rebates offered by the region up a data centre there, are further With greater powers following ter that brings together the various and biodegradable food packaging. and AWEX, investors are well looked examples of the region’s broader re- regional devolution and the prospect actors and channels funding for But Jean Hindriks, a senior fellow at after, says Mr Marcourt. A country with high taxes but many loopholes

the tax bill to nearly zero. amount withheld from the versité catholique de Lou- Taxation “There are a lot of tax worker’s remuneration. vain (UCL). deductions, but often inves- This is key to attracting The Chinese group, which Incentives abound tors see Belgium as a coun- fresh talent. will invest up to €250m in try with high taxes because All this is aimed at the project, acquired 8.5 for those prepared to they are not aware of the attracting skilled workers hectares of land on the site look, says James potential tax exemptions and investors operating in and expects to generate at they might be entitled to hi-tech sectors such as bio- least 1,500 jobs. “UCL has Fontanella-Khan have,” says Mr Claes. technology, pharmaceuti- had an excellent reputation The list of tax incentives cals and research and devel- for nearly 600 years,” Wei is endless, but for the super opment, says Wouter Caers, Gong, founder of Whibi told When the news emerged rich the most attractive a tax advisor at KPMG. Le Soir, Belgium’s leading this summer that France’s ones are the zero levy on “The patent rule was French-language newspa- richest man, Bernard capital gains and rental done precisely for the per. “UCL welcomes in its Arnault, was seeking Bel- income. Obviously there pharma and bio-tech indus- science park a lot of great gian citizenship, it caught are conditions: capital gains high-tech companies.” everyone completely by sur- are not taxed as long as As well as tax breaks, prise. the investment is held for international groups invest- Why was the head of more than one year and is Often investors see ing in Wallonia are eligible LVMH, the luxury goods not part of a professional Belgium as having for subsidies provided by group behind brands such portfolio. regional or national bodies, as Dior, Louis Vuitton Billionaires are not the high taxes because or even EU structural and Dom Perignon cham- only ones being treated funds, which are designed pagne, seeking Belgian kindly in Belgium. Innova- they are not aware to stimulate growth in what nationality? tive companies and startups of the exemptions is still considered an eco- Was it because of the hiring young and highly nomically backward area. great weather in Brussels, skilled talent can also be Jean-Claude Marcourt, or because he has a sweet exempted from heft taxes. the Walloon minister of tooth for Belgian chocolate The “patent income try, and it has been very economy and trade, says – or simply because the deduction” reduces the tax successful as many pharma the Whibi investment was French billionaire was try- rate on income derived companies have opened achieved partly because of ing to escape the 75 per cent from new patented products shop in Wallonia,” says Mr the tax exemption offered marginal tax rate on by 80 per cent, bringing Caers. by the federal as well as incomes of more than €1m the overall rate to about 7 Such tax incentives have regional government in introduced by France’s per cent. recently played a key factor Wallonia. “The on-the- president François Hol- On top of that, a company in convincing Chinese ground support provided by lande. The later seemed to that works closely with uni- group Whibi, which special- the local authorities was be the most likely but not versity staff can enjoy gen- ises in helping build tech essential to seal this agree- obvious. erous tax breaks, while a startups, to sign a collabo- ment.” Many international group employing research- ration with the Louvain-la- Other key tax exemptions observers were surprised ers or masters degree grad- Neuve science park, which are linked to the notional Mr Arnault had picked Bel- uates is allowed to exempt is associated with the interest, which allows com- gium and not Monaco or 80 per cent from the region’s top university Uni- panies to deduct 3.45 per Luxembourg, the classic cent on their equity invest- destinations for the world’s ment. This system is of wealthiest to lower their great interest to new com- tax exposure. panies that have to invest Belgium’s income tax – Contributors » heavily with small immedi- which applies to Wallonia ate returns. However, for as well as Flanders – is high-margin companies the among the highest in the exemptions are reasonable. world, with peaks for top James Fontanella-Khan Andy Mears However, Mr Claes of the earners close to 60 per cent, Brussels Correspondent Picture Editor head of AmCham, which including social security. represents more than 9,000 For companies it is no Nicholas Hirst For advertising, contact: companies in Belgium, says better. Belgium’s standard Reporter, Policy and Sophy Pierre such incentives would be corporate tax rate, at Regulatory Report Phone +33 1 53 76 82 55 useless unless exemptions 34 per cent, is among the Fax +33 1 53 76 82 53 were better promoted. He highest in the European Simon Mee Email: [email protected] says the country should Union – about 10 points FT contributor or your usual FT learn from Ireland, which above the the 27-country representative. sells itself as a low-tax-base bloc’s average. Aban Contractor country that adds taxes However, appearances Commissioning Editor All FT Reports are available depending on sectors. can be deceiving. on FT.com at ft.com/reports “In Belgium they tell the Marcel Claes, chief execu- Richard Gibson world, ‘We are going to tive of the American Cham- David Scholefield All editorial content in this tax you like crazy,’ but ber of Commerce in Bel- Philip Parrish supplement is produced by once a company arrives gium, says that the govern- Sub Editors the FT. it discovers that actually ment provides a series of Our advertisers have no the tax regime is not tax exemptions for rich Steve Bird influence over, or prior sight that bad...Belgium has individuals as well as Designer of the articles or online a lot to learn on this from companies that can reduce material. Ireland,” he says. 4 ★ FINANCIAL TIMES TUESDAY NOVEMBER 13 2012 Doing Business in Wallonia Fears of federal break-up cast long shadow

Politics Despite Wallonia’s regional stability, disunity at the national level is undermining investor confidence, writes James Fontanella-Khan

olitical instability irritates francophone prime minister of the looser confederation, with French and “It is not only in Wallonia that we als, has indeed been able to bring Bel- 10-year benchmark bond close to 6 per businesses more than most country since the 1970s, has given Dutch-speaking parts of the country should be concerned [about the rise of gium’s finances under control since it cent – to being one the region’s safer other annoyances. In that Wallonia a further edge politically. able to pursue different social, eco- the NVA]. We should be worried came to power in late 2011, although places for investors, with short-term respect, Belgium must seem Local politicians in Wallonia can nomic and cultural policies, will about how it will affect the markets cynical pundits say this has been debt hitting negative yields for the like a basket-case to many rely on the support of Mr Di Rupo, a remain unclear for some time. and investor confidence.” achieved thanks to the political paral- first time this summer. Pmultinational companies. former minister-president of Wallonia, This uncertainty risks destabilising Mr Marcourt says the NVA was ysis that blocked spending during the Belgium’s more stable political situ- The lack of a predominant party in when it comes to seeking federal sup- the federal government and the Wal- responsible for the parliamentary government-free period. ation means investors are willing to the country has for many years forced port for a regional plan. loon economy, according to analysts impasse of 541 days, when Belgium Belgium went from being part of the accept lower returns, rather than tak- political leaders from opposite fac- However, the outcome of municipal and senior government officials. beat the record of post-Saddam Hus- group of troubled peripheral econo- ing the risk of investing in less stable tions to form shaky coalition govern- elections last month, in which support Jean-Claude Marcourt, the Walloon sein Iraq for the longest government- mies of the eurozone in November last countries that offer higher returns. ments. When those have failed, the for the separatist New Flemish Alli- free period for a country in history. year – with yields for the country’s The progress made, however, risks nation has gone without a govern- ance (NVA) strengthened across Flan- The Flemish nationalists, which being squandered if investors still see ment for months, the record being 541 ders, the northern, Dutch-speaking, emerged as the largest party in the Belgium as a basket-case environment days following the 2010 elections. half of Belgium, has raised concerns The rise of francophone 2010 elections with about a fifth of the when it comes to politics. Although But the regional government of about the unity of the country. Elio Di Rupo to prime vote, refused to form a coalition gov- Wallonia will continue to have a sta- Wallonia is an entirely different story. The success of the NVA, which ernment with other groups, leading NVA leader ble government, the uncertainty over In this, the French-speaking part of emerged as the biggest party in Ant- minister has given Wallonia Belgium into a state of paralysis that Bart De Wever the unity of the country will have a Belgium, stability is the one thing of werp, the economic heartland of Flan- lasted nearly two years. says separation spill-over effect in the southern part which investors can be assured. ders, has reignited secessionist ten- a further edge politically “Today, the message that Belgium is not his goal of Belgium as well as the north. The Socialist party has been in sions. Although the party’s leader, has to give to investors is that it is a “Our federal model has created a lot power ever since greater autonomy Bart De Wever, has said separation is minister of economy, warns that the stable country, because it has a stable of instability,” says Marcel Claes, was given to Wallonia in the 1970s. not his goal, the NVA’s manifesto rise of the NVA could scare off inves- government led by Elio Di Rupo, chief executive of the American Since 1995, when the Walloon parlia- states clearly that independence from tors, who are concerned about the who has governed in a serious Chamber of Commerce in Belgium. ment was set up, the role of minister- Belgium is the top priority for the possibility of a break with Flanders. manner, in line with EU rec- “Although I don’t think fears of a president has – apart from a one-week Flemish nationalists. “I am not happy about the rise of ommendations,” says Mr break-up are justified, there is cer- hiatus in 2005 – always been occupied Flanders has been opposed to sup- the Flemish nationalists,” says Mr Marcourt. tainly a perception that this might by a socialist politician. porting the economically less prosper- Marcourt. “I am worried about the The , happen – and perception matters a lot The rise to the highest level of ous francophone part of the country. programme of the NVA, which does which includes socialists as to potential investors, if there is even power in Belgium of Elio Di Rupo, Whether Mr De Wever will push for not correspond with the economic well as centre-right Chris- a small risk they will look for safer who last December became the first a fully fledged secession or a much needs of the country. tian Democrats and liber- options.”

Mons puts Global taste for Trappist itself on the ale brings job benefits

set up breweries across the self-imposed rule not-for- Brewing globe, says a cultural revo- profit, says Mr Goffinet. map with lution is taking place in the There are three basic But critics say success US as millions become fans rules that certify the Trap- has seen beer quality of craft beer. “Belgian Trap- pist trademark: the beer has pist beer is a trademark in to be brewed inside the suffer, writes James the US,” he says. abbey; monks have to be in Google deal Fontanella-Khan Paul Arnott, a British control of the brewery; and brewmaster responsible for profits must go to charity. quality of Chimay beers, These values are defended The Trappist monks who says the word “Belgian” on by the International Trappist Deplus, Mundaneum presi- started brewing Chimay in the label has become a sym- Association, a group based Culture dent. “Google wants to 1862 would have never bol of excellence for inter- in Vleteren, Belgium, that highlight the project and its imagined their artisanal national customers. “People protects Trappist monks’ Sponsorship acts as founders as pioneers of the dark, peppery ale would one trust the Belgian brand – interests. “We are aware tribute to pioneers of worldwide web and the day become a refined global they value it,” he says our family name has eco- search engine.” commodity. The rise of Belgian craft nomic value. That’s why we knowledge sharing, The company has spear- But 150 years since the beers, however, is a recent want to protect the monas- writes Simon Mee headed similar initiatives in first “Red” brew was pro- fad. Twenty years ago sev- tic economies that support other European countries, duced by 17 monks at the eral craft breweries were on our communities against such as Germany and Abbaye Notre Dame de the verge of collapse, so the unfair competition,” it says. Google, the internet giant, France – it opened a Euro- Scourmont in Forges, Wal- reluctant decision to inter- Mr Goffinet says the has teamed up with a Wal- pean cultural centre in lonia, Chimay has become a nationalise their brands monks, who have ceased loon museum as part of an Paris in 2011. wholesale name for beer was caused by their peril- working on a day-to-day effort to portray itself as a But Google’s strategy has connoisseurs the world over. ous financial situation. basis but still oversee the friend of European culture. been criticised in some “Today about half of the Some experts and fans of running of the brewery, had The move comes as pres- quarters as a blatant beer produced at the abbey the beers complain the no interest in expanding sure increases from regula- attempt to win the hearts of is consumed outside Bel- increased commercialisa- but agreed to do so to gen- tors and traditional content key policymakers when it gium,” says Jérôme Goffinet, tion of Chimay has harmed erate local employment and industries in Europe over faces legal pressure on sev- Out of the archives: the Mundaneum’s indexing presaged web search engines Mundaneum a senior manager at Chi- the quality of the beer, support other chapters as copyright issues and the eral fronts. In recent may. “The US is our biggest betraying the monks’ val- well as charity projects. company’s privacy policies. months Google has battled market, but Chimay is also ues and original recipe. “If I owned Chimay I At first glance the part- with French news publisher “If you look at it from one launch in March this year. already gearing up for 2015 enjoyed in China, Japan, Tim Webb, author of the would not run it the way it nership seems an odd one. associations over moves to side, you could say it is a “I am delighted to see this and ’ tenure as a Euro- Africa and the Middle East.” authoritative Good Beer is now,” says Mr de Hal- But the Mundaneum in force search engines to cynical public relations relationship,” he told the pean Capital of Culture, Chimay, which is one of Guide – Belgium, has been leux. “I would produce way Mons – a city that will be a license news content. stunt to help market its press conference. “Espe- hoping that larger inflows the six remaining Belgian very critical, saying the more beer with fewer peo- European Capital of Culture Google also faced trouble image,” says Roger Scoble, cially because I was educa- of tourists will boost the Trappist ale beers, produces quality of its beer has ple, but that’s not their phi- in 2015 – is no ordinary in Germany after regulators a technology blogger. “But tion minister when we city’s vitality. A number of 170,000hl a year at the aus- changed into “a pretentious losophy and given that they museum. It commemorates found its Street View map- on the other hand, Google found these archives in a tourist attractions and cul- tere abbey, which has 8.5ha pastiche of its old self”. still do a great beer, it the work of two Belgian pio- ping service may have is doing many things to rotting warehouse in Brus- tural venues, including a of land, where the monks Chimay denies this, should be respected.” neers, Paul Otlet and Henri breached data protection help give us access to the sels and moved them to my new war museum, will be hide their precious water although many aficionados Chimay is based in one of La Fontaine, who in 1895 laws. In October, Brussels world’s information.” home city of Mons.” opening their doors before wells – good quality water question how profit-making Wallonia’s most impover- founded the institution that gave the firm four months The museum’s exhibition, 2015, according to a spokes- is a key ingredient of beer. values can be reconciled ished areas, with a high sought to index, classify to change its privacy policy, “Renaissance 2.0: A Journey person for the mayor’s The output of Chimay, with monastic tradition. rate of unemployment. Hir- and share knowledge. seen by many as invasive, Through the Origins of the office. and other Trappist peers The simple answer is that ing local people is a priority The partnership high- or face large fines. ‘We needed to Web”, which focuses on the While no firm plans are such as Westmalle and Trappist breweries, despite for the monks. lights the parallels between “It is clear that the inter- reach out and story of Otlet and La Fon- in place yet, Mr Deplus Orval, represents a fraction being profitmaking, are by The abbey employs more the museum and Google’s net is disruptive to many taine, runs until next July. hopes the Mundaneum’s of the world’s beer market, than 250 people and occa- underlying philosophy, traditional content indus- invest in Europe and The Mundaneum has also archives will be digitised in which is dominated by sionally acts as a local namely to organise knowl- tries, and that culture is a held a series of lectures this the near future as the insti- Anheuser-Busch InBev, the money lender, without edge and make it univer- particularly sensitive topic European culture’ year, given by internet pio- tution continues its efforts Belgian beer behemoth charging interest, to small sally accessible. But it also in many areas of Europe,” a Google neers such as the French to widen its audience from behind the Budweiser, entrepreneurs who will cre- brings much-needed promo- Google spokesperson said. inventor of the datagram, a local to an international Stella Artois and Hoe- ate new jobs. tion and investment for a “We had publishers who Louis Pouzin. one. gaarden brands. AB InBev The monks also assist city that is still suffering were suing us in France Although technically an Google is no stranger to “Only a small audience, alone produced more than other abbeys in severe from the decline of its min- and we needed to reach out archive centre that employs the region surrounding mostly scholars, knew 350m hl of beer in 2011. financial difficulty. ing industry and the result- and invest in Europe, and just 15 people, the Munda- Mons. In 2010, the company about the Mundaneum But while AB InBev suf- Father Theodore, the ing structural unemploy- invest in European culture, neum has benefited from opened a data centre in before the launch of this fers a decline in volumes, monk who in 1948 isolated ment. in order to change that per- the increased international nearby Saint-Ghislain that partnership,” Mr Deplus Belgian Trappist beers are the yeast cells still used in “We think Google redis- ception and establish con- visibility that stems from employs some 120 people. says. “Never would the increasingly popular in Chimay beer, might have covering part of its own structive working rela- the partnership. Information technology museum have got the world western markets as con- disliked the notoriety but roots and history in the tions.” The Belgian prime minis- heavyweights such as recognition the institution sumer taste shifts towards would have been proud of heart of Europe was some- The museum’s creation ter Elio Di Rupo, who is Microsoft, HP and IBM have and its founders have today more refined beers. the benefits of turning the thing really exciting for the has also generated interest also the mayor of Mons, also set up shop in the area. without the international Hubert de Halleux, a Wal- abbey’s beer into a global company,” says Jean-Paul from online commentators. spoke at the project’s Local authorities are focus Google worked on.” loon brewmaster who has Chimay: international brand brand, says Mr Goffinot. The man from left field who has defied expectations

Profile conservative parties, and have known him for years. appreciation for his efforts benchmark bonds went adds that despite having immigrants, Mr Di Rupo Rupo openly declared his where Dutch is the mother “He is a scientist, for god’s to pick up the language from being close to 6 per managed to convince lost his father in a car homosexuality. Elio di Rupo tongue of 60 per cent of sake,” says a friend. “As despite the fact that he cent highs – just before Mr outside investors that crash at a young age and After having cleared his the population, it was any good chemist, he is a still struggles to master it. Di Rupo took office – to a Belgium is stable “many was separated from most name he went on to Belgium’s unlikely hardly outlandish to think perfectionist who wants to Many in Flanders, where little more than 3 per cent people at home are of his six siblings after become president of the that an openly gay, atheist, get the formula right.” rightwing parties are in recent weeks. His unsatisfied with the his mother was forced to Socialist party in 1999, PM, by James French-speaking leftist When he came to power traditionally more popular, government took a series government’s reform give them away to an mayor of Mons in 2000 and Fontanella-Khan would struggle to win the he did not speak much dislike his politics more of austerity measures that efforts”. orphanage when she could chief minister of Wallonia hearts and minds of the Dutch, irritating many of than his poor language helped bring the country’s Mr Devos says that the not support them. Despite in 2005. Mr Di Rupo’s rags- majority. the 6m people living in skills. Flemish business debt costs under control. future of Mr Di Rupo will the difficulties faced in his to-riches story culminated But nearly a year after Flanders. Bart de Wever, leaders complain that Mr “Di Rupo deserves credit depend on his audacity and early life, Mr Di Rupo went in his appointment to When Elio di Rupo was the 61-year-old socialist leader of the Flemish Di Rupo has failed to push for taking the country out courage in presenting a on to earn his PhD at prime minister in 2011. appointed prime minister leader became prime separatist party that through key structural of the danger zone,” says radical cost-cutting 2013 Leeds University, where he “My life is a fairytale,” of Belgium by King Albert minister – ending the topped the polls in the reforms to liberalise Carl Devos, professor of budget. “If he fails that, later lectured for a while. Mr Di Rupo admits in an II in December, his critics longest period in history June 2010 elections, Belgium’s labour market political science at Ghent the government will be When he returned to interview with Francis Van warned he would be the (541 days) during which a attacked Mr Di Rupo at the and lower income tax rates University. However, he over; if he manages to Wallonia, his political de Woestyne, the author of weakest prime minister in country remained without time, saying: “My Nigerian for salaried workers. push through key reforms career took off at a rapid his biography. “You could Belgian history. government – Mr Di Rupo cleaning lady who has Nevertheless, the there is hope,” he says. pace locally, but was not make it up.” The first French-speaking has emerged stronger than been in Belgium for two politician, who regularly For a man who started nearly derailed in 1996 by Whether he can give it a Walloon to lead the many had predicted. years speaks better Dutch sports a distinctive red As a good chemist, life from the bottom and false accusations that Mr sequel will depend on his country in more than 30 Although often described than Elio.” bowtie is credited Di Rupo is a had to face numerous Di Rupo was having sex ability to convince Belgian years was seen by many as flamboyant and However, his popularity internationally for having economic and social with underage males. It voters – as he did with as the most improbable colourful, Mr Di Rupo, who has grown in Dutch- brought back stability to a perfectionist who challenges, Mr Di Rupo has was in the midst of the foreign investors – that he of leaders. has a PhD in chemistry, is speaking Flanders to above country that was on the shown to have plenty of scandal, while he was is the right man to revive In a country that has rather more moderate and 30 per cent, according to verge of a Spanish-style wants to get the audacity and courage in trying to defend himself Belgium’s economy and historically voted into restrained than he is recent polls, as Flemish sovereign debt crisis. formula right his DNA. from the wrongful return it to economic power centre-right portrayed, say people who citizens have shown Belgian 10-year The son of poor Italian allegations, that Mr Di growth at a time of crisis.