US Investments in Belgium - the 2010 report

This 2010 edition of the Belgium’s Annual Report on United States Direct Investment in Belgium examines the structure and evolution of the activities of US-owned affiliates operating in Belgium. In addition, the report reviews major trends in the level of US direct investment in Belgium as well as in global direct investment flows. This report is a joint effort by the American Chamber of Commerce and Vlerick Business School.

The financial crisis of 2008-09 had a substantial negative impact on the level of foreign direct investment (FDI) flows. Belgium, one of the most open economies in the world, was strongly hit by these developments. Since 2010 the situation started improving and the outlook for the next two years is rather positive. These positive changes in FDI in 2010 are reversing the situation in the right direction.

It is not only the financial crisis that is affecting FDI flows. There are important structural changes in the world economy that have an equally profound effect on FDI, and consequently on Belgium’s attractiveness.

The first and most important structural change is the global rebalancing. In 1960, the United States accounted for over 40% of world economic activity. By 2008, they accounted for only over 20% of world economic activity. A similar change occurred in other developed countries, including the older EU countries. Conversely, the share of world output accounted for by developing nations is rising and is expected to account for more than 60% of world economic activity by 2020.

This rebalancing has a strong impact on foreign direct investment. In the 1960s, US firms accounted for about two-thirds of worldwide FDI flows. Today, the United States accounts for less than one-fifth of worldwide FDI flows. Also the share of EU countries is declining.

The post-war growth and integration of EU countries has given a strong boost to cross border investment, with the share of the EU in FDI outflows growing over a considerable period of time. More recently, the strong growth in FDI by firms from developing countries has been reducing the relative importance of EU investments in total FDI outflows. Developing countries, especially China, have also become popular destinations for FDI.

The global economy has also shifted in terms of the types of companies that are involved in FDI. Since the 1960s, there has been a strong rise in non-US multinationals, and a growth of new smaller multinationals originating from different types of industries. In the same period off-shoring of activities has been increasingly used by Western companies to improve their global competitive position on world markets.

Another important trend is the emphasis on sustainable investment; in other words, investments in energy saving and ecological friendly production processes and products. Not only has this created rapidly developing clean technology sectors in which new multinationals emerged; it has also stimulated new foreign direct investment to lower the ecological footprint of existing activities in foreign countries.

A final important trend is the changing role of national governments in the local economies and social systems of countries. The social models of many Western countries are increasingly challenged by changes in demographic structure, including ageing populations and rising immigration flows. At the same time, the continuing liberalization and deregulation of industries – especially services industries – is creating new opportunities for firms to operate across borders and to widen their networks. Equally interesting opportunities arise in developing countries that are opening their markets for foreign direct investment.

It is against the background of this rapidly changing global environment that the figures reported in this report should be interpreted. Considered as the most globalized country in the world (KOF foundation), Belgium is increasingly challenged by the rapid and drastic developments in the world economy.

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