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Belgium’s inward and outward foreign direct investment

C. Duprez and Ch. Van Nieuwenhuyze
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C. Duprez: National Bank of Belgium
Ch. Van Nieuwenhuyze: National Bank of Belgium

Economic Review, 2016, issue ii, 45-62

Abstract: The article analyses the size and the economic impact of Belgium’s foreign direct investment (FDI), both inward and outward. Outstanding FDI figures confirm Belgium’s status as a small, open economy. However, a large proportion of that investment is capital in transit, partly owing to government initiatives which in past years aimed to attract FDI, particularly by means of tax incentives such as the notional interest deduction. In net terms, and thus excluding the impact of capital in transit, inward FDI exceeds outward FDI. This is an atypical situation for a developed economy with a substantial savings surplus. Belgium’s FDI relationships entail a loss of net income to the rest of the world. This adverse financial result is due partly to the low level of net outward FDI, but also to a relatively low return on Belgium’s outward FDI. However, FDI relationships do have a favourable impact on Belgium’s real economy. Firms receiving inward or engaging in outward FDI generally achieve higher productivity and make a positive contribution to Belgium’s net exports. As regards employment in Belgium, the economic crisis affected jobs in Belgium-based subsidiaries of foreign groups to a much greater extent than jobs in Belgian parent companies and purely domestic firms.

Keywords: foreign direct investment; investment income balance; multinationals; productivity (search for similar items in EconPapers)
JEL-codes: F21 F23 F30 G30 (search for similar items in EconPapers)
Date: 2016
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Handle: RePEc:nbb:ecrart:y:2016:m:september:i:ii:p:45-59