Last Update: June 2021
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Belgium is a constitutional monarchy with a parliamentary system of government. It has a federal structure, with the country divided administratively into the northern, Flemish-speaking region of Flanders; the southern, French-speaking region of Wallonia; and the bilingual Brussels-Capital Region. Belgium is home to many of the EU institutions, and its capital Brussels brands itself the capital of Europe. The presence of these institutions and of the European headquarters of many multinational companies demonstrates the generally business-friendly nature of the country, but the operating environment can pose some challenges.
Nearly 16 months after its federal elections, Belgian political leaders finally agreed to form a new coalition government in September 2020, which includes seven political parties. Alexander De Croo, a Flemish liberal, was sworn in as prime minister in October 2020 and became the first Flemish federal prime minister since 2011. This coalition replaced the caretaker administration of Sophie Wilmes, appointed at the start of the coronavirus pandemic in March. However, the so-called ‘Vivaldi’-coalition (consisting of Liberals, Socialists and Greens, as well as the Flemish Christian Democrats) is now so large that any disagreement has the potential to topple it.
The negative impact of the COVID-19 outbreak on Belgium's economy is likely to be high. According to the IMF, Belgium's economy contracted by 6.4% in 2020, which meant that Belgium endured its first recession since the second half of 2008. The economy is expected to grow by 4% in 2021. The downgrade is caused by the more apparent economic costs of the lockdown measures implemented to halt the spread of the COVID-19 virus.
The governing partnership has succeeded to keep a growing far-right movement at bay so far and allowed the country to finally pass a budget and consider a COVID-19 recovery package. Moreover, under the new government agreement, the coalition negotiators decided to increase the health care budget by 2.5% annually and raise the minimum pension to €1,500, including for the self-employed, according to De Standaard. Prime Minister Alexander De Croo also decided to appoint Pedro Facon, director-general for health at Belgium's Federal Public Service Health (FPSH), as COVID-19 commissioner in order to manage the health crisis and streamline its coronavirus policy.
Current projections on COVID-19 predict the persistence of the decrease in infections during summer, but the sanitary crisis has resulted in a severe economic recession (IHME). Moreover, depite the overall improvement trend, the uncertainity regarding the global situation of the pandemic, may imply that business will still face operational challenges.
On the other hand, recent years have seen a series of incidents in Belgium involving the injury or death of young men from ethnic minority backgrounds during police interventions. On 18 January 2021, the public prosecutor’s office confirmed the death of a man in police custody in the capital Brussels, less than a week after riots in the city over police violence. The death is the second in two weeks. The incident is likely to lead to renewed demonstrations over police violence more broadly in the short-term. Such protests hold the potential for clashes between protesters and police, presenting an incidental threat to businesses and personnel in the vicinity. Further incidents of police brutality and racial profiling will likely lead to sporadic protests throughout 2021.
Moreover, the divisions between Belgium’s regions have become increasingly stark in recent years. Flanders has prospered, while Wallonia has suffered an economic decline as its key sectors of agriculture and traditional heavy industry have proven less profitable. Flemish residents resent the perception that Wallonia, where welfare payments and government subsidies are higher, benefits from the federal tax system. In turn, French speakers resent the in-built dominance of the federal system by the more populous Flemish, and the impression that a nationalist current in Flanders is seeking to undermine the federal system.
Belgium is a stable democracy. Due to the country’s federal nature, many powers are devolved to the regional parliaments and bureaucracy is onerous at all levels. The complexity of the federal system occasionally leads to periods of uncertainty and protracted negotiations are often required to form governments after elections. The large number of parties entering parliament under the proportional system means that the country is often without a national government for many months. However, the wide-ranging powers of the regional governments, together with the experience of the federal civil service, ensure the continuation of basic stability during periods without a federal government. Thus, this temporary uncertainty has only a very limited impact on the business environment.
The current government headed by De Croo replaced Sophie Wilmès’ government, which was given full power at the start of the COVID-19 virus outbreak to deal with the pandemic. The main Walloon and Flemish parties agreed to support Wilmès in managing the response to the pandemic instead of attempting to form a cabinet after the inconclusive elections held in May 2019. Given the sanitary emergency and the otherwise limited power of a caretaker government, significant progress in policymaking was delayed until a permanent government was formed. Political parties resumed talks over government formation in June, which resulted in the present agreement of the governing Vivaldi Coalition.
Belgium is considered a Flawed Democracy in the 2020 Democracy Index, developed by The Economist Intelligence Unit (EIU), where the country ranks 33 out of 167 countries scored.
The country ranks 14 on the 2020 Human Development Index developed by the United Nations Development Programme.
Belgium’s operational environment is generally attractive for international businesses. The country’s regulatory framework is stable and closely intertwined with European Union laws. Belgium is located between the EU’s political powerhouses, France and Germany; has access to the EU’s single market; and forms part of the Benelux Union, providing well-established economic and political ties with neighboring Luxembourg and the Netherlands. Belgium has a high-quality communications and infrastructure network and a broad array of transport links with other European countries. As in many other countries, restrictions imposed in response to the global coronavirus disease 2019 (COVID-19) pandemic are likely to continue to cause significant operational disruption.
The business environment and entrepreneurial culture are strong, particularly in Flanders. The complex nature of the country’s system of government can sometimes lead to overlapping competencies between federal, linguistic, regional and local levels of bureaucracy. This problem is likely to persist as the country seeks to resolve its future internal relations. Excessive red tape and strong trade unions can also slow down business operations.
Ownership of land is generally not disputed, though dealings with the land registry are notoriously slow and can be a source of significant frustration. The quality of public transportation is generally high. However, transportation strikes are relatively common in Belgium and can occur with little notice.
Corruption is not a significant problem. Corruption in business circles is limited and usually takes the form of low-level patronage, rather than large kickbacks to secure contracts. Companies are unlikely to encounter attempts to solicit bribes.
Overall, Belgium ranks 46 out of 190 countries scored at the 2020 Doing Business Index by the World Bank and 15 out of 198 at the 2020 Corruption Perception Index by the Transparency International Organization.
Organized crime is mostly present in Brussels and Antwerp, but criminal groups also operate in other major urban areas. Criminal gangs often use Belgium as a crossroads at the center of Europe, for instance for trafficking people and drugs to other destinations. Police have seized large quantities of cocaine smuggled from Brazil in the ports of Antwerp, Ghent, and Ostend between 2017 and 2019. In addition, there is also a risk of cross-border terrorist cells operating from the country. According to data released by Interior Minister Pieter De Crem in December 2019, knife-crime incidents increased to 657 in 2018, compared with 626 in 2017.
Brussels has a large population of people from diverse ethnic minority groups, and instances of police violence and discrimination against such groups are not uncommon. In June 2020, large protests in Brussels in solidarity with the Black Lives Matter (BLM) movement highlighted the issue of police brutality and racial profiling in the country. Various human rights organisations have identified institutionalised racism and discrimination as systemic problems in Belgium. A joint report published in June 2020 by Police Watch, an NGO dedicated to monitoring police brutality and excessive violence, and Unia, an independent public institution fighting discrimination, includes 76 reports of Brussels police using excessive force during the March-June 2020 lockdown to prevent the spread of COVID-19. Police Watch co-ordinator Saska Simon stated that such incidents mainly occur in lower income neighbourhoods, and that racism is a major factor. Incidents such as these will continue to reinforce mistrust of law enforcement among certain ethnic minority groups. Further incidents of police brutality and racial profiling will likely lead to sporadic protests throughout 2021.
Occasional environmental and anti-government protests are also likely, specially in Antwerp, Brussels, Ghent, and Liège. Although the majority of protests will be peaceful, there is a moderate risk of violent groups attacking police with blunt weapons or thrown objects. Repeated demonstrations in the center of Brussels and especially near European Union assets (for example, the Berlaymont building) by interest groups affected by EU decisions are also common. These protests occasionally lead to minor confrontations with police. Anti-migrant protests organized by the right-wing PEGIDA movement, particularly in Antwerp and other parts of the Flanders region in northern Belgium, are also likely.
The risk of inter-state war on Belgian territory is likely to remain minimal. The country is an active member of NATO and the European Union and does not face any hostilities from neighboring countries. Although the Belgian army participates in multilateral international military operations, the government usually focuses on soft diplomacy in external relations. However, Belgium supports the US-led international military alliance against the Islamic State, so the threat of retaliatory terrorist attacks in Belgium (as opposed to traditional warfare) has increased since 2014.
Belgium faces an elevated risk of mostly low-capability terrorist attacks by self-radicalized Islamists acting alone or in small groups using firearms, knives, or crude IEDs and targeting public spaces, state or security force personnel, or Jewish assets. There is also a risk of further co-ordinated mass-casualty assaults such as the March 2016 Brussels attacks. These would likely require the participation of well-trained returning foreign fighters to succeed. There is a substantial presence of radicalized individuals in several largely isolated Muslim communities.
In recent years, the authorities have clamped down on local groups that they believe have incited attacks and been involved in radicalizing individuals, and terrorism-related arrests have become common. According to several studies since 2014, Belgium had a higher proportion of its Muslim population engaged in the conflict in Syria and Iraq than any other European nation. The authorities are concerned by the potential for more attacks, including upon the return of these fighters.
Overall, Belgium ranks 17 out of 163 within the 2020 Global Peace Index by the Institute for Economics and Peace.
Belgium is not currently among the most cyber-attacked countries in the world. According to Kaspersky cyber threat map, it is ranked as the 53rd most cyber-attacked countries.
No vaccinations are required to enter the country.
Belgium ranks 19 out of 195 within the 2019 Global Health Security Index, a project of the Nuclear Threat Initiative (NTI) and the Johns Hopkins Center for Health Security (JHU), developed with The Economist Intelligence Unit (EIU).
Belgium has a temperate oceanic climate and rain is common throughout the year. Summers (June to September) are mild and winters are cool, even cold.
The heaviest rainfall has usually caused Belgian rivers to burst their banks flooding villages, highways, and railroads throughout the country.