Metropolitan Brussels

2010 and beyond

Brussels Attractiveness Symposium December 9th 2010

Martin EichlerSenior Economist and Member of the Executive Board

2

Content

Metro Brussels and the 2008/2009 crisis

Metro Brussels structural performance

Brussels and demography

Brussels’ attractiveness Attractiveness: in the long run a deciding factor for regional

success The attractiveness of Brussels revised

3

Regional definitionsMetro Brussels and the benchmarking regions

Brussels Capital Region(Brussels C.R.)Halle-Vilvoorde

Brabant Walloon

Source BAKBASEL

B r u s s e l - H o o f d s t a d

V l a a m s G e w e s t

R e g i o n W a l l o n n e

Stoc k holm s lä n

Upps a la lä n

Söde rm a nla nds lä n

Ös te rgötla nds lä n

J önk öpings lä n

Kronobe rgs lä n

Ka lm a r lä n

Gotla nds lä n

Ble k inge lä n

Sk å ne lä n

Ha lla nds lä n

Vä s tra Göta la nds lä n

Vä rm la nds lä n

Öre bro lä n

Vä s tm a nla nds lä n

Da la rna s lä n

Gä v le borgs lä n

Vä s te rnorrla nds lä nJ ä m tla nds lä n

Vä s te rbotte ns lä n

Norrbotte ns lä n

Metro Brussels

Madrid

Edinburgh

Dublin

Paris

Lyon

Zurich

Vienna

Frankfurt

Berlin

Stokholm

Randstad

Luxembourg

London

MilanNote All regions in this presentation

are metropolitan regions if not stated otherwise

MEAV: Metropolitan Average (European)

Metro Brussels Sample of benchmarking regions

4

Metro Brussels and the 2008/2009 crisis

How did Brussels perform during the 2008/2009 economic turmoil compared to other metropolitan regions?

What are the factors driving this performance?

Which conclusions can be drawn for the future?

5

Real GDP growth Different impact of the crises on metropolitan regions

Note In % p.a. (at constant prices and PPP), sorted according to growth 2007-2009Source BAKBASEL

-7%

-6%

-5%

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

Lyon

Berlin

Luxe

mbo

urg

Metro

Bru

ssels

Paris

Madrid

Rand

stad

Vienn

a

MEAV

Edinb

urgh

Zuric

h

Fran

kfurt

Lond

on

Stoc

kholm

Dublin

Milan

2008 2009

6

Industries react differently on crisisSlump in economic activities 2009 vs. 2005-2007

-35%

-30%

-25%

-20%

-15%

-10%

-5%

0%

Agric

ultur

e

Extra

ction

Food

Texti

le & cl

othin

gWoo

d

Pape

r, pr

int. &

pub

lish.

Fuels

Chem

ical

Rubb

er &

plas

tics

Oth. n

on-m

etall

ic mine

ralMet

al

Mecha

nical

engin

eerin

g

Compu

ters &

office

equ

ip.

Electr

ic &

electr

onic

Prec

ision

& optica

l ins.

Tran

spor

t equ

ipmen

t

Other m

anufac

turin

g

Utilitie

s

Cons

tructi

on

Trad

e an

d Re

pair

Tour

ism

Tran

spor

t

Commun

icatio

n

Finan

ce

Busin

ess s

ervic

es

Non-m

arke

t servic

es

Aggregate economy

Note Growth of GVA, in % p.a., 2009 minus average 2005-2007, in Western Europe (WE17) Source BAKBASEL

7

-30%

-25%

-20%

-15%

-10%

-5%

0%

-4% -2% 0% 2% 4% 6% 8%

Share of GVA

Gro

wth

of

GV

A FinanceBusiness Services

Mechanical Engineering

Construction

Non-market services

Computers & office equip.Transport equipment

Trade and repair

Different industry structures in regionsRegions are differently exposed to the economic downturn

Stuttgart

Turku

Metro Brussels

London

-30%

-25%

-20%

-15%

-10%

-5%

0%

-6% -4% -2% 0% 2% 4% 6% 8% 10% 12% 14%Share of GVA

Gro

wth

of

GV

A

FinanceBusiness Services

Mechanical Engineering

Construction

Non-market services

Computers & office equip.

-30%

-25%

-20%

-15%

-10%

-5%

0%

-10% -5% 0% 5% 10% 15%

Share of GVA

Gro

wth

of

GV

A FinanceBusiness Services

Mechanical Engineering

Construction

Non-market services

Electric & electronic

Transport equipment

-30%

-25%

-20%

-15%

-10%

-5%

0%

-10% -5% 0% 5% 10% 15% 20% 25%

Share of GVA

Gro

wth

of

GV

A

FinanceBusiness Services

Mechanical Engineering

Construction

Non-market services

Transport equipmentComputers & office equip.

Note x-axis: derivation of share of GVA of industry in regions economy from Western Europe sharey-axis: Growth of GVA, in % p.a., average 2009/2010 minus average 2005-2007, in Western Europe (WE17)

Source BAKBASEL

8

90

95

100

105

110Paris London Berlin Frankfurt

Milan Randstad Vienna Dublin

Stockholm Lyon Madrid Zurich

Edinburgh Luxembourg Metro Brussels MEAV

Real GDP development 2007 to 2009Metro Brussels did fairly well

Note Index 2007=100 based on real GDP (at constant prices and exchange rates, PPP corrected)Source BAKBASEL

9

Forecasts for growth of real GDPPerspectives for Metro Brussels in the coming years are good

Note In % p.a.Source BAKBASEL, Oxford Economics

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

7%

Lond

on

Dublin

Stok

holm

Luxe

mbo

urg

Metro

Bru

ssels

Edinb

urgh

Rand

stad

Vienn

aPa

ris

Züric

hLy

on

Fran

kfurt

Madrid

Berlin

Milan

201020112012-2016

10

Metro Brussels structural performance

Metro Brussels performance during 2008/2009:Coping with the crises due to structural strength?

Is Metro Brussels keeping up with other metropolitan regions in economic advancement in the middle term?

Which role plays the internal structure of the Metro Brussels region?

11

GDP per capita 2009Metro Brussels amongst the most productive regions in Europe

Note In 1'000 US$ (at constant prices and exchange rates, PPP corrected)Source BAKBASEL

0

10

20

30

40

50

60

70

80

90

100

Luxe

mbo

urg

Lond

on

Brus

sels

Zuric

hPa

ris

Vien

na

Stoc

kholm

Dublin

Rand

stad

Lyon

Fran

kfurt

MEAV

Milan

Madrid

Edinb

urgh

Berlin

12

80

100

120

140

160

180

200

220

240

260

280Paris London

Berlin Frankfurt

Milan Randstad

Vienna Dublin

Stockholm Lyon

Madrid Zurich

Edinburgh Luxembourg

Metro Brussels MEAV

Real GDP growth trends since 1990 In the longer run Metro Brussels growth is less impressive

Note: Index 1990=100 based on real GDP (at constant prices and exchange rates, PPP corrected)Source: BAKBASEL

13

Sources of growth 2000-2009 Participation is a key challenge for Metro Brussels

Note In % p.a. (at constant prices and exchange rates, PPP corrected)Source BAKBASEL

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

Luxe

mbo

urg

Dubli

n

Madrid

Lond

on

Edinb

urgh

Lyon

Stoc

kholm

Metro

Bru

ssels

MEAV

Paris

Rand

stad

Vienn

a

Zuric

h

Fran

kfurt

Berlin

Milan

GDPhourly productivityhours worked per personpopulationparticipation

14

100

102

104

106

108

110

112

114

116

118

120

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

Real GDP

Employment

Population

100

105

110

115

120

125

130

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

Real GDP

Employment

Population

Growth of real GDP, employment and population, 2000 to 2009Different patterns in the different parts of Metro Brussels

Note Index, 1990=100, based on real GDP (GDP at constant prices and exchange rates, PPP corrected)Source BAKBASEL

Brussels Capital Region

Brabant Walloon and Halle-Vilvoorde

15

Share of industries, 1980 to 2009 Strong structural change in Metro Brussels …

Note in %, based on USD at current prices and exchange ratesSource BAKBASEL

10.3%

11.8%4.4% 5.0%1.2%

12.7%

6.7%

3.8%

0.1%

2.2%

12.8%

2.9%

13.9%

3.3%

9.0%

Pharmaceuticals and chemicals Precision and optical equipment, watchesHotels, restaurants, etc (a55+a92) LogisticsBanking and insurance Real estate

Business Services excl. Real Estate (a71-a74) Education and research (a73+a80)Health and social services Interest groups and other associations Other prim. and sec. sector ConstructionTrade and repair Postal service and telecommunications

Public administration and other tert. sector

5.3%

12.4%

2.8%

8.7%

17.9%

2.6%

0.8%

4.8%

5.2%

8.0%

10.1%

10.8%

4.6%5.3%0.6%

8.3%

2.7%

11.0%

4.8%

12.7%

6.4%

0.6%4.7%

15.0%

11.2%

9.1%

5.1%5.9%

0.7%1.8%9.5%

4.0%

14.0%

2.8%

1.2%

17.6%

9.8%

10.6%

5.8%3.7%

0.1%1.9%

5.3%4.8%

8.9%

2009 2009

19901990

MetropolitanRegions Average

Metro Brussels

16

Share of industries, 1980 to 2009 … with the parts of MB developing quite differently

Note in %, based on USD at current prices and exchange ratesSource BAKBASEL

5.0%

1.5%

4.3%

8.6%

16.6%

13.4%

5.6%

4.4%

0.1%1.1%

11.2%

2.4%

11.1%

4.2%

10.5%

Pharmaceuticals and chemicals Precision and optical equipment, watchesHotels, restaurants, etc Logistics

Business Services excl. Real Estate Education and researchInterest groups and other associations Real estateHealth and social services Banking and insuranceOther prim. and sec. sector ConstructionTrade and repair Postal service and telecommunications

Public administration and other tert. sector

4.0%

19.4%

1.1% 5.1%

15.8%

5.2%0.1%

2.3%

7.9%

13.8%

5.1%

0.3%13.2%4.6%2.1%

5.0%1.2%

21.1%

3.5%

10.5%

4.4%2.3%13.6%

0.3%

5.0%

18.2%

8.2%

2.2%0.1%4.3%

11.9%

5.5%

10.2%

2.4%

15.7%

1.6%

5.4%

16.3%

4.7%4.5%

0.1%

0.9%

7.8%5.0%

8.1%

2009 2009

19901990

Walloon Brabant and

Halle-Vilvoorde

Brussels Capital Region

17

Brussels demography

Exceptional population growth in Brussels?

Is it a source for economic growth?

18

Growth of Population, 1990 to 2009 Population growth in Metro Brussels strong but not exceptional

Note In % p.a.Source BAKBASEL

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

Madrid

Dublin

Luxe

mbo

urg

Zuric

h

Vien

na

Metro

Bru

ssels

Stoc

kholm Mila

nMEA

VLy

on

Lond

on

Edinb

urgh

Paris

Rand

stad

Berlin

Fran

kfurt

90-00

00-09

19

Population forecasts, 2000-2060Strong population growth in Brussels due to external migration

Note In personsSource Bruessel Studies (Bureau du Plan, 17. mars 2009)

-20'000

-10'000

0

10'000

20'000

30'000

40'000

2000 2010 2020 2030 2040 2050 2060

Population change

Net external migration

Net internal migration

Natural change

0

200'000

400'000

600'000

800'000

1'000'000

1'200'000

1'400'000

2000 2010 2020 2030 2040 2050 2060

Brussels Capital Region

Population level Population change (per year)

20

Brussels populations growthSources?

Highly qualified migrants

Highly qualified migrants

Refugees Refugees

Investors /Entrepreneurs

Investors /Entrepreneurs

Less qualified migrants

Less qualified migrants

RetireesRetirees Family members of migrants

Family members of migrants

TouristsTourists

StudentsStudents

low qualifiedmigrants

low qualifiedmigrants

21

The attractiveness of regions

Does it matter?

What is “attractiveness” of regions?

Which kind of attractiveness is relevant for metropolitan regions in Western Europe?

22

Why attractiveness and openness matters?

Cities in the Western hemisphere can only maintain their lead in economic welfare when they manage to keep ahead in productivity

This requires permanent innovation …

… which, in turn, requires the best people (talents, creative class, highly qualified)

The demand for talents is increasing and talents are increasingly mobile

Cities and regions compete in attracting and retaining human capital from all over the world

=>Policy makers need indicators to evaluate differences in both quality of life performance and openness among regions and to better design and assess regional policies!

23

A basic model for discussionThe way to long-term economic performance

Potential

resources structures

The ultimate goal is welfare. Its indicator is long-term economic performance.

Attractiveness

people companies

Openness

people companies

Long-term economic performance(welfare)

Source BAKBASEL

24

A basic model for discussion Determination factors

Potential: What is the economic foundation of the regional economy (today)? Resources: Availability of productive manpower and capital Structures: Portfolio of industry sectors, manpower and capital

Attractiveness: How attractive is it to go to a city/region (and stay there for some time)? People‘s climate: Quality of life for talents, workers, students and retirees Business climate: Framework conditions for companies

Openness: Is there access, or how easy is access to all relevant goods? for people: absence of barriers for entry and staying (and leaving) for business: absence of barriers for starting and conducting

(and closing) a company

25

People follow jobsversus Jobs follow people

One empirical result

In the short run: people follow jobs

In the long run: jobs follow people

Note Granger-Causality test: employment and population, 40 metropolitan regions in Europe and the US, 26 years (1980 – 2006)

Source BAKBASEL

Talents and economic developmentHow to solve the «hen and egg» problem?

26

The attractiveness of Brussels

Is there a concept to measure the relevant attractiveness?

What can we say about Brussels?

How can Brussels further assess and exploit its attractiveness?

27

Attractiveness is a multi-dimensional issue

Not one but numerous indicators and measurement concepts available

Summarized as indices

These indices are predominantly based on quantitatively measurable indicators

Alternative: subjective questionnaires

Economic attractiveness – Quality of life – OpennessOverlapping concepts for measurement

BAK Attractiveness

Index

Index ofOpenness

BAK Quality of Life Index

28

BAK Attractiveness IndexBrussels faces some disadvantages vis-à-vis its competitors

Note Index, WE17 = 100, 2009, no data available for MEAV and LuxembourgSource BAKBASEL

95

100

105

110

115

120

Zuric

h

Rand

stad

Lond

on

Fran

kfurt

Dublin

Paris

Vienn

a

Stoc

kholm

Edinb

urgh

Brus

sels

Berlin

Milan

Wes

tern

Europ

e

Madrid

Lyon

29

Brussels: Attractiveness profile“Belgium” factors create a disadvantage for Brussels

Note Position of Brussels within the benchmarking sample (for each indicator, percentiles) Higher values indicate a better performance; IBD 2010

Source BAKBASEL

Taxation (Companies)

Taxation (Manpower)

Accessibility (Global)

Accessibility (Continental)

Regulation (Product Market)

Regulation (Labour Market)

Universities quality: TS per 100'000 inhabitants

Patent density

Publication density

Expenditures on research and development

Brussels

Inn

ova

tio

nT

axat

ion

Acc

essi

bil

ity

Reg

ula

tio

n

50% 75%25%-- ++

30

Company taxation and taxation of highly qualified* manpower, 2009

Zurich

Brussels

Stockholm Milan

LyonParis

Randstad MEAVDublin

FrankfurtBerlin MadridVienna

London, EdinburghLuxembourg

25%

30%

35%

40%

45%

50%

55%

60%

10% 15% 20% 25% 30% 35%taxation of companies

taxati

on

of

man

pow

er

Note Effective average tax rates (EATR) in %, *disposable income of EUR 100‘000/single personSource BAKBASEL, ZEW

31

People can not be forced but must be attracted!

Concepts Richard Florida

the creative class Edward Glaeser

identifies factors to attract highly qualified people like:High incomes, rich variety of services and goods, aesthetics and physical setting, good public services, speed (commuting time), …

Florida and Glaeser measure different aspects of quality of life

They should be used combined

Attractiveness of a regionA broad approach is necessary

32

BAK–Qality of Life–Index Construction

Income and Consumptio

n

Housing Market

LabourMarket

Access to Markets

Economic Conditions

Climate Pollution Traffic

Environmental Conditions

Safety

Health

Education

Culture and Amenities

Societal Conditions

Quality of Life Index

A total of 28 indicators is used

33

Quality-of-Life Index

Again, Brussels at the lower part of the ranking

Quelle: BAK Basel Economics

Note Weighted ranking points, 2007; some data preliminary (including some data for Brussels)Source BAKBASEL

0

10

20

30

40

50

60

70

Economy Society Environment

34

Quality-of-Life Index: Societal conditions

Quelle: BAK Basel Economics

Note Weighted ranking points, 2007; some data preliminary (including some data for Brussels)Source BAKBASEL

0

10

20

30

40

50

Safety HealthEducation Leisure

35

Brussels: Quality of Life index

Economic Market Access and Property Markets are at competitive level … … but Labour Markets and Income limit the achievements of Brussels

in this field

Society Strongest area for Brussels Safety is the only limiting factor compared to the competitors … … while Education, Health and Leisure all contribute positively

Environment Climate and Location build a disadvantage for Brussels Infrastructure available for traffic is fairly good, Pollution is about

average

Note: Results are partly based on preliminary data, which is also true for Brussels, particularly for the data used in the Environment section of the index

36

Brussels’ position in other rankingsLiveability

Quality of Living survey by Mercer Consulting: Brussels is ranked 15th from 221 cities compared.Similarly to the BAK QoL-Index Brussels is behind Copenhagen, Amsterdam, Vienna, Stockholm, Frankfurt and Munich,

but before Stuttgart, Milano and Paris.

European Cities Monitor (Cushman & Wakefield): Brussels is ranked 4th in “best cities to locate a business today”.But in terms of “quality of life for employees” Brussels is outside

the top 10; it is ranked 16th from 35 cities

behind Copenhagen, Barcelona, Madrid, Munich, Stockholm and Vienna.

37

Brussels’ position in other rankingsGlobal city

GaWC studies (Globalisation and World Cities Research Network):

Cities ranked from Alpha++ world cities (New York, London), Alpha+ world cities (e.g. Hong Kong, Paris, Singapore, Tokyo) to Gamma- world cities. Brussels is a Alpha world cities together with Madrid, Moscow, Seoul, Toronto etc.

Global Cities Index (Foreign Policy et al) “the world biggest, most interconnected cities help to set global

agendas…”Brussels is ranked 11th. It reaches the third place among the Europeancities, behind London and Paris.

Global Power City Index (consultant firm Knight Frank LLP and Citibank)

rank “the world most influential cities according to economic activity,political power, knowledge and influence as well as quality of life”. Brussels reaches place 6 behind New York, London, Paris, Tokyo, Los Angeles.

38

The complementary concept of «Openness»What is openness?

Openness is the quality and sum of local conditions to attract and retain international populations (Towards OPENCities 2008)

Places are open to new people and ideas if they have “low barriers of entry” (Florida 2004)

Thus cities have to be attractive, so that people want to go and stay there open, so that people can go and stay there

Openness is equivalent to low barriers of entry for international populations easy integration and participation for international populations

39

The complementary concept of «Openness»Open for whom?

Highly qualified migrants

Highly qualified migrants

Refugees Refugees

Investors /Entrepreneurs

Investors /Entrepreneurs

Less qualified migrants

Less qualified migrants

RetireesRetirees Family members of migrants

Family members of migrants

TouristsTourists

StudentsStudents

low qualifiedmigrants

low qualifiedmigrants

40

How can openness be measured?

Openness is a multidimensional and complex phenomenon

It can be measured by a large number of indicators which measure different aspects of openness

The indicators can be grouped thematically (e.g. into areas)

Each of these key factors represents one of the various dimensions of the quality of life of all inhabitants. Special attention is paid to the international populations which are important for the attractiveness and openness of the city

41

Indicators grouped systematically

Migration Freedom Barriers of entry Quality of living Intern. presence Education International flows

Intrastructure International events

Standard of living Diversity Actions

54 internationally comparable indicators, aggregated to

11 areas:

or 3 policy themes:

Internationalisation Leadership & Governance Managing diversity

42

43

44

Summing up

Economic performance of Brussels Was good during crisis … … but limited in a broader view There are challenges ahead

Attractiveness of the Brussels region … … is high – clearly a world city … often good in perceptions … but not confirmed by quantitative indicators

Options Awareness of the importance of high potentials Better understanding and monitoring of attractiveness

45

Thank you for your attention!

Senior Economist& Executive Board

Martin Eichler

Contact

BAK Basel Economics AGGueterstrasse 82CH-4052 BaselSwitzerlandTel + 41 61 279 97 14Fax + 41 61 279 97 28martin.eichler@bakbasel.comwww.bakbasel.com

46

Note: All regions are either official statistical regions (NUTS-classification) or an aggregate thereof

Definition Benchmarking Regions

Region IBC notation Country IB Key Type Delimitation

Brussels Greater Brussels BEL BELMBIB-Member Metropolitan Region

Paris Ile de France FK FK11 NUTS ZEAT

London Greater London UK UKI NUTS Region of England

Berlin Berlin DE BN NUTS Bundesland

Frankfurt FrankfurtRheinMain DE RMBAKBASEL IB-Aggregat

Milan Milano IT IT205 NUTS Provincie

Randstad Randstad NL RDBAKBASEL Metropolitan Region

Vienna Wien AT AT13 NUTS Bundesland

Dublin Greater Dublin Area IR IRGDBAKBASEL Metropolitan Region

Stockholm Stockholm SE SE01 NUTS Riksområden

Lyon Rhône FK FK716 NUTS Département

Madrid Comunidad de Madrid ES ES3 NUTS Agrupación de CCAA

Zurich Zürich CH ZH NUTS Kanton, BFS-Grossreg.

EdinburghMetropolitan Edinburgh UK UKME

BAKBASEL Metropolitan Region

Luxembourg LUXEMBOURG LUX LUX NUTS National Level

MEAVMetropolitan Regions Average MEAV

BAKBASEL

Average of the group of Metropolitan Regions

47

All data in this Chart-Set are from the «International Benchmarking Database» by BAKBASEL. For the BAKBASEL list of data within the International Benchmarking Programme please consult the «International Benchmarking Report».© Copyright for data and figures BAK Basel Economics AG. The data included herein are taken or derived from various data sources, among them particularly: - National and regional statistical offices, EUROSTAT- International Comparisons of Output and Productivity (ICOP), University of Groningen- Thomson Scientific Ltd. (TS), London, UK, © Copyright Thomson Scientific 2006 - Shanghai Jiao Tong University - Organisation for Economic Cooperation and Development, Paris (OECD) - Centre for European Economic Research, Mannheim (ZEW) - Institute for traffic planning and transportation systems, Zürich (IVT)

For further Information please contact:Marc Bros de PuechredonMarc.puechredon@bakbasel.com

Sources