Country Focus: Belgium – a country of three halves

In a companion piece to this issue’s Mystery Shopper, Adam Bernstein takes an in-depth look at Belgium, including the depth of its character and its potential as an export market…

With a rich history along with a major diamond industry, three official languages, and a variety of beers along with waffles and heavenly chocolates, Belgium is also well-known for its medieval towns, national football team, and for suffering during two world wars.

Belgium, or rather, the Kingdom of Belgium, is a relatively young country that only come into existence in its modern form in 1830. Its name originates from ‘Belgica’, a title given by the Romans to the northern part of Gaul which Julius Caesar conquered a few decades before the Christian era. The word is derived from the fierce tribes in the area which the Romans had to subdue.

In the Middle Ages, Belgium was divided in fiefdoms: the County of Flanders by the sea, the Duchy of Brabant, the Principality of Liège along the Meuse River and so on. During the late Middle Ages, present-day Belgium, Holland, and Luxemburg were unified into the so-called XVII Provinces and became part of the lands originally belonging to the Dukes of Burgundy.

In 1792, following the French Revolution, France invaded the Austrian Netherlands which were annexed to become part of the Napoleonic Empire. Post Waterloo the former Austrian territories were reunited with Holland into the United Kingdom of the Netherlands.

The union only lasted until 1830 when the Belgians revolted against Dutch rule to become independent.

July 1831 saw Leopold of Saxe-Coburg-Gotha became the first King of the Belgians.

The German Empire invaded a neutral Belgium in 1914 to outflank the defences of the French army.

The Belgian army resisted, holding territory north of Ypres alongside the British and French armies until the Armistice of 1918. The country was again invaded in 1940 but surrendered after two weeks.

Following World War II and wanting an end to wars fought on its soil, Belgium led the way to European unification being one of the six founding members of what became the European Union. Its capital, Brussels, now hosts several European institutions and the headquarters of NATO.

Demographics and geography

Bounded by the English Channel and the UK to the northwest, the Netherlands to the north, Germany and Luxembourg to the east, and France to the south, Belgium is very reachable.

Belgium isn’t very expansive and covers just 30,528 sq. km but with a population of 11.7m according to Statbel, it is the 22nd most densely populated country in the world and the 6th in Europe.

According to the World Cities Database from simplemaps – using various “authoritative sources”, at the end of March 2023 there were 388 towns and cities of 8,500 inhabitants. Brussels was the largest with 1.74m people, Antwerp next with 529,000, Gent had 265,000, Charleroi 202,000 and Liège had 197,000 residents. Four more cities had more than 100,000 population, 19 more had between 50,000 and 100,000, 321 others had 10,000 to 50,000 residents, and just 49 had between 8,500 to 10,000 inhabitants.

In terms of demographics, Belgium is ageing – so reckons the World Population Review. It noted a population growth rate of just 0.41 percent which puts it in 173rd place. The average age in Belgium is now 41.9 years and some 30 percent are approaching retirement. Peak population of around 12.5m is expected around 2050 after which the population should decline to 11.5m by the end of the century.

Healthy Belgium noted in July 2023 that life expectancy for men is now 79.5 years compared to 83.8 years for women. Index Mundi offers data on age bands based on 2020 estimates – those aged 14 or under made up 17.22 percent of the population, 15–24-year-olds accounted for 11.2 percent, those in the 25-54 aged band equated to 39.23 percent, those between 55-64 took up 13.14 percent and 19.21 percent of the population were over 65 years of age. With its complex history, it’s not hard to see why the country is just as complex administratively. Belgium is divided into three autonomous regions – Flanders in the north, Wallonia in the south, and Brussels-Capital. There are three official languages – Dutch, French and German. However, French is the lingua franca. It’s been said that the political parties are not just driven by ideological interest but also by regional selfinterest. A July 2023 Politico op-ed stated: “Mounting concern over migration is fuelling a surge for Flemish independence parties ahead of an election next year.” In essence, it said that the country has a “dysfunctional national political life.” Proof of this was indicated by long periods without an officially functioning government –589 days between 2010 and 2011 and 500 days during 2018 to 2019, nearly three years in total. Politico also reported that the Vlaams Belang party — which wants Flanders to move away and into a fully independent, breakaway state — is now the biggest political force in the country.

Adult sector

Market analysts ECDB estimate the Belgium erotic and adult products ecommerce market was worth around €34m in 2023. ECDB also estimates online sales accounted for 10.7% of the total Belgian erotic and adult products retail market last year, suggesting the overall market value is somewhere in the region of €342m. Online or offline, consumers searching for a supplier of sex toys have no shortage of options, with a quick online search bringing up names such as All Black, Belgium Sex Shop, Belgo Toys, Bondage Life, Boris Boy, Erovibes, Erotosche Verbeelding, Eva Luna, L’eXtase, Loveware, Madame Rêve, Nuit de Chine, Pabo, Sexy Style and Sexy World, in addition to the big players who cross borders.

Unlike its European neighbours, Belgium has a unique claim to fame when it comes to sex toys: it is the only country – to our knowledge – that has hosted an annual sex toy hunt.

The event was launched in 2008 by Nicolas Bustin, from Belgian sex toy company Soft Love, in the small village of Wépionin, just outside of Namur. Known as the Chasse aux Sextoys festival, it took place annually around Easter time and saw people digging up a muddy field in search of buried treasure – tokens that could be exchanged for sex toys and other erotic accessories.

Conceived as a marketing gimmick, it grew to attract thousands of women participants – only a token number of men were allowed – dressed in hen nightlike attire for the occasion. In addition to the main event, attendees could also enjoy refreshments, Zumba sessions, body positivity workshops, and pole dancing classes, with money raised from the festival distributed to women’s health charities.

Although the event did not take place in 2023, it was reported to be returning in 2024 under a new name –The Love Toy Hunt – and in a new setting, following Soft Love’s relocation to Mont-Saint-Guibert.

A Facebook group dedicated to the festival can be found at www.facebook.com/groups/205815377817387

Economy

Both Coface and Lloyds Bank highlight some concern for the Belgian economy, primarily because of the price of energy and the country’s reliance on gas for its chemical and pharmaceutical sector.

Lloyds commented that the Belgian economy rebounded strongly in 2021 and the first half of 2022, but that “high energy prices, declining confidence and weakening international trade slowed GDP growth in the second part of the year.” While the IMF estimated an overall growth of 2.4 percent, the EU’s Economic forecast for Belgium, last updated in May 2023, outlined growth of 3.2 percent in 2022, a forecast of 1.2 percent for 2023 and a projected rate of 1.4 percent in 2024. In dollar terms, GDP hasn’t grown much (despite peaks and troughs) since 2008 when it stood at $517.33bn; in 2022 it was listed as being $578.6bn. In comparison, GDP more than doubled between 2001 ($236.75bn) and 2008 according to the World Bank. The problem for Belgium is that it is highly exposed to the performance of its main trading partners who, according to Worldtopexports.com – citing May 2023 data - were Germany (21.2 percent of exports), the Netherlands (13.8 percent), France (13.1 percent), the US (5.9 percent) and the UK (5.2 percent). Another ten countries made up the top 15 countries that generated 78.4 percent of Belgian exports.

As for inflation, EU data recorded this as 10.3 percent in 2022, 3.4 percent for 2023 and an estimated 3.5 percent for 2024. The unusually high inflation rate has been attributed to sharp increases of wholesale gas and electricity prices that quickly fed into retail prices. Unemployment in 2022 stood at 5.6 percent, was expected to be 5.8 percent for 2023 and is predicted to drop to 5.7 percent in 2024. A low labour market participation rate could be a problem for Belgium in the coming years; worryingly, unemployment disproportionately affects the young, non-European immigrants and those in Wallonia. The World Bank reckoned that Belgian GDP per capita for 2022 was $49,582.80. In comparison, the World Bank puts Burundi bottom at $238.40, Romania at $15,892.10, Italy at $34,158, the UK at $45,850.40 and Monaco top at $234,317.10. All things are relative.

Industry and business

A Belgian government agency, Federal Public Service Economy, noted in its Economic Outlook of May 2022, that the Belgian economy “just like any modern industrialised economy is characterised by the growing importance of services.” It stated that the share of market services (including wholesale and retail, financial activities, and insurance) represented 55.4 percent in 2020, compared to only 13.8 percent for industry and 5.3 percent for construction with the rest split between non-market services (including healthcare), energy and agriculture.

Stanbic Bank draws attention to significant discrepancies between the three Belgian regions. Flanders has succeeded in developing the second largest petrochemical industry in the world. Wallonia is in the middle of restructuring, following the closure of collieries and steel plants. Brussels distinguishes itself in the areas of telecommunications, software development, and the pharmaceutical and automobile industries. It commented that “the Belgian economy is largely oriented towards services. In fact, the tertiary sector accounts for 68.8 percent of GDP and employs 78 percent of the active population.”

The service sector is in the main based on commerce, transport, and hospitality along with public administration, education and business services. The most common occupations are office workers, shop assistants, maintenance staff, and teachers.

Chemical, plastics and life sciences

The European Chemical Industry Council (CEFIC) states that the Belgian chemical sector is worth some €74bn and directly employs 97,400 workers in more than 720 companies with another 220,000 employed indirectly. The sector accounts for more than one third of all Belgian exports.

Agro&Chemistry noted, in April 2022, that the sector saw its strongest growth in 20 years and that “within the EU, Belgium has even become the second most important exporting country for chemicals, plastics and pharmaceuticals, following Germany.” It added that chemistry and life sciences also account for 40 percent of all Belgian patent applications; 982 were filed with the European Patent Office in 2021.

Manufacturing

Federal Public Service Economy data for 2020 recorded that the biggest segments within the manufacturing sector were the pharmaceutical industry (20.4 percent of the total value added), food and beverage industry (15.3 percent), chemical industry (15 percent), and basic metals and fabricated metal products (11 percent).

In more detail, Federal Public Service Economy noted other elements of the Belgian manufacturing sector included electrical equipment, textiles and leather goods, furniture and machinery equipment, transport equipment, wood and paper products, and computer and optical equipment.

The World Bank reckons that the entire manufacturing sector is worth around $72.95bn which equates to around €66.68bn. However, that doesn’t quite stack up with data from the Federal Public Service Economy and CEFIC. Indeed, the Federal Public Service Economy detailed that (in 2020) pharma and chemicals were worth a collective 35.4 percent of GDP which equates to around €204bn.

Statista has stated that in 2020 there were around 39,630 manufacturing enterprises.

Agriculture

Agricultural activity in Belgium has continued to shrink - both in terms of employment and in its contribution to the GDP. However, its key crops are sugar beets, chicory, flax, cereal grains, and potatoes. The country also cultivates fruits, vegetables, and ornamental plants. Forty-four percent of the land surface of Belgium is cultivated with farmland increasingly concentrated. In 37 years, the average utilised agricultural area per farm holding has more than tripled in Flanders (from 8.4 ha in 1980 to 26.4 ha in 2017) and in Wallonia (from 20.7 ha to 56.6 ha). Livestock farming has become significantly more intense.

The problem for the sector is as FPS Foreign Affairs commented in April 2022: “…agricultural land is subject to competition from housing, industrial areas and road infrastructure, even in the countryside” which is forcing up land prices. This is why Belgian Common Agricultural Policy (CAP) financial support is aimed at investments in agricultural holdings and the setting up of young farmers.

Tourism

Statista recently commented that Belgium’s accessibility is what makes it a popular travel destination in Europe. It has a coastline, historically interesting cities, as well as a decent cuisine. In other words, it has much to offer in the way of attractions and cultural activities for tourists.

In 2019, the number of overnight tourist stays in Belgium peaked at approximately 42.5m before understandably declining to around 20m in 2020 following COVID. Some 313,600 people work in the sector – a figure which Statista says is almost identical to the level pre-COVID. The sector was worth €25.9bn in 2022, down 11 percent on 2019’s €29.1bn. However, more recently, in July 2023, the Brussels Times wrote that “Belgium’s tourism sector clocked a record 51m overnight stays last year, largely in coastal areas and Brussels.” The growth, however, was spread unevenly across Belgium with West Flanders seeing over 14m overnight stays, followed by Brussels and Antwerp province at 7m and 6m a piece. The Belgian Ardennes’s Luxembourg province saw over 4.1m overnight stays.

Tax

The general rate of corporate income tax (CIT) is levied at a rate of 25 percent. This rate applies to both Belgian companies and Belgian permanent establishments of foreign companies.

A reduced rate applies to small and medium-sized enterprises (based on article 1:24 of the Code for Companies and Associations or on article 15 of the old Companies Code, and provided several other conditions are met). Such businesses are able to benefit from a reduced rate of 20 percent on the first €100,000 of profit.

A surcharge is due on the final CIT amount upon assessment. The surcharge can be avoided if sufficient advance tax payments are made. Currently, the surcharge is 6.75 percent.

There is also a tax of 100 percent that is applicable to so-called ‘secret commissions’ - any expenses where the beneficiary is not identified properly by means of official forms filed with the Belgian tax authorities.

The standard rate of VAT is 21 percent. However, there is a 12 percent rate that applies almost randomly to phytopharmaceutical products, inner tubes, certain combustible material, margarine, social housing and certain renovation works, and restaurant and catering services.

There is also a 6 percent rate on numerous other supplies such as basic necessities (food and medicines), passenger transport, repair of bicycles, some medical supplies and prostheses, and hotels and camping.

Beyond that there is a VAT exemption for supplies that include education, banking, insurance, and cultural services.

Tax brackets apply to net taxable income after the deduction of social security charges and professional expenses. There are four bands – 25 percent for income under €15,200, 40 percent on income from €15,201 to €26,830, 45 percent on income between €26,831 and €46,440, and 50 percent on income over €46,440.

Interest and dividends paid out and collected via Belgian financial institutions are, in principle, subject to a flat-rate tax of 30 percent. €980 can be earned interest free; interest exceeding this amount is subject to 15 percent tax. Dividend payments are exempted for the first €800.

To summarise, Belgium has much to offer firms based in other countries. However, while the common thread that holds Belgians together is Europe, as is the case elsewhere, Belgium is a little fractured. Applying some common sense and regional sensitivities to discussions would be a worthwhile move.