19 June 2017

Belgium as a European top location for international enterprises?

Marcel Claes

Director of the American Chamber of Commerce in Belgium

The American Chamber of Commerce in Belgium decided to make a study on the attractiveness of Belgium as a destination for international enterprises. An interview with Marcel Claes, its Chief Executive.

New European headquarters in Belgium today: a dream or a reality?
"Belgium’s unique position at the heart of Europe makes it stand out in a changing world."

In the past, international businesses chose Belgium for its inherent strengths, such as its prime location for market access, proximity to EU institutions and the quality of its workforce. Yet Belgium is now no longer able to rest on its laurels as global political and economic changes force companies to re-evaluate their corporate footprint.

The American Chamber of Commerce in Belgium wanted to understand if Belgium was still an attractive destination for international enterprises, and so decided to make a study to find out. The survey yielded 70 completed responses from international companies with a European hub in Belgium, and who taken together, employ more than 33,800 people in Belgium. US companies made up 81% of the respondents.

The key finding of the study is that when Belgium has a corporate decision center, it significantly increases its chances of receiving subsequent investments from these companies. “Our goal was to show just how important local headquarters are to the Belgian economy, and to the country as a whole. Belgium’s unique position at the heart of Europe makes it stand out in a changing world. Now, more than ever, it’s a great time to re-establish itself as a preferred hub for regional headquarters”, explains Marcel Claes.

Why invest in regional headquarters and decision centers?

Investing in regional headquarters and decision centers is a win-win for both parties. “First of all, there’s an immediate effect on the employment rate. Regional headquarters create jobs. But there’s also a very strong spillover effect. Nearly two-thirds of respondents said that the location of their regional headquarters is important for investment decisions. When an international enterprise opens a regional headquarters, the chances are high that future investments will follow.”

The corporation also reaps the benefits of a regional headquarters overseas. “A decision center has a strategic advantage when it comes to allocating resources: they know the lay of the land, how things work and the challenges that a certain region faces. This is an invaluable asset for any international company.”

"After we opened our European headquarters in Brussels in 1996, we made many targeted investments, including the acquisition of Kiala in 2012. This was a game-changer for UPS and led us to expand the Kiala model to many other countries."

– Karl Haberkorn, Managing Director, UPS Belgium

Optimistic about the future

The study shows that most regional headquarters are satisfied with their current situation in Belgium and optimistic about their future there, indeed one third of them intend to expand their activities in the country over the next five years. Their growth is mainly due to mergers and acquisitions, the international economic context and Belgium’s talent pool.

The regional headquarters located in Belgium tend to have a strong strategic value: more than 80% of them handle general management, human resources, accounting, marketing, treasury and finance. From their base in Belgium, regional headquarters coordinate the EMEA region (35%), Europe (16%) and the Benelux (14%).

Multilingual and high quality workforce

“Belgium is a very interesting location for foreign investors. And rightly so. The multilingual and educated workforce is a major reason of course. Other factors are the stable economic environment, the available workforce, the proximity to international institutions and the strong link to the European market. These combined make Belgium a very good location for a regional headquarters.” In addition to these factors, frequently mentioned advantages from the respondents in setting up shop in Belgium today are its competitive real-estate market, quality of life and strong financial infrastructure.

Improve the taxation regimes

Most companies that have a regional headquarters in Belgium plan to stay and grow. 19% however, expect to downsize in the next three years and 7% of all respondents indicated that their company’s headquarter had already relocated to a neighboring country such as France, Luxembourg or the Netherlands.

The survey shows that most companies who are closing their Belgian headquarters or not planning on opening one do so because of restructuring and the international economic context. “It would be negligent to ignore the international economic context in this equation, after all this is a factor that affects other countries as much as Belgium. But we also cannot ignore the Belgian taxation system. In our opinion, the government needs to reform the corporate income tax, and needs to create international tax deals with other countries.

Another important factor for Belgium’s slight decline in attractiveness to foreign investors is the unfavorable labor market. “The high cost of labor is the main factor, especially for highly qualified employees. The gap with other countries is almost non existent for lower paid jobs.”

Make Belgium attractive again

The main conclusion from this study is that it is essential to put Belgium on the international map again, and highlight its unique position as an excellent location for a regional headquarters. “The government needs to actively promote Belgium as the top location in Europe for a regional headquarters or decision center. Which it definitely is. And we need to take advantage of the opportunities that offer themselves, such as the upcoming Brexit. A lot of European headquarters are currently located in London and two thirds of the respondents emphasized the importance of having a location that is part of the European Union. There is a definitely a very nice opportunity there.”

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