Belgian businesses are badly placed to take advantage of the expected upswing in the economy in 2010, as their competitiveness is being compromised.

According to the Central Economic Council (CRB / CCE), three factors contribute to this situation:

• The wage disadvantage, created by automatic wage indexation
• Companies cutting down on professional training for their employees
• Stagnation of innovation investments

The wage disadvantage has decreased slightly to 3.3 percent when comparing Belgian wages to those in Belgium neighboring countries. However, while this decrease is good news, it is important to note that this indicator has only been in use since 1996. Calculating the wage disadvantage using the early ‘80s as a baseline shows an increase of 10 percent.

Based on the most recent social agreements, the Central Economic Council expects the wage bill to increase by 3.5 percent in Belgium over the period 2009-2010, compared to 3.8 percent in Germany, France and The Netherlands. On the other hand in 2007-2008, Belgium’s wage bill increased by 6.6 percent compared to 4.1 percent abroad. This was a consequence of higher inflation and automatic wage indexation.

Secondly, it is clear that the economic crisis has impacted negatively on professional training. Companies spent less money on training courses, and trained fewer people. 32.6 percent of employees received training in 2007 compared to 29.7 percent in 2008. Although cutting costs and investments seems a rational decision in economically difficult times, it is not always wise in the long term. Even when taking into account informal professional training, the cost does not exceed 1.59 percent of total salary expenses, which is still long way to go from the target of 1.9 percent set in 1998.

Finally, investment in Research and Development has stabilized at around 1.9 percent of Belgium’s GDP, which equals the European average. However, it is 0.4 percent under the scores of Germany, France and The Netherlands, and well under the targeted level of 3 percent wherebny the public spending on R&D is lagging behind even further. It is also of concern that innovation is particularly weak in the knowledge sector.

AmCham Belgium’s position
The problems facing the Belgian economy illustrate the need for reforms to make it a competitive and attractive place to do business. In Priorities for a Prosperous Belgium AmCham Belgium recommends reducing social security contributions, increasing government spending on R&D, improving employment flexibility and reforming wage indexation.

The abolition of the system of automatic wage indexation would curb inflation and decrease the wage disadvantage. This would increase Belgium’s international competitiveness.

AmCham Belgium recommends that the Government:

• focuses on the knowledge sector where innovation is weakest; and
• Encourages innovation-oriented education to stimulate economic growth; and
• Increases spending on R&D by at least 25% to stimulate innovation and meet the EU average.

Click here for more information about AmCham Belgium's Priorities for a Prosperous Belgium.