Global Location Trends Country Results 2014 Belgium IBM-Plant Location International 19 March 2015
Content 1. New Inward Investment in Belgium by Foreign Companies 2. Downsizing by Foreign Companies in Belgium 3. Government Actions to Improve Competitiveness of Belgium 2
1. New Inward Investment in Belgium by Foreign Companies
Introduction to IBM s Global Location Trends database IBM-Plant Location International (PLI) is the global center of excellence within IBM Global Business Services for location strategy consulting services. IBM-PLI maintains a Global Location Trends database, which tracks announced decisions of companies to locate new operations in regions outside of their HQ region/country. Our database monitors location decisions since 2003; currently > 150,000 projects Traditional Foreign Direct Investment (FDI) statistics do not correctly reflect these trends and can be (very) misleading: Looking at capital investment transfers between countries Strongly impacted by Mergers & Acquisitions as well as divestments Creating impression that higher capital investment numbers reflect positive growth Our annual (free) Global Location Trends report and detailed Facts & Figures report (for purchase) with multiple country, city and sector rankings are scheduled for Autumn 2015. This document provides the preliminary results on foreign investment into Belgium, based on announcements made in 2014. 4
Jobs created and number of projects show an increase in 2014 to reach the highest level since the crisis: 216 projects will create appr. 5,960 jobs Jobs 11,000 242 239 Projects 250 10,000 9,000 8,000 7,000 6,000 151 190 210 189 177 165 179 162 +30% 194 +11% 216 200 150 5,000 4,000 100 3,000 2,000 50 1,000 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 0 Source: IBM-PLI Global Location Trends 5
Job creation shows a strong increase in Wallonia and a moderate increase in Flanders. Brussels attracted less jobs. 11,000 10,000 9,000 8,000 7,000 6,000 5,000 4,000 Brussels Wallonia 3,000 2,000 Flanders 1,000 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Source: IBM-PLI Global Location Trends 6
Number of projects showed strong growth in Wallonia but declined in Flanders and Brussels. 250 200 Brussels 150 Wallonia 100 Flanders 50 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Source: IBM-PLI Global Location Trends 7
Trend in regional share of attracted FDI by estimated jobs 2014 versus 2003-2013 Flanders 4,124 Wallonia 1,548 Brussels Number of estimated jobs from foreign investment projects 288 0% 10% 20% 30% 40% 50% 60% 70% 80% Source: IBM-PLI Global Location Trends 2003-2013 2014 8
Trend in regional share of attracted FDI projects 2014 versus 2003-2013 Flanders 112 Wallonia 76 Brussels Number of foreign investment projects 28 0% 10% 20% 30% 40% 50% 60% 70% Source: IBM-PLI Global Location Trends 9 2003-2013 2014
Average project size shows a moderate increase during 2014 90 85 80 75 70 65 60 55 50 45 40 35 30 25 20 15 10 5 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Flanders National Wallonia Brussels Source: IBM-PLI Global Location Trends 10
More than 40% of the new jobs created by investment announced in 2014 will be located in the province of Antwerp Antwerpen 43% 47 Liege Hainaut Vlaams-Brabant Oost-Vlaanderen 8% 8% 8% 8% 28 20 19 20 Brabant Wallon 6% 18 Limburg (B) West-Vlaanderen Brussels Capital 6% 5% 5% 16 10 28 Luxembourg (B) 3% 6 Namur 1% Number of foreign investment projects 4 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% Source: IBM-PLI Global Location Trends 11 2003-2013 2014
The Antwerp agglomeration attracted most new jobs during 2014, whereas Brussels attracted most projects Antwerp 29% 41 Brussels 12% 46 Liege 6% 21 Ghent 3% 15 Hasselt - Genk 3% 9 Charleroi 2% Number of foreign investment projects 7 0% 5% 10% 15% 20% 25% 30% 35% Source: IBM-PLI Global Location Trends 12 2003-2013 2014
Top agglomerations in Belgium by number of projects, 2013 versus 2014 Brussels Antwerp Liege Ghent Hasselt - Genk Charleroi 0 10 20 30 40 50 60 Source: IBM-PLI Global Location Trends 2013 2014 13
US remains the leading single source of jobs created in Belgium, but European companies are increasingly important investors. United States 24% 42 France 15% 30 Switzerland 13% 5 Germany 11% 21 United Kingdom 9% 18 Netherlands 6% 20 India 5% 8 Japan 3% 8 Luxembourg 2% 9 Ireland 2% Number of foreign investment projects 1 0% 10% 20% 30% Source: IBM-PLI Global Location Trends 14 2003-2013 2014
Transport & distribution activities have become the prime job creators in Belgium in recent years, replacing production Transport & Distribution 46% 34 Production 31% 76 Sales & Services Office 12% 75 R&D Center 5% 19 Other 3% 6 HQ 2% 4 SSC 1% Number of foreign investment projects 1 0% 10% 20% 30% 40% 50% Source: IBM-PLI Global Location Trends 15 2003-2013 2014
The logistics sector has become the dominant sector for foreign investment. Top ranking sectors include few contestable investments. Logistics 23% 19 Textiles & Clothing 13% 5 Wholesale & Retail 9% 11 Chemicals 8% 26 Food, Beverages & Tobacco 6% 18 Tourism 6% Number of foreign investment projects 9 0% 5% 10% 15% 20% 25% Source: IBM-PLI Global Location Trends 16 2003-2013 2014
Largest investment projects (in jobs) in Belgium, as announced in 2014 Parent company Origin Country Location Activity Sector Mediterranean Shipping Company (MSC) Switzerland Antwerp Nike Europe United States Laakdal Movianto United States Aalst Tech Mahindra India Antwerp Coubertin United Kingdom Nivelles Transport & Distribution Transport & Distribution Transport & Distribution Sales & Services Office Transport & Distribution New jobs announced Logistics 760 Textiles & Clothing Wholesale & Retail 580 167 ICT 164 Textiles & Clothing 150 17
Main conclusions on inward investment Foreign investment into Belgium increases again: 30% more jobs in 2014 compared to 2013. Increase is driven by growth in both Wallonia (jobs and projects) and Flanders (jobs). However, total level of new job creation is still not at the pre-crisis level of job creation. Transport & Distribution has firmly established itself as the prime job creator from foreign investment in recent years. Most investment into Belgium is market driven and can be considered as less contestable The province of Antwerp attracts almost half of all new jobs, strongly driven by logistics. USA remains the dominant investing country, followed by various Western European countries. 18
2. Downsizing by Foreign Companies in Belgium
Since the start of the crisis, foreign investors announced restructuring plans that involve the loss of at least 52,000 jobs (all activities, > 30 jobs involved) Note: this analysis is based on publicly announced restructuring plans. Unpublicised (small) scale initiatives to downsize local operations are not included. 0 2008 2009 2010 2011 2012 2013 2014-2,000-4,000-6,000-8,000-10,000-12,000 Job loss Source: IBM-PLI analysis of publicly announced corporate restructuring plans 20
New job creation by foreign owned companies does not compensate for job losses through closures and restructuring (all activities, > 30 jobs involved) 12,000 Job creation 10,000 8,000 6,000 4,000 2,000 0 0 2008 2009 2010 2011 2012 2013 2014-2,000-4,000-6,000-8,000-10,000-12,000 Job loss Net job creation / loss -1,699-8,834-2,319 40-11,122-3,740-772 21 Source: IBM-PLI analysis
Particularly in (labour cost sensitive) production activities job losses by foreign owned companies are far higher than new jobs created 12,000 Job creation in production 10,000 8,000 6,000 4,000 2,000 0 0 2008 2009 2010 2011 2012 2013 2014-2,000-4,000-6,000-8,000-10,000-12,000 Job loss in production Net job creation / loss -2,800-8,620-2,619-1,626-10,428-4,515-2,272 22 Source: IBM-PLI analysis
Main conclusions on downsizing Since the beginning of the recent crisis (2008), foreign investors in Belgium are announcing job reductions at a substantially higher rate than new job creations. Particularly in (labour cost sensitive) production activities, job losses by foreign owned companies are far higher than new jobs created. The most frequently quoted rationale for restructuring initiatives leading to job losses is the high level of total labour costs compared to other countries. 23
3. Government Actions to Improve Competitiveness of Belgium
One time non-indexation of salaries ( index-sprong ) will have minor impact on Belgium s labour cost handicap with neighbouring countries 120 115 Belgium Germany France 110 105 100 95 90 85 25 Netherlands 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Source: IBM-PLI analysis based on (gross) market salaries by Towers Watson, and social security regulations by country. Note: Average index based on representative mix of 5 job profiles with a combination of blue collar and white collar employees (skilled worker, technician, accountant, team leader, middle management. Belgium 2010 = 100 Assumptions: Indexsprong in 2015-2017 taking into account forecasted wage growth. 80 75
The additional action to reduce employer social security contributions to 25% by 2019 will have stronger impact on Belgium s competitiveness, but will not close the gap. 120 115 Belgium Germany France 110 105 100 95 90 85 26 Netherlands 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Source: IBM-PLI analysis based on (gross) market salaries by Towers Watson, and social security regulations by country. Note: Average index based on representative mix of 5 job profiles with a combination of blue collar and white collar employees (skilled worker, technician, accountant, team leader, middle management. Belgium 2010 = 100 Assumptions: Indexsprong in 2015-2017 taking into account forecasted wage growth. Reduction of employer social security contributions proportionally distributed over 2015-2019. 80 75
Overall productivity of the Belgian economy is comparable to neighbour countries, and considerably higher than most lower cost countries Below productivity differences between economies do not mean that individual employees in Belgium are more or less productive than in other countries 90,000 Productivity by country 80,000 70,000 60,000 80,845 69,219 GVA per person employed, 2011 66,959 59,134 50,000 40,000 30,000 39,773 34,114 20,000 10,000 - Netherlands Belgium France Germany Czech Rep. Poland Source: Eurostat - European Cluster Observatory 27
Productivity of an economy is driven by factors linked to labour, companies, sectors and the wider economy. For Belgium, specialization in high productivity sectors is the main driver of higher productivity. Below data do not mean that employees in Brussels are more productive, or that employees in Wallonia are less productive than other employees in Belgium Brussels is home to many companies using high technologies (ICT, FS,...) Antwerp concentrates industries with high value added (such as Chemicals) 90,000 85,214 80,000 70,000 60,000 75,529 69,219 68,890 60,926 50,000 40,000 30,000 20,000 10,000 0 Brussels Source: Eurostat - European Cluster Observatory 28 Antwerp province Belgium Flanders Wallonia
Belgium generally offers a high quality location, but at a high price. Short term efforts should focus on marketing this high quality profile. Location analysis for a prototype regional headquarters (RHQ) RHQs are less sensitive to high labour costs, and focus strongly on high quality of business environment Belgium is among the strong candidates for such RHQs Other functions with relative lower sensitivity to labour costs are R&D, distribution,... 29 Source: IBM & Site Selection Magazine, The World s Most Competitive Cities (2013)
Main conclusions on competitiveness International competitiveness of Belgium for attracting foreign investment mostly suffers from high labour costs (total costs for the employer/investor). The true gap of annual labour costs with neighbouring countries (up to 20%) is much higher than the frequently quoted loonkosten-handicap (around 3-4%). We consider this loonkosten-handicap an incorrect measurement of today s competitiveness. The current government s initiative to reduce social security costs for the employer to 25% will improve Belgium s competitiveness. However, it will not close the gap with neighbouring countries. The additional initiative for an index-sprong will have less impact as long as it remains a one-off effort. Being one of the very few countries* maintaining an automatic and generic salary indexation will continue to have a negative impact on Belgium s competitiveness. There is no evidence that Belgium s labour cost disadvantage is compensated by higher labour productivity. Data on Belgium s overall productivity are incorrectly used to suggest that Belgian workers generate a higher labour productivity. 30 * Other countries are Luxembourg and Malta. Many other European countries had a similar policy in the past, but decided to end this many years ago.
Final observations on attracting foreign investment to Belgium The immediate priority should be to promote Belgium for investments which are less sensitive to high (labour) costs and for which the high quality of Belgium s business environment forms the prime value proposition. Examples are: logistics, R&D, headquarters, and elements of high value ( advanced ) manufacturing. To maintain and further enhance the high quality proposition of Belgium s business environment, sustained investments in infrastructure, education and R&D are required. This is particularly the case for knowledge driven investments such as life sciences and ICT. For a longer term structural improvement of Belgium s competitiveness, more effective initiatives to reduce the cost burden should be implemented in the medium to long term. 31
Plant Location International (PLI) Introduction Plant Location International (aka IBM-PLI) is a global service offering within IBM Global Business Services consulting division, exclusively specialized in global location strategies. Area of expertise focuses on analyzing international business locations for expanding or consolidating companies to select the optimal location (country / region / city / site) against best shareholder value: where should we operate our business units? Across all industries Across all business functions (e.g. manufacturing, headquarters, R&D, shared services, data centers) Across all geographies Independent from government authorities or other organizations with local interests and fully objective and unbiased in its advice 32 32 WWW.IBM.COM/GBS/PLI Global PLI hub Local coordinators in key markets IBM s global Center of Excellence for global location strategies and economic development A team of subject matter experts present in the key global markets More than 50 years of experience as trusted location advisor to multinationals and governments A portfolio of over 3,000 projects worldwide A robust set of methodologies and analytical tools developed and perfected by PLI over time Cooperating closely with IBM s global network of strategy consultants as well as industry and subject matter experts
Global location strategy and site selection services Strategic Operational Tactical Strategic location planning: advice on locating or consolidating business functions in alignment with the overall business strategy Definition of key location criteria: help corporate executives define and prioritize key criteria to assess locations for specific business functions Location benchmarking: assess and rank locations on key cost and quality criteria to quickly identify the most interesting candidate investment locations Location network optimization: strategic advice on optimal organization of the corporate operations footprint identifying scope for improvement and developing different scenarios Location strategy workshops: help optimize company s own location strategy efforts based on latest insight in market trends and location dynamics, data sources and evaluation techniques Validation of location options: validation or second opinion of preferred locations to assess their suitability based on specific project parameters Risk assessment: analysis of risks associated with relocating or expanding activities in new locations and the implications on corporate strategy Advice on financial support: analysis of financial incentives available to corporations in countries around the world: amounts, conditions, application, etc. Business case development: assessment of business benefits of relocating, expanding and/or consolidating locations through analysis of costs of implementation, transition, operations, etc. Monitoring business environments: constant screening of dynamics in specific regions of interest to provide early advice on upcoming location opportunities and threats Site or facility search: researching and validating available sites and buildings meeting the client s project specifications once a preferred country/region has been identified Consolidation of existing sites: projections and assessment of location impact of consolidation scenarios; assisting with determining best site for future consolidation 33
Global services to economic development organizations Strategic Operational Tactical Investment promotion strategies: define the objectives for inward investment promotion, setting out priorities and targets for sector/business functions Competitive location benchmarking analysis: provide tailor made analysis of the attractiveness of regions/countries as investment locations relative to key competitors, covering a range of sectors and business functions, and based on typical investor s requirements Economic impact analysis: analyze impact of policies and initiatives on the attractiveness of specific locations to investors, coupled with broader economic impact assessments for investments Strategy workshops: conduct workshops to review investment promotion strategies and provide advice on trends and upcoming changes Smarter cities strategies: based on the city s unique vision define strategic priority areas to become smarter Investment trend analysis: provide comprehensive investment trend analysis for countries and regions across the world using IBM s Global Investment Locations Database (GILD) - a unique database that records investment project announcements around the world on an ongoing basis Marketing strategies and tools: develop marketing tools and initiatives based on investor needs, including the unique IBM- PLI Location Benchmarking Tool to validate your location s proposition and market this to prospective investors using their own location selection criteria and techniques Analysis and advice on Economic Development Organization (EDO) effectiveness: analyze and provide advice on structure, organization and operations of EDOs, based on international best practices Training: train economic development staff on the corporate location decision process, how to undertake investment promotion activities and initiatives, and deal with investors Location Intelligence On Demand: deliver ongoing support services, providing prompt responses to urgent requests for market or location intelligence 34
Contact details Plant Location International (PLI) Global Location Strategies A service of IBM Global Business Services Web-site: www.ibm.com/gbs/pli Roel Spee Global Leader +32 475 915 832 Roel.Spee@be.ibm.com Visit www.ibm.com/gbs/pli for our free Global Location Trends report, or to order the detailed Facts & Figures report 35