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Belgiums economy

Belgium's Economy

Belgium

The international business market place involves much more than handshakes and cocktails to close deals. International business keeps the global economy going, and in order for countries to trade with each other, they must learn and understand the culture and economy of the each other's country. The idea of learning and understanding another country well enough to practice profitable business encompasses everything from the country's being able to perform business practices in its geographical settings to knowing whether or not the country has a balance of payment surplus or deficit. However, the two latter ideas barely even touch what is needed to know about conducting trade on an international level. Our cultural, economic, and marketing analyses are our attempts to understand the environment of Belgium, as well as all of its components. We must also know how to market our product in the Country of Belgium most effectively.

Cultural Analysis

Belgium became an independent state in 1830, by adopting a Constitution providing for a parliamentary system of government, with provisions for operating within the framework of a unitary, highly centralized state apparatus on the Napoleonic model (Mughan). In recent times, there has been a separation between the Belgians of Walloonia, who speak French, and the Dutch speaking Belgians of Flanders. The major reason for the discord is a product from when the Constitution was developed. No official recognition was given the Flemish majority; rather, French was adopted as the soul official language of the country. From there, the Flemish people were forced to adopt the language of the minority Walloons. Industrialization grew to favor Walloonia in respect to its reserves of coal and iron ore. Eventually, laws were changed to recognize Dutch as the official second language as well as to give the Flemish equal representation with the Walloons.

The official name for Belgium, the Kingdom of Belgium, lies in the northwestern region of Europe, and bordered to the north by the Netherlands, to the east by Luxembourg and Germany, and to the south by France. Temperature in the capital, Brussels, ranges between about 0 degrees C and 23 degrees C (32-73 degrees F). July is the warmest and wettest month, while March is the driest. Average precipitation throughout the year is about 33.7 inches in the form of rain. Due to its location in relation to the North Sea, the much of Belgium's climate is very temperate and mild.

The terrain of southwestern Belgium is relatively hilly, while some areas in the north, like Flanders, are subject to periodic flooding. The North Sea coast is sandy. Less than 50% of the land is used for agriculture, 20% is considered as forestry, which is concentrated in the Ardennes region.

As for minerals and resources, as of 1995, Belgium produced 637,000 metric tons of Lignite, 24,000 metric tons of Uranium, and 2,186,000 metric tons of chalk. Mining accounted for 0.3% of the GDP, and 0.2% of the labor force (70, 74).

Surface transportation in Belgium includes both passenger and freight rail systems, cars, buses and coaches, goods vehicles, tractors (non-agricultural), and motorcycles and mopeds. As of 1997, there were :

Railways (traffic) Passenger-km 6,984,000

Freight ton-km 7,465,000

Private Cars 4,500,000

Buses and Coaches 14,500

Goods vehicles 400,000

Tractors (non-agricultural) 41,000

Motorcycles and mopeds 225,000

Communications systems as of 1995 included:

Telephones 4,632,000

Fax 165,000,000

Cellular Phones 235,000,000

Radio 8,000,000

Televisions 4,600,000

Newspapers 28

general interest dailies - combined circulation of 1,962,422 copies per issue

In Belgium, the family is focus of most everyone's social life, and happiness is often based on the family. In both Flanders and Walloonia, the nuclear family is the primary unit, composed of a married couple and their unmarried children. According to a cross-European survey, 53% of Belgians say that if they had more time, they would spend it with family. Belgians remain conservative on family values. There is also a strong belief among Belgians that children need both parents in the home, which results in low divorce rates.

When it comes to marriage and courtship, Belgians are liberal when it comes to remarriage after divorce, birth control, and premarital sex. "Marriage is viewed as enriching one's personality, and spouses were seemingly chosen on the basis of mutual affection. Common courtship involves the couple seeing each other daily, or several times during the week. It is also common for a couple to move quickly to engagement, however, the engagement may be broken off and each could start the process over with another partner fairly quickly (Wickman).

Education is one of the most important elements of Belgian society. As common in the United States, the political system has been split by governing the educational policy. The Belgian educational system is quite diverse, in that there are separate schools for religious and language differences. It also gives the parent and student and the choice as to which school the student wants to attend. Education is not compulsory until children reach the age of six. Primary education consists of three cycles, which are made up of two years each. The main goals of primary education are to teach self-expression in the mother language, reading, writing, and arithmetic. The curriculum includes moral or religious instruction, a second language, natural sciences, geography, music and art, physical education, and hygiene. Secondary education is only required to age 15. In 1981, 90% of kids ages 12 to 17 were in school, as opposed to only 69% in 1960. Various options for secondary education include: lower level technical, vocational, and artistic school, general middle school, and six-year academic high school. Secondary school consists of two cycles of three years each. In this program, included are studies in classical and modern humanities, economics, science, and modern languages. Higher education is divided into a short course of 2 to 4 years, and a long course of 4 to 6 years. Belgium has six certified universities, each including at least the five traditional faculties of philosophy, law, medicine, science, and engineering. The oldest university, which is the Catholic University of Louvain, is considered by many Catholics to be the very best Catholic university in the world, was founded in 1425. Most students receive grants and scholarships making tuition only a few hundred dollars per year. Enrollment in higher education is on the rise (Wickman).

Belgium's political system is that of a constitutional monarchy, with a bicameral Parliament, made up of a Chamber of Representatives and the Senate. The king is the supreme head of state, although he exercises his power and delegates power through his cabinet. The chamber of representatives consist of 150 members, 40 of which are directly elected by the people of Belgium, 21 are appointed by the legislative bodies of the three language communities (10 each from Flemish and French speaking communities and one from the German speaking community). The Belgian government is stable, and is continuing to experience positive growth and surprisingly low levels of corruption (Mughan).

The independence of the judiciary system is based on the constitutional separation of the executive, legislative, and judicial branches of the Belgian government, which is similar to that of the United States. The judges are appointed to life-long terms by the king. Judges can only be removed by judicial sentencing. The Belgian judicial system is divided into four levels: Judicial Canton, District Courts, Regional, and National Courts. The lowest courts are known as the Justices of the Peace and the Police Tribunals. Each district has one of each of the following: Tribunals of the First Instance, Tribunals of Commerce, and the Labor Tribunals. Each province has a Court of Assizes, and each region has a Court of Appeals and a Labor Court. The nation's highest courts are National Civil and Criminal Courts of Appeal, Labor Courts, and the Supreme Court of Justice (Mughan).

Belgium is a country where citizens has full religious liberty. The great majority of Belgians are Roman Catholic, however, regular attendance at traditional religious services varies. The country of Belgium comprises one archdiocese and seven dioceses of which there are an estimated 8,097,726 adherents (approximately four-fifths of the total population) to the Roman Catholic faith (Turner). Also, the State pays a portion of the income of ministers for all denominations. Roman Catholicism is the most commonly practiced religion in Belgium, but there are many denominations throughout the country. The five main religions in Belgium are: Roman Catholic, Protestant, Anglican, Judaism, and Greek Orthodox. Roman Catholicism is marked in the Flemish region and the Ardennes, but regular attendance has decreased in the Walloon industrial region, as well as in Brussels. Roman Catholicism has over 75 percent of the 87.9 percent of the religious population (Turner). The few Protestants live in urban areas in Hainaut, particularly in the Burinage, and in Brabant. Those practicing the Jewish faith are concentrated in and around Antwerp and make up around .3 percent of the population. There are also some 350,000 Muslims in Belgium, which makes comprises roughly 2.5 percent, followed closely by other Christians at 2.4 percent, of which Protestant is 1 percent. and there is approximately 7 percent of "other" religion(s) (Riley).

There are no prominent Orthodox doctrines or structures in Belgium. The people of Belgium are decreasingly involved in making religion a vital part of their daily lives. Even with the many religions in Belgium, there has been a recent decline in regular church attendance, which shows that religion is becoming of little importance. Also, there are no powerful or influential cults to in Belgium.

The diet patterns are also separated by the tow major culture groups of the Walloons and the Flemish. Since much of Belgium is rural and agricultural, most of what families produce are consumed by the same (1). The country produces and consumes abundances of dairy products and eggs, which make up a major part of the diets along with wheat and rye breads. Walloons eat four or more times per day. They start off with an early breakfast of bread and fruit preserves or cheese, and coffee. Dinner, which is the noon-time meal consists mostly of one or more types of soup, bacon or ham, seasonal vegetables, and always fried potatoes, which of course Belgium is famous for (Belgium, not France, is the birthplace of french-fries). There is often a mid-afternoon snack frequently made up of tartines, which is the combination of bread, butter, and preserves, such as those eaten for breakfast. A typical late supper is commonly made up of fried potatoes, bread and, bacon, eggs, and sometimes rabbit, which is very well liked, especially on farms. Pastries are also common with supper, as is pork with head cheese (Moss & Wilson).

Nutrition is very high in Belgium, which can be seen as a bi-product of agriculture and the high level of farm life. Malnutrition is almost non-existent. This can also be attributed to the fact that Belgium is so highly developed and productive for the workforce. People are able to provide for their families (Belgium: A Country Study).

The housing situation is basically the same throughout Belgium. Belgium is one of the very few countries that doe not have to contend with a housing shortage, nor has there historically been a shortage of housing, which can be attributed to the ideals that Belgians hold. In fact, it has been said Belgium has the highest "quality of life", especially because of the excellent housing conditions. This is the main reason why Belgians build and buy and do not rent: culturally, it is held very deeply in tradition that the father acquire a home for his family, and is seen as the major accomplishment for a man's life. The houses themselves are of typical Europe, mostly being built out of brick with wood frames. Farms houses are typically larger in build due to the fact that farming families are usually larger. Rent, while offering little ground for speculation in view of the number of houses and flats available, are sufficiently high to ensure good upkeep and to also encourage capital investment in real estate. Also, mortgage interest rates are extremely low, in order to encourage private buying and building. Historically, the National Housing Corporation builds houses for resale to those Belgians who do not have a sizeable amount of money to

begin with. There is also the Housing Fund, which was set up by the Large Families League, which grants credit to members at the lowest of interest rates. Families are typically made up of the nuclear family in one household with many relatives nearby. Rural and farming communities are commonly made up of the nuclear family as well as relatives (parents, grandparents, and cousins) who all live on the same farm, whether in the same house or in several different houses. They do so because often times, the entire family will purchase the land together and work the land as one farm (Moss & Wilson).

Once again, the "high quality" of life plays a large role in the working conditions for Belgians. Most employees are high skilled and extremely productive. This high productivity results from the highly educated workers, extended automatization, shift work - which enables idle time, and low absenteeism. Employees have a relative high vacation allowance and free time, it is easy for them to take off from work for illness without risk of losing their job, but few work days are actually missed. Relations among employees and employers are highly structured, but good. For example, senior executives arrive at the office later than subordinates. If he/she were to arrive early, showing integration with other workers, it would make them very uneasy. This is important because Belgians are keenly aware of their status in the corporate hierarchy. Participation among employees is high, however, they remain within their hierarchal boundaries. Women have historically been lower positions in comparison with men, but that is beginning to change. Mutual trust among business people is highly prized in Belgium. Salaries, for the most part are based much like those in the United States - the higher level of education and position within the firm, the higher the salary. Benefits are also much like those in the United States, but are mostly offered in the corporate sector. Also, Foreign national workers who are not members of the European Community must apply work permits (www.executiveplanet.com).

Both cultures, the Walloons and the Flemish, appear similar, having abandoned traditional costumes and have started to wear the more common dress and business suits of modern Europe. Farm families can still be seen in traditional dark-colored clothing, with men wearing caps and women wearing aprons, especially while working. As a whole, the Belgians keep up with fashion, as does Europe. They wear "in-style" clothes of both Europe and America (Moss and Wilson).

Common leisure is very similar to that of France. Belgians spend most of their leisure time in the small cafes having coffee and discussing politics, work, and their families. This is especially popular in small towns and villages. However, it is also extremely popular in the larger, more developed cities, such as Brussels. The national Belgian passion is British-style football, to which huge numbers of fans turn out to watch, and avidly take sides in the contests. In fact, in 1985, at a football game in the city of Garmesh at which a riot broke out, debates got so heated that they nearly brought down the government. Bicycling is also very common and very popular among Belgians, especially being done on roads through rural areas (Belgium: A Country Study)

There are clear lines of separation in Belgium according to the different languages spoken throughout the country. Statistically, the country is broken up like this: 58% Dutch, 32% French, 10% German, but the entire country is legally bilingual. Brussels, Belgium's largest, most developed city, is officially bilingual, as well. Flemish is the official language of Flanders, while French is official in the south. The French-speaking people are commonly called Walloons. The written languages are broken up throughout Belgium as are the languages, speaking and writing the same respective language. Flemish is known to have originated around the 17th century and is very closely related to Dutch, some saying it is a dialect of Dutch, while evidence currently points to Flemish being the original language and Dutch being a dialect of it. Even with Belgium's small size, the country is very divided by the different languages, and many dialects are picked up in most regions of the country, as is the common rule in most countries. The languages are often seen as barriers to communication, especially affecting commerce. This is the reason why the country has legally become bilingual, requiring some cities to post signs, regulations, and price in

French as well as the region's official language. An example of overcoming this barrier is the following: it is recommending for foreigners doing business in Belgium to have their business cards translated- on one side it should be in English and on the other it should be French or Flemish, depending on the main language of the travel region (Moss and Wilson).

Executive Summary

In doing the cultural analysis of Belgium, we learned so much about the way that people in Belgium believe and act. Belgium has location and climate that are very comfortable and inviting to both leisure and work. The political system of Belgium is a constitutional monarchy and not especially prohibitive of new businesses being developed, and we observed that Belgium itself is a developing nation that would likely welcome western influence in entrepreneurship and enterprise.

Although minerals and mining are present, they do not play a major role in the society and workforce of Belgium. We were pleased to learn that transportation was abundant and somewhat easy to use. The growth of communication and technology was also a positive factor, considering the product that we are planning to market.

As for the society of Belgium, we were pleased to learn that the people are fundamentally conservative. Education and family are two important factors that the Belgians hold dear. All Belgians are required to attend school for a set amount of time. This would ensure a minimum standard of knowledge and or skill level. The family, to the Belgians, is the basic social unit, and most Belgians prefer to spend time with family. Respect for elders and authority is another important characteristic that the Belgians instill in the children and is enforced throughout the life of every Belgian. The Belgians are a simple people, generally not needing much more than the little things to keep them happy

We see Belgium as a nation with much promise for expansion and profitability not only to our company, but to our stockholders as well. The people are hardworking and simple, which we see as potential loyal employees and share-holders.

Economic Analysis

Not only is Belgium rich in culture and history, it is also one of the most prosperous countries in all of Europe. In fact, Belgium is considered one of the strongest leaders among the members of the European Community and is growing at a faster pace than any of the EC countries. As many countries throughout the world do, Belgium places high regard on international trade and encourages every aspect of economic globalization.

As of July, 2000, Belgium has a cumulative population of 10,241,506. The population growth rate is approximately 0.18%. There are approximately 1,000 live births per year. The birth rate is 10.91 per 1,000 inhabitants. The distribution of population is as follows: approximately 18% of population is in between newborn to 14 years of age, 66% consists of the ages of 15 to 64, and the remaining 16% is made up of those 65 years and older. There are roughly 0.96 male(s) per female and 0.98 immigrant(s) per 1,000 inhabitants as the year of 2000. Belgium's population is also divided by ethnic groups and language. The division is as follows: Flemings 58%, Walloon 31%, and mixed/other is 11%. Approximately 900,000 foreigners reside in Belgium as well. Population density is the second highest in Europe, after The Netherlands (www.nationbynation.com). (See Appendix 1).

Belgium's wealth is distributed somewhat evenly. For the most part, there are more Belgians in the middle class than upper class. There are quite a few upperclass Belgians, but the distribution is not very distorted. The opportunity for work has a strong presence in Belgium. Finding work is simply a matter of going out and finding it. With the dense population, there is no defined income classes in Belgium. Although there is a noticeable difference between the upper class and lower class, but the amount of Belgians in the middle class levels off the difference.

The principal industries in Belgium are: engineering and metal products, motor vehicle assembly, processed food and beverage, chemicals, basic metals, textiles, glass, petroleum, and coal. The Gross National Product is approximately 9.384 billion BEF (+1.8% growth) (Riley). Industry provides for about 25 % of the labor force. And within this grouping of industry, the major products that are produced are: chemicals, food industry, mechanical, electrical and plastic equipment, construction and assemblage of automobiles, textiles, iron and steel, printing industry. Motor vehicle assembly, engineering, and processed food and beverage make up the largest portion of the GNP. The economy in Belgium is mixed, i.e. having corporations both state-owned and privately owned. The private sector is, of course, the largest, which can be noticed by the abundance of trade, both within the country and internationally (I.M.F. source).

Foreign investment led to considerable growth in the engineering sector of Belgium's economy in the late twentieth century. Foreign investors are have equal rights and opportunities, just as domestic investors have. Both foreign companies and foreign individuals are permitted to own real property within the borders of Belgium. Also, local financing sources are available to foreign investors, which is a large tool to encourage foreign investment in Belgium (World Book).

Foreign investors may participate as financial entities within the Belgian economy through many different avenues. They include going concerns as a corporation, a limited liability company, a general partnership, a cooperative company, or a sole proprietorship. Foreign investors can also invest as a subsidiary of their mother corporation, which is seen as a less risky venture into a foreign market. Another mode of investment that is common within Belgium is joint ventures, which may be formed with other foreign investors or with domestic parties. The opportunity for foreign investment has a strong and encouraged presence in Belgium. Other large industries that offer opportunities for investment within Belgium include assembly plants for American, Swedish, German, and French automobiles, as well as firms manufacturing heavy electrical goods.

As of 1999, Belgian exports reached $187.3 billion which consisted of much the same industries that are prevalent for domestic consumption, such as machinery and equipment, chemicals, diamonds, and metal products.. On the other hand, imports were about $172.8 billion as of 1999, which consisted of virtually the same components as exports. Belgium has a balance of payment surplus, resulting from a greater amount of exports than imports. Their current account has increased from 4.4% of GDP ($10.9 billion) to 4.7% of GDP ($12.1 billion) between 2000 and 2001. Belgium's currency has been and is currently the Belgian Franc, however, it is currently in the process of converting all currency to the Euro, as Belgium is a member of the European Community. The current exchange rate, although varying by a few points, is approximately 44.48 Francs to the U.S. dollar. Over the past four months the rate has fallen slightly from 48 to 42 Francs per U.S. dollar, following many of the othe!

r currency drops from around the world (Dept. of the Army source).

Over the past few years, the GNP of Belgium has grown more rapidly than the population. The GNP of Belgium in 1998, which is still comparable to now, was 6.515 billion in BEF. Per capita, Belgium's GNP has been, and still is better than the average among those countries that are members of the European Economic Community (ECC). The strong Belgian economy growth is also part of the strong support from the Belgian government (on a federal level) to support trade both with the its borders and internationally (World Book). Per capita wealth, or per capita GNP falls under that of a wealthy economy at $23,900 as of 1999. Belgium also enjoys a low inflation rate which fluctuations within fractions of 1% (www.odci.gov).

As for trade restrictions, the Belgians are not as strict as other European countries, since they wish to promote international trade. Once a corporation decides to do business in Belgium, not only would it find itself right in the middle of the European Union, but also in a country that specializes in international trade relations. This means that not only are businesses devoted to international trade, but also that the customs administration is receptive to international trade. Belgium encourages trade with virtually any country that is willing to be partners in trade, thus there are few regulations on trade, which are all results of the European Union. Belgium and the other fourteen countries of the EU, besides Portugal and Spain, apply the same rates of customs duties to goods imported from outside countries. No customs duties are applied on goods traded between members of the EU if they meet the following requirements: (1) the goods contain no parts exported from ex!

ternal sources, (2) contain parts from external sources, but which duties have been paid according to common customs duties, (3) are goods from other countries (non-Eu members) in respect to which customs duties have already been paid in full under common external tariff. These three classes of goods constitute what is known as "free circulation" and are also known as "Union goods" (www.executiveplanet.com).

The European Union is also in agreement with a number of countries, those being most important are states in Africa, the Caribbean, and the Pacific (known as the ACP countries - the Lome' Agreement), as well as China. There is a "non-reciprocal" reduction in customs duties on types of goods specified in the agreement and conform to the definition of origin, which are in the agreement.

Belgium, along with all other members of the EU, apply the VAT system

(Value Added taxes), which operates basically the same as the customs duties, except that the value added tax rates vary from country to country. The EU has provisions which enable it to operate within limits to decide the applicable rates for countries. These rates have no bearing in the single market since. For example, products manufactured in Germany and sold in Germany will pay VAT at the German rate, but a products produced in Belgium and sold in Germany will not have to pay the VAT in Belgium, but are subject to the German rate. Value added taxes are paid by means of a monthly declaration, while at the same time, the VAT is recoverable under the payment deductions formula provided for in the VAT system. All goods which are imported into Belgium from countries outside the European Union are subject to VAT unless they are goods that are in transit, consigned to a customs warehouse, or imported temporarily. There are also some domestic and imported consumer products, such as tobacco, alcohol, coffee, beverages, and petroleum products are charged excise duties (www.belgium.fgov.be).

Bibliography:

http://www.odci.gov/cia/publicaions/factbook/geos/be.html

http://www.infoplease.com/ce6/world/A0806844

http://pespmcl.vub.ac.be/Belgcul.html

http://belgium.fgov.be/abtb/en_abtb.htm

http://www.executiveplanet.com/community/default.asp?section=Belgium

http://www.tradeport.org/ts/countries/belgium/market.html

http://www.nationbynation.com/Belgium/population.html

http://www.nationbynation.com/Belgium/index.html#Anchor-Basic-23240

International Monetary Fund. World Economic and

Financial Surveys: World Economic Outlook October 2000. New York: International Monetary Fund, 1999.

Moss, Joyce, and George Wilson, eds. Peoples of the World:

Western Europe. Detroit, Michigan: Gale Research

International Ltd., 1993.

Europa Publications. Regional Surveys of the World: Western

Europe 2000. 3rd ed. London: Europa Publications.

Turner, Barry, The Statesman's Yearbook 2000.

Washington: Macmillan Reference Ltd, 1999.

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Encyclopedia Britannica, 1994.

The World Book Encyclopedia. 2000 ed.

Vol 2 World Book, Inc. , 200.



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