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Fact or fiction: 5 common beliefs about foreign investments

The figures prove it year after year: Flanders is an attractive destination for foreign businesses. However, there are still many misconceptions about foreign investments. Flanders Investment & Trade (FIT) brought the loyal sponsors of the Foreign Investment Trophy – ING Belgium and Deloitte Belgium – to the table to either confirm or eliminate five controversial ideas once and for all.

1) Investing abroad is only possible for large companies

Vanessa Temple: “This is a myth. In practice, we see that a lot of small and medium-sized enterprises also find their way to Flanders. Large investors simply attract more attention from the press because of their size.”

Piet Vandendriessche: “The number of foreign start-ups that set up business in Flanders is still relatively limited. In the early stages of their development, start-ups often look for large, single-language markets. However, more mature SMEs indeed see Flanders as an attractive expansion location, thanks to a wide range of unique assets.”

Both large and small foreign companies find their ways to Flanders.

Vanessa Temple
Head of ING Wholesale Bank Clients at ING Belgium

Vanessa Temple ING Belgium

2) Political stability is a priority for any foreign investor

Sabrina Polito: “Political, legal and fiscal stability are very important considerations for entrepreneurs. However, I believe that the political situation in Belgium and Flanders is not much of an issue for foreign companies looking to set up business here. It’s important to put things into perspective: we live in an open economy as well as a mature and stable democracy where we don’t struggle with any major political uncertainties.”

3) Tax burden and high labor costs deter foreign investors

Piet Vandendriessche: “A lot of progress has been made in this area. Since the corporate income tax reform in 2018, our tax regime has become a lot more attractive to foreign investors. In the final phase of the corporate tax reform, the nominal rate will decrease from 29% to 25% in 2020. The pressure of our wage costs has been eased, while flexibility regarding overtime has increased. All these improvements ensure that Flanders is back in the running and can compete with neighboring countries. Now, it’s crucial to continue keeping our finger on the pulse of the international business environment in order to keep pace with any challengers.”

Sabrina Polito: “It’s also important to note that foreign investors look beyond obstacles such as tax burden and labor costs. Flanders has many assets to be highlighted. Think of its central location, for instance, as well as the proximity of European institutions and the presence of a skilled, productive workforce with extensive linguistic knowledge.”

Flanders can compete with neighboring countries.

Piet Vandendriessche
CEO, Deloitte Belgium

Piet Vandendriessche,  Deloitte Belgium

4) Companies should choose an investment destination close or similar to home

Sabrina Polito: “Of course, it’s easier to grow in a similar market and environment. But if we look at the nominees for Flanders Investment & Trade’s Foreign Investment of the Year Trophy, proximity and business culture don’t seem to matter much in a company’s decision to invest abroad. It all depends on what sector you are operating in, your business targets, the maturity and complexity of your company and the scale of your investments.”

Proximity doesn’t seem to be a major decisive factor in the decision to invest abroad.

Sabrina Polito
Head of International Clients at ING Belgium

Sabrina Polito ING Belgium

5) A company takeover is the ideal first step toward investing abroad

Vanessa Temple: “A company takeover may be interesting in terms of generating cash flow from day one – if the target generates cashflow. Even so, it is no guarantee of a smooth course or flawless track record. In the case of a takeover, foreign companies may be confronted with challenges relating to permits and licenses, or barriers such as cultural and linguistic differences. Opting for a partnership, such as a joint venture, can increase your chances of success.”

Piet Vandendriessche: “A takeover is one way to get a foothold in Flanders, but it's not necessarily the best choice. Especially in biotechnology, Flanders has seen various large, successful takeovers in recent years, but in the case of chemistry and pharmaceuticals, expansion is also an interesting path to take. After all, Flanders has developed rock-solid ecosystems in this field. Partly due to the quality of our ports and infrastructure, the far-reaching interaction between our universities and knowledge centers, and the high level of education of the population, Flanders is an attractive investment destination more than ever. The fact that the government of Flanders pursues a stimulating policy completes the picture.”

Reported by
Flanders Investment & Trade (FIT)
6 February 2020

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