Belgium has been a federal state since 1994, following a number of institutional reforms that began in 1970 and is divided into the three regions of Flanders in the north, the Brussels Capitol Region, and Wallonia in the South. There are significant disparities in economic performance between the north and south of the country. Wallonia has historically been the richer and more dynamic of the two areas, but in recent decades this trend has reversed and now Flanders is the more prosperous of the two regions. For example, according to the working paper 'Regional Labour Market Disparities in Belgium' published by the IMF, unemployment in Flanders was just 4 per cent in 2002 compared with 10.7 per cent in Wallonia.

The IMD World Competitiveness Scoreboard 2002, which takes into account a country's economic performance, government efficiency, business efficiency and infrastructure, ranks Belgium 18th out of 49 countries around the world.

Economy:
According to the National Bank of Belgium, the country's GDP was just over 254 million euros in 2001, with a growth rate of approximately 1 per cent. Figures published by the OECD show that service sector dominates the economy, contributing 70.9 per cent of GDP in 2000. The industrial sector and agriculture contributed 27.7 per cent and 1.4 per cent respectively.

The economy is highly dependent on the state of world markets. This is largely due to the country's limited natural resources and small domestic market, which together necessitate the substantial importation of raw materials and high levels of exportation. Figures published by the Belgian Foreign Trade Board put the value of Belgium's exports at more than 80 per cent of the country's GDP in 2001. They also show that chemical and pharmaceutical products are the countries main export commodities, contributing more than 21.5 per cent to the total export revenue. Transport equipment is the next largest with 14.6 per cent of the total, followed by machinery and appliances with 13.15 per cent. The vast majority of Belgium's exports are destined for countries within the European Union.

Infrastructure:
Belgium has several regional and international airports. Brussels international airport, situated to the north east of the capital, is one of the largest in Europe. In 2001 it catered for approximately 20 million passengers and almost 584, 000 tons of cargo. Brussels South Charleroi Airport and Liège-Bierset Airport are the main airports in the Wallonia region. Both airports handle passenger traffic and cargo business and Charleroi airport's adjacent industrial zone is home to much of the region's aerospace industry. Antwerp Airport and Ostend Airport are the main airports of the Flanders region. Antwerp airport is less than 2 kilometres from the city centre and offers daily flights to several prominent European destinations including London, Amsterdam, Dublin and Geneva. Ostend airport is one of the fastest growing cargo airports in Europe, specialising in outsize cargo, perishables and livestock.

The country has major ports at Antwerp and Zeebrugge on the north coast, as well as several ports further inland at Brussels, Ghent and Liège. The port at Antwerp is the second largest on the continent after Rotterdam and still has room for expansion. It is connected to the centre of Europe and the Black sea via an extensive network of inland waterways and offers more than 4.8 million square metres of warehouse space. The port complex of Bruges-Zeebrugge enjoys an excellent central location on Belgium's north coast, within a short distance of Great Britain. Between 1972 and 1985 the port benefited from a significant expansion project that included the construction of an outer port, 2 long breakwaters, a large sea lock and a completely new inner port. Since then Zeebrugge has become a multifaceted port capable of handling a variety of cargo. It also operates extensive roll-on roll-off ferry services between the Continent, Great Britain, Scandinavia and Southern Europe. The port of Brussels is relatively small, handling approximately 6,500 tonnes of cargo each year while the port of Ghent handles in the region of 25 million tonnes. Ghent is equipped to deal with the transhipment, storage and distribution of a large variety of goods and is located some 90 kilometres inland, connected to the sea via a series of canals. Liège is one of the most important river ports in Europe and caters for approximately 15 million tonnes of cargo annually.

Belgium has extensive road and rail networks that provide efficient links with the rest of Europe. According to information published by the federal state government, Belgium's road network is comprised of approximately 1,700 kilometres of highways, 12,500 kilometres of regional roads and around 1,500 kilometres of provincial and local roads. Furthermore, the motorways are maintained to high standards and are toll free. The Thalys TGV high speed trains provide frequent services to the surrounding countries and there are also daily services to Switzerland and Italy. The high-speed Eurostar train connects Brussels directly to London.

Workforce:
Figures published by the National Bank of Belgium show that unemployment in Belgium has been falling in recent years, down from a total of 508,000 people out of work in 1999 to 470,000 people in 2001. In general, the country has a well qualified and productive workforce with excellent language skills. The latter reflecting the multicultural character of the country and also the fact that the Flemish Education system teaches its high school students 3 to 4 languages.

In terms of labour regulations, however, the IMD World Competitiveness Yearbook 2001, shows Belgium to have some of the least flexible labour regulations in Europe, receiving a score of 2.97, where 10 is sufficiently flexible and 1 is relatively inflexible. This compares to scores of above 7 for Switzerland and the USA, of more than 6.5 for the UK and of nearly 5 for the Netherlands.

New Technologies:
The Belgian government is committed to the growth and development of new technologies and is putting a number of measures in place to encourage such development. These include the creation of a High Council for Innovation, which has responsibility for developing new strategies and establishing methods of best practice. A fund is also being established to reduce the information technology gap in society by helping those on lower incomes to gain access to the latest technology.

Business Costs:
Figures for 2002 published by the inland revenue in the UK show the corporate income tax rate in Belgium to be one of the highest in Europe at just over 40 per cent, compared to around 30 per cent for the UK and Luxembourg and about 35 per cent for Italy and France. However, business costs in Belgium have been falling due to an emphasis on tax cuts, which has characterised the federal government's fiscal policy in recent years. As part of a plan to attract investment and stimulate growth the Belgian authorities have been cutting employers social security contributions, while in a political memorandum published at the beginning of 2002 there was a pledge to decrease the level of corporate taxation to less than 34 per cent.

Telecommunications costs in Belgium remain relatively high despite recent changes such as opening the fixed telephony service to competition and the partial privatisation of Belgacom. The situation is not helped by the absence of an effective regulatory authority.