In this country of some 30,518 square kilometers, with a population of 10.3 million, French, Flemish and German are all official languages. From the administrative point of view, Belgium is divided into three regions – Brussels, Flanders and Wallonia – and 10 provinces. It also consists of three communities.
The federal government controls the interior, foreign, foreign trade, financial, defense and justice departments and supervises the Belgium National Bank. Local governments of the three regions and communities have independent control of education, regional development, environment protection and scientific research. The three regions also have their own organizations of trade development and export incentives.

Since 1994, the regions began operating their own commercial representation networks abroad. In Hungary –the first in Central and Eastern Europe – all three regions opened representation offices in the late 1990s. Aside from Budapest, only Warsaw hosts all three Belgian representations.

Belgium, used to being a cradle of industrialization, has in past years become a leading champion of EU integration. In the union of 15 countries, the EU is only surpassed by Luxemburg and Ireland as the most open industry – considering Belgium’s foreign trade makes up 88 percent of the country’s GDP. As founder of the EU’s predecessor, the European Community, Belgium finds it important the structure of its public administration and the understanding and cooperation between its central and local authorities are exemplary. One example is Belgium’s insistence that decisions are made based on experience levels. That translates into decisions typically being made at the national level and carried down to the regions.

Finding comon ground
" Belgium’s ability to find a consensus is very positive. As a result, the conflicts between the regions and communities are nothing like the arguments seen in France, Spain or Ireland," says Rodrigo Dos Santos A. Garcia, head of the Budapest representative office of the Walloon region.

Rodrigo Dos Santos A. Garcia

" In terms of the development of Hungary’s regions, whether its seven or three of them [the latter has been suggested by new EU Commissioner Péter Balázs a few weeks ago] mainly depend on what the local politicians want and whether they are willing to cooperate," says Koen Haverbeke, trade attaché at the Budapest/Flemish representative office since 1998.

In his opinion, it must be understood that the formation of regions is in the common interest of smaller local communities that create them. In Belgium, it took several decades for regions to get used to the system, meaning Hungary will also need time to create a new structure of public administration, Haverbeke says.

Members of the Flemish representative have often traveled to such Hungarian cities like Nyíregyháza, Záhony, Debrecen and Békéscsaba, where several Belgian projects were initiated and established by Belgium. This gave momentum for the appearance of Flemish companies attracted to subsidies provided by local governments. Their business efforts in Hungary were also supported from the 1992 Flemish fund for export subsidies. A quarter of the funds targeted for Eastern and Central Europe were used in Hungary. The Walloon region, meanwhile, has focused its activity mainly in the Pécs and Szeged regions.

Professional exchanges
Aside from supporting economic cooperation, Wallonia emphases inter-organizational and cultural relationships as well," says Dos Santos Garcia. An intensive exchange of professionals between Budapest and Brussels has been ongoing on for six years, according to Patrick Pauwels, economic and trade attaché of the Budapest Agency of the Belgian Capital Region. He adds that Brussels experts also take part in the further training of Hungarian civil servants in the fields of urban rehabilitation and environment protection.

More than 200 Belgian or Belgian/Hungarian joint ventures or representations operate in Hungary. The value of Belgian investments amount to some EUR 1.6 billion, making Belgium the seventh largest foreign investor in Hungary. Larger scale Hungarian investments mainly come from Belgian multi-national companies. Their interests lie in wide areas of industry, agriculture and services. The Argosz insurance company is in Belgian hands. Kreditebank (KBC) has a 60 percent share in K&H Bank. The Tractebel investment company, a member of the Suez group, built Campona Shopping Center. Tractebel Powerfin privatized the Dunamet Power Station, Interbrew owns the Borsodi Brewery and the Buchmann company bought the MOM Optical Factory. A prominent investment this last year was the launch of a new elementary vaccine substance manufacturing company of Belgian-based GlaxoSmithKline Biologicals, in Gödöllő.

Dwindling trade
Hungarian/Belgian trade developed dynamically between 1990 and 2001, although since some decline was experienced, largely due to global recession. In 2002, the value of Hungarian exports was pegged at EUR 984 million, and the value of imports was EUR 763 million. Exports and imports decreased by more than 10 percent in that year, after a decline in the trade of machines and equipment on both sides. Last year, trade figures further fell.

Belgium is well known for its superior beers

Heads of representations blame the decrease in Hungary’s ability to attract investments on the international revaluation of competitors.

" Hungary needs to transfer the investors to the more complex public service areas from the simple assembly production," emphasizes Pauwels, pointing out this process has already begun, and that foreign companies have started building their service and call centers in Hungary.

Haverbeke added that investors need to be approached by more clear and simple messages.

Expansion fears
It is not only in Hungary where expansion of the EU is somewhat feared. Increasing competition, and the future location of production facilities – especially by car manufacturers coming to Eastern Europe, places psychological stress on Belgians as well.

They also fear the flow of workforce into Hungary. Patrick Pauwels explains the reasons of mixed feeling toward EU expansion in all three Belgian provinces.

Koen Haverbeke, trade attaché

Earlier, he says, Belgian companies looked upon Hungary as a sub-regional center, especially from a logistical and transportation point of view. The opportunities are still there, but fast steps must be taken to make Hungary a gateway to markets in countries further east. Slovakia is becoming an ever strengthening competitor in this field, which is demonstrated by the infrastructure investments around Kosice. If Záhony wants to throw its hat in the ring for competition, it must take quick steps to modernize its cargo transportation.

The long-term consequence of joining the EU is likely that a larger number of small and medium-sized Belgian companies will appear in Hungary. This process started in the early 90s, but stopped because smaller Belgian companies felt too weak compared to high numbers of large-sized Hungarian companies at the time. They also had less power to take part in privatization.

Hungarian partnerships
In the meantime, smaller Hungarian companies have become stronger, providing good partnerships to Belgian companies of similar scale, says Haverbeke. Garcia is also optimistic about the future, based on the knowledge that Belgian companies, even the smallest ones, are well versed in rules of the EU. Therefore, they can more bravely turn to the new members, since their operational circumstances will be the same as in traditional EU member countries.

Will Hungarian companies also become more active in Belgium? Haverbeke doubts it. He believes Hungarian companies do not consider Belgium an important market, and therefore do not visit there often. Lack of knowledge of foreign languages is also a handicap in building international relations for Hungarian companies. But the opportunities are there, even for small companies, because from the 15 members, Belgium is the sixth richest in terms of GDP. This also shows in consumption. And this is why Pauwels regrets that Hungarian wines are not better known in Belgium, adding that Romanian wines are sold at four times the price of Tokaj.

Belgium and the labor market
Belgium will close its workplace markets to new EU members for two years. Citizens of new member countries may only work in Belgium if their local employers can prove to authorities that the job can only be filled by a citizen from a new EU nation.

Unemployment in Belgium is 7.3 percent, and increasing worries about more narrowing employment opportunities in the Belgian industry are understandable. For instance, Belgium, – a world leader in car-assembly per capita – was recently told by Ford that it will lay off 3,000 employees from its Genk factory.