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July 2009 Flanders Economy and Public Finances Agenda I. Summary II. Economy III. Public Finances 2 Flanders in a nutshell Key Points and Major Strengths Flanders benefits from: • A wealthy and diversified economy • Sound budgets despite cyclical economy • A strong educational system • A strong taxable basis with a GDP around EUR 200 bn. • Strong and stable credit ratings • Solid financial position on a consolidated level • Prudent and sophisticated management • Low regional debt and continued focus on fiscal discipline 3 Agenda I. Summary II. Economy III. Public Finances 4 Economy Main Facts & Figures 5 Capital Brussels Language Dutch Surface 13 684 km² Population 6 161 600 (2008) Density 450 hab./km² (2008) Currency Euro N° of Companies 537 800 Nominal GDP EUR 200 bn (2008) GDP/Capita EUR 30 500 (2008) Income/Capita EUR 33 300 (2008) Economy Strong Economic Fundamentals Flanders benefits from very strong economic fundamentals. Despite the current virulent economic crisis, most economic indicators should remain sound and encouraging in the coming years. Flanders France Germany Netherlands EU - 27 Unemployment Rate* 3,9% 7,4% 7,6% 2,7% 7,1% Real GDP Growth Rate* 1,1% 0,4% 1,3% 2,1% 0,9% (*) 2008 figures Source: Eurostat, Study Office of the Flemish Government 6 Economy Stands Out from its Peers Government (2007 figures) Flanders BadenWuerttemberg Bavaria Catalonia (region of) Credit rating (S&P/M/F) AA+/Aaa AA+/Aaa/AAA AAA/Aaa/ AAA AA/Aa2/A+ Country Belgium Germany Germany Population 6,0 m 10,7 m Unemployment rate 3,9% Operating balance (% of operating revenues) Balance after capital exp. Madrid (region of) North RhineWestphalia AA/-/AAA AA+/Aa1/AA AA-/Aa1/AAA Spain Germany Spain Germany 12,5 m 7,2 m 6,0 m 6,0 m 18,0 m 4,9% 6,2% 6,6% 7,7% 6,3% 9,4% 7,8% 3,5% 9,0% 7,8% -1,0% 14,4% -1,0% 2,7% -1,4% 1,4% -6,5% -2,3% 3,1% -8,4% Total Revenues (EUR billion) 22,875 34,267 38,253 22,109 20,386 17,583 47,514 Direct debt (% of operating rev.) 1,2% 129,1% 65,9% 59,1% 160,1% 31,1% 254,9% Source: S&P, Moody’s 7 Hesse Economy An Economy based on Trade and Services Primary Sector 1% Secondary Sector 28% • Construction: 6% • Chemicals: 4% • Iron, Metal & Steel: 3% • Food & Tabacco: 3% Tertiary Sector 71% • Real Estate and Business Services: 24% • Wholesale and Retail: 15% • Transport: 8% • Health Services: 7% Source: Institute of National Accounts (2007) 8 Economy High GDP per Capita (2008) EUR (thousands) 34 32 30 28 26 24 22 20 Flanders Belgium France Netherlands Germany Source: Eurostat, Study Office of the Flemish Government 9 United Kingdom EU-15 EU-27 Economy Low Unemployment Rate % 12 10 8 6 2003 2004 4 2005 2006 2 2007 2008 0 Flanders Belgium France Netherlands Source: Eurostat, Study Office of the Flemish Government 10 Germany EU-15 EU-27 Economy Flanders’ Employment: Resilient in Periods of Crisis Economic Growth and Employment in Flanders, 1981 - 2008 % 7 2,600,000 R e o r g a n i sa t i o n s a f t e r i n v e st m e n t 6 h a u sse a n d d o t . c o m hy pe 5 2,500,000 Ge r m a n u n i f i c a t i o n a n d Ye a r s o f Ec o n o m i c pr e pa r i ng f or t he R e st r u c t u r i n g M a a st r i c h t c r i t e r i a 2,400,000 4 3 2,300,000 2 2,200,000 1 2,100,000 19 81 19 83 19 85 19 87 19 89 19 91 19 93 19 95 19 97 19 99 20 01 20 03 20 05 20 07 0 2,000,000 -2 1,900,000 -1 Real % GDP growth (left scale) Source: Eurostat, Study Office of the Flemish Government 11 Total employment (right scale) Economy Flanders’ Key Strengths • Located in the heart of Europe • Unique European hub • Strong export-driven economy • Diversified base of trading partners • Foreign direct investment figures & trading partners • Diversified economy • Highly qualified workforce • R&D competence center 12 Economy Located in the Heart of Europe Flanders lies at the center of the EU’s wealthiest and most populated area – and Flanders has the highly developed transport and communications systems required for companies to take full advantage of this fact. 13 Economy A Unique European Hub Flanders offers companies rapid and efficient supply and distribution links with other major European centers and beyond. 14 Leading ports Antwerp, Ghent, Ostend, Zeebrugge Airport freight & logistic hubs Brussels, Ostend Extensive inland waterway system Linking into the European system High density of freeways Connecting directly to other European countries High density rail network Dedicated freight lines to other parts of Europe Economy Strong Export-Driven Economy Regional Distribution of Belgian of Belgian Exports (%) Increase in Flemish Exports (EUR billion / Nominal Figures) 201 Brussels 2% 191 200 178 169 Wallonia 18% 158 150 146 100 50 Flanders 80% 0 2003 2004 2005 2006 2007 2008 The Flemish economy is strongly export-oriented, in particular in the areas of food, beverage, automobiles, iron and steel. Flanders’ exports represent over 80% of Belgium’s total export in volume. Source: Institute for the National Accounts (National Bank of Belgium) 15 Economy Diversified Base of Trading Partners TOP 10 Flemish Export Markets in 2008 (in EUR billion and as % of total) 16.8% 13.9% 13.6% 4.0% 2.7% 1.8% 1.8% India Poland Sweden 4.4% United States Italy United Kingdom France Netherlands 4.9% Spain 7.9% Germany 40 35 30 25 20 15 10 5 0 The Flemish export markets have traditionally been focused on Western Europe and more particularly on Germany. Source: Eurostat, Study Office of the Flemish Government 16 Economy Foreign Direct Investment Figures & Trade Partnerships Flanders has a proven track record of welcoming Top 10 biggest investors (in 2008, total =100) foreign businesses to its region. 1 USA 28% 2 Netherlands 12% 3 Germany 11% 4 UK 9% 5 Japan 8% Source: Flanders Investment and Trade Office 17 Life Sciences Johnson & Johnson, Pfizer, Schering-Plough, AstraZeneca, ... Automotive Ford, General Motors, Volvo, … ICT Alcatel Lucent, British Telecom, Philips, ST Microelectronics, ... Chemicals BASF, Total, Suez-GDF, Bayer, Kaneka, Nippon Shokubai, ... Food Products Heinz, Procter & Gamble, Tropicana, ... Logistics Caterpillar Logistics, Deutsche Post, NYK, ... Economy R&D Competence Center Share (%) of GDP invested in Research & Development 3 10 2 5 1 Source: Eurostat, Study Office of the Flemish Government (2006) 18 EU-27 Germany The Netherlands 0 France EU-27 Germany The Netherlands France Flanders 0 Flanders 15 Share (%) of workers in knowledge intensive sectors Economy Education: Flanders on Track for the Future Mathematical literacy Scientific literacy Reading literacy Top countries Finland 563 Korea 556 Hong Kong China 542 Finland Hong Kong - China 547 536 Excellent countries Canada Chinese Taipei 534 532 Chinese Taipei Finland 549 548 Canada 527 Flanders 522 Estonia Japan New Zealand 531 531 530 Hong Kong China Korea 547 547 New Zealand Ireland 521 517 Flanders 543 Flanders 529 Australia Netherlands Korea Liechtenstein Average 46 countries! 527 525 522 522 Germany United Kingdom France 516 515 495 Source: PISA 2006, Average country scores 19 50 countries! 53 countries! Netherlands Germany France United Kingdom 531 504 496 495 Netherlands United Kingdom Germany France 507 495 495 488 Economy Flanders in Action Goal A well-defined plan to make sure that Flanders will be in the top five of the European regions by the year 2020 carried by all social groups in Flanders Vision & Ambition To ensure and assure the region’s future by developing it into an innovation-driven, ecologically sustainable and socially welcoming society 20 Concrete Objectives Examples: • Increase of R&D from 2,1% to 3,0% of GDP • Double number of participants in lifelong learning programs 20 Economy Countering the Economic Crisis in the Nearby Future •Capital injections in financial sector for a total amount of EUR 4.5 bn (KBC, Dexia, Ethias) •“Restore Confidence” plan Strengthen the granting of credit and capital to companies (EUR 300 m guarantee scheme) and l aunch of XL-fund which provides growth capital Enhancement of the activation policy on the labour market Speed up investments (total indicative budget of EUR 842 million •Special measure to increase purchasing power (EUR 710 m) •Financing was done using existing cash reserves and EUR 2.8 bn in bond issuance. An additional call on the debt capital markets will further complete the financing Continued focus a balanced budget on the medium term Following the elections of June 7, 3 parties (Christian democrats (CD&V), Flemish conservative nationalist party (N-VA) and the socialist SP.A party) are in the process of forming a new government. During the negotiations, all parties have put a special emphasis on savings measures to attain a balanced budget 21 Agenda I. Summary II. Economy III. Public Finances 22 Public Finances Belgium Federal Structure Federal State The Flemish Community and the Flemish Region decided to merge their 3 Regions: Flanders Wallonia Brussels 3 Communities: Flemish French German competences. As a result, Flanders has one Flemish Parliament, one Flemish Government and one public administration, 10 Provinces responsible for community and regional matters. 589 Towns and Cities 23 Public Finances Competence Distribution Flanders Federal State Flemish Community • • • • • • • Public Finances Defense Security Justice Social Security Public Health Domestic & International politics • Transport & Communication 24 • Education • Culture • Public health (prevention) • Welfare • Language issues • Child protection Flemish Region • Economic development & co-operation • Public infrastructure • Town & country planning • Environment • Energy • Employment • Agriculture • Foreign Trade • Regional transport • Control & organization of local governments Public Finances Revenues by Segment EUR (million) 30,000.0 Regional taxes 20% Others 1% 25,000.0 20,000.0 Specific allocations 4% 15,000.0 10,000.0 Combined and shared taxes 5,000.0 75% 0.0 2009 2010 Combined and shared taxes Allocated income 2011 Specific allocations Other funds Combined taxes are part of Belgium’s personal income tax levied in Flanders. Shared taxes are part of Belgium VAT and transferred at endowment to Flanders. Source: Flemish Community, Department of Finance and Budget (2009) 25 2012 2013 2014 Regional taxes Credit grants and participations Public Finances Breakdown of Public Spending EUR (million) Economy, Science and Culture,Youth , Innovation 4% Sports and Media 5% Finance and Budget 5% Work and Social Economy 6% Administrative Mobility and affairs Public Works 10% 12% Rest 9% 30,000 25,000 Education and Training 20,000 37% 15,000 10,000 5,000 0 2009 Public Health and Family Welfare 12% 2010 2012 2013 2014 Education and Training Public Health and Family Welfare Mobility and Public Works Administrative affairs Rest Work and Social Economy Finance and Budget Culture,Youth , Sports and Media Economy,Science and Innovation Source: Flemish Community, Department of Finance and Budget (2009) 26 2011 Public Finances Flanders Sustaining Belgian Financial Stability EUR (million) EUR (million) 1 000 400 800 200 600 0 400 -200 200 -400 0 -600 Balance to be achieved (left scale) Realizations (left scale) Difference between balance and realizations (right scale) Source: Institute of National Accounts (National Bank of Belgium) 27 2008 600 2007 1 200 2006 800 2005 1 400 2004 1 000 2003 1 600 2002 1 200 2001 1 800 2000 1 400 1999 2 000 Public Finances History of a Healthy Budget… EUR (billion) EUR (million) 30 1 500 25 1 000 20 500 15 0 10 Revenue (Left Scale) Expenditure (Left Scale) 2008* 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 -1 000 1994 0 1993 -500 1992 5 Balance (Surplus/deficit) (Right Scale) (*) Without redemption of local debt (EUR 650 million) and capital injection in Dexia & Ethias (EUR 1 000 million) in 2008 Source: Flemish Community, Department of Finance and Budget 28 Public Finances …has led to zero-debt in 2008 EUR (billion) 9 8 7 From the 1995 peak, Flanders has reduced its debt at the regional to zero end of 2008 6 5 4 3 2 1 Source: Flemish Community, Department of Finance and Budget 29 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 0 Contacts Hedwig Van der Borght Secretary – general Flemish Community, Department of Finance and Budget +32 2 553 54 09 [email protected] Luc Keereman Head of financial management division Flemish Community, Department of Finance and Budget +32 2 553 54 34 [email protected] 30 Disclaimer This presentation has been prepared by Flanders for informational purposes only. Although the information in this presentation has been obtained from sources which Flanders believes to be reliable, we do not represent or warrant its accuracy, and such information may be incomplete or condensed. This presentation report is not intended to provide the sole basis for any evaluation of the transactions discussed herein. All estimates and opinions included in this presentation constitute our judgment as of the date of the presentation and may be subject to change without notice. Changes to assumptions may have a material impact on any recommendations made herein. Flanders will not accept any liability whatsoever for any loss howsoever arising, directly or indirectly, from the use of this presentation or the information provided for in this presentation or otherwise arising in connection with this presentation. This presentation is confidential and is provided to you for information purposes only and does not constitute a public offering or an investment service in Belgium. This presentation is being submitted to selected recipients only and neither this presentation nor any other offering materials may be distributed, published or made available to the public in Belgium. This presentation may not be reproduced or passed on (in whole or in part) to any other person than the selected recipients. Neither this presentation nor any offering materials may be used in relation to any investment service in Belgium unless all conditions of directive 2004/39/EC, as implemented in Belgium, are satisfied. Neither this document nor any offering materials can be used to publicly solicit, provide advice or information to, or otherwise provoke requests from, the public in Belgium in relation to the offering. Any offering in Belgium is made exclusively on a private basis in accordance with article 3 of the Belgian law of 16 June 2006 on the public offering of investment instruments and the admission of investment instruments to the trading on a regulated market. © March 2009 Flanders. All rights reserved. 31