FLANDERS:

MASTERS IN INNOVATION

John Verzeele, Oct. 31, 2012

Taipei

Belgium’s tale of the tape

10-98 - 080133

Flemish Region 58% of population

82% of Belgian exports

Brussels Capital 10% of population

2% of Belgian exports

Walloon Region 32% of population

16% of Belgian exports

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FLANDERS: Key Figures

Flanders: a prosperous region

with an open economy in the core of Europe

Population: 6.28 million (= 57.6% BEL)

Language: Dutch (NL)

Surface: 13.521 km² (= 45% BEL)

GDP: €194 billion

GERD: €4.15 billion (+- 2/3 of BEL)

% GERD/BBP: 2.12% (2009)

Total public budget STI policy: €1.7 billion of which €1.07 billion R&D

The region has constitutional competences on

research, innovation and economic policy

Strategic Location in Europe

Unique location at European crossroads

Proximity to EU headquarters of major commercial & official organisations

The port of Antwerp is Europe’s n°2, its most centrally located one, and port of entry for thousands of products.

Flanders offers logistics operations access to the

largest one-day-market in Europe: main markets can be served within 24 hours

750 km

236 Mio consumers (53%)

€ 6 Bn GDP (67%)

Belgium at the heart of Europe EU=EU-27

members

500 km

131 Mio consumers (29%)

€ 3,7 Bn GDP (42%)

250 km

54 Mio consumers (12%)

€ 1,5 Bn GDP (17%)

Total EU population: 490 Mio

Total EU GDP: € 12.00 trillion

Source: PricewaterhouseCoopers, Report 2004 11-00 - 170149

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R&D & Innovation

Main drivers for R&D

Knowledge driven

Customer market

History

Skilled labour presence

Source: Buck Consultants International 2009

Best quality for education and schooling (The Global Competitiveness report World Economic Forum 2012)

03-04 - 170160 Source: 2012

Ranking Primary education

Educational System

Math and Sciences

Management Schools

Belgium 2 6 2 1

Netherlands 14 10 9 10

Germany 36 17 48 36

France 28 34 15 5

UK 23 20 43 2

Reading skills + best foreign language skills PISA assessment score 2011

9

09-07 - 030125

Source: Education at a glance, OECD Indicators 2011

508

506

497

496

494

519

Flanders

Netherlands

Belgium

Germany

France

UK

Mathematics achievement score PISA assessment score 2011

10

09-07 - 030125

Source: Education at a glance, OECD Indicators 2011

526

515

513

497

492

537Flanders

Netherlands

Belgium

Germany

France

UK

Science achievement score PISA assessment score 2011

11

09-07 - 030126

Source: OECD, aps.vlaanderen.be, 2011

522

520

514

507

498

526Flanders

Netherlands

Germany

UK

Belgium

France

2012 Survey of Japanese companies (BJA)

93% of Japanese companies think that the level of technological education in Belgium meets the needs of their business.

100% of the Japanese companies believe that the level of management education in Belgium meets the need of their business

94% of the Japanese companies agree that the level of language skills meet the needs of their business

High quality and availability of R&D The Global Competitiveness Report World Economic Forum 2012

03-04 - 170160 Source: 2012

Ranking Availability of latest

technology

Capacity for innovation

Quality of scientific research

institutions

Availability of scientists

and engineers

Belgium 8 14 5 13

Netherlands 6 10 8 17

Germany 20 3 10 41

France 11 8 15 11

UK 7 13 3 14

Most popular study branches in Flanders 2011 - 2012

students seem to prefer to choose science and technology as a major University of Antwerp Biomedical sciences: +31% Commercial engineering: +28% KU Leuven Chemistry: +105,88% University of Ghent Chemistry: +35,71% ICT: +35,13% VUB Brussels Engineering: +14% UCL Limburg Commercial engineering: +30% Civil engineering: +20% Veterinary medicine: +34%

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Toplocation for R&D

Research: a proven track record of market-driven innovation

Over the last few decades our dense network of universities has been complemented by market-driven strategic research centers in selected fields

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1986 IMEC 1993 VITO 1996 VIB 2004 IBBT/i-minds

Flanders: The 6 domains of expertise in ICT (6/6)

Software products

• LMS, Materialise, Inventive Designers, Real Dolmen, ACA-IT-solutions, Invenso, Produmex, Metris, Helios-IT, …

• Speech & Language Technology: Nuance,…

• Gaming: Larian Studios

• Agoria ISV (Independent Software Vendors-platform)

Smart hubs

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Flanders’ Vision for the Future

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Why ‘smart specialisation’ is important for Flanders

‘Flanders in Action’: strategic framework for a new growth path

Future project (starting 2006) of the Flemish government, supported by +100 stakeholder organisations (‘Pact 2020’),

Aiming at a ‘top 5 region’ position in Europe = transition towards an innovation driven growth model,

Consensus that STI investments should be focussed on ‘spearheads’: domains that can position Flanders in future value chains with important societal and economic impact.

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Focussing on 10 spearhead initiatives in 6 ‘clusters’

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SWOT Analysis of Flanders vs EU

EU Foresight Study with 15 key areas

NEW INDUSTRIAL POLICY: an integrated framework

White Paper ‘New Industrial Policy (27 May 2011): Integrated policy platform for economic transformation

A new Productivity Offensive

• Increase knowledge productivity in clusters (critical mass and specialisation)

• Support ‘lead companies’ ‘lead markets’ and ‘lead clusters’

• Factory of the Future

Transformational Sectoral Policy

• Focus on transformation strategies based on value chains, clusters and grand projects

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Productivity &

Competitiveness

Policy

New Industrial

Policy

Infrastructures

Policy

Competences

& Labour Market

Policy

Industrial

Innovation Policy

Advanced manufacturing

Advanced manufacturing:

- flexible tailor-made production

- specialized high added-value products

- first series before mass production

Belgium, at the crossroads of different cultures, offers the ideal test market for new products

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1. specialized high added-value products:

High end products in Ostend (Flanders) vs

low end production in Czech Republic

2. first series before mass production

The heating and airco systems can be tested in simulation for the climats in more than 30 countries ranging from – 25 degrees (Nordic countries) to + 60 degrees for heat waves and African countries

3. flexible tailor-made production:

Special systems for wine culture

Daikin

Examples of authentification and smart card technology-applications

Cartography: a Flemish tradition

Examples of digital audio-video and digital printing applications

Recent investments

Genzyme’s biomanufacturing plant extension (€46 mio)

Janssen’s new pilot plant in Geel (€130 mio)

Pfizer’s investments in Puurs and Zaventem (€61mio)

R&D Incentives and Tax Features

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1. Patent income deduction

Deduction of 80% of the income from patents from the taxable basis, resulting in an effective tax rate of maximum 6,8% on this income

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2. Investment deduction

Investment deduction for R&D related inv. deduction of 15,5% on the investment

value (in one shot) OR 22,5% on the annual depreciation

(spread deduction)

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3. Exemption from withholding tax on the remunerations of researchers

•Principle: the salary withholding tax is normally retained on the remunerations paid to the researcher, but the amount of tax so retained must not be totally paid to the Revenue Collector (= extra financial means for the employer) 80 % exemption !

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IWT: Subsidies IWT wants to encourage companies in Flanders to innovate in various ways.

1.Subsidies: IWT has a wide range of subsidy programs in fundamental, basic and Applied research, where can make use of, as individual company, as partner of a research institute or in collaboration with other companies, universities, etc…

2.Funding: financing innovative projects of companies, research centres, organizations and individuals through assignments set by the Flemish Government.

INCENTIVE between 25% and 70%

of your project

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Belgium has a very long tradition of international trade : Origin of Stock Exchange Bruges 14th century (1309)

Financial expertise and innovation

1. United States 226,9

2. China 123,9

3. Belgium 89,1

4. Hong Kong 83,1

5. Brazil 66,7

6. Singapore 64,0

7. United Kingdom 53,9

8. British Virgin Islands 53,7

9. Russia 52,9

10. Australia 41,9

2012 FDI inflows (UNCTAD) in billions of dollars

03-04 - 170160

Ranking

Belgium number 1 investor in the USA!

Tax advantages: unique system

-Notional Intrest Deduction

-Ruling

-No withholding taxes on dividends

ForeignCo

BelCo

Bank Loan

Capital injection 200

Loan 200 Interest 10

Interests received : 10

N.I.D. : -6 (200 x 3%)

Income : 4

Corp. tax = 4 X 33,99% = 1,35

Effective tax rate : 13,5%

1. Notional Interest Deduction

Dividend withholding tax exemption

Parent company (treaty partner of

Belgium)

Belgian Subsidiary

• No WHT

• No LOB

• 10% shareholding

• 12 months

Belgium Effective (Average) Corporate Tax Rate (ECTR) 2009*

Sources : Report 2009, made by ZEW (Centre for European Economic Research) for the EU Commission Project : Taxud/2008/CC/099, Mannheim and Oxford, October 2009

*(based on asset and source of finance) Especially in Belgium, the ECTR is considerably below statutory tax rates (-9,3%)

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Innovative tax benefits

TOP 1000 companies with highest profits pay an average of only

5,73 % taxes

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The effective corporate tax rate in Belgium is one of the lowest in the EU! This is confirmed by the Institute of International and European Affairs!

R&D practical example

Example

Manufacturing company with a R&D division:

Share capital: 100 000 (of which 20 000 = contributed patent value)

Return on equity: 12%

Net profit: 12 000 (of which 3 000 = patent income ; 9 000 = product revenue)

To deduct

Invest. ded. on patents: 15,5% x 20 000 = 3 100

Patent Income Ded.: 80% x 3 000 = 2 400

N.I.D. 3% x 100 000 = 3 000

Taxable basis: 3 500

Corporate Tax: (3 500 x 33,99%) = 1 190

Effective tax rate: 9%

Office Renting Prices (Cushman & Wakefield) 2012/prices in €/m²/year (1st quarter 2012)

Frankfurt: 408

Amsterdam: 423,53

Paris: 580

London: 708,75

Brussels: 352,06

Antwerp: 179,12 Prague: 297.36

Sofia: 178,56

GET THE BEST OUT OF EUROPE: CHOOSE FLANDERS AND

MAKE A MASTERPIECE OUT OF YOUR PROJECT