STU 01-00 : Special Topic - Government participation in Belgian companies
The recovery in world economic growth in 1999 led to a strong acceleration in economic growth in Belgium during the second half of 1999. Faced with improved prospects, the manufacturing sector is expected to build up stocks again from the fourth quarter of 1999 onwards, after having strongly reduced their stocks during the recent economic slowdown (mid-1998 to mid-1999).
Fixed capital formation in non-industrial sectors increased strongly in 1999, private consumption grew at a relatively sustained pace, and the contribution from external trade was positive. For 1999 as a whole, economic growth in Belgium reached 2.3%. The upward trend of all demand components in the course of 1999, if confirmed, will lead to a positive carry-over effect for the year 2000.
Economic activity in Europe should accelerate in 2000, US economic growth should be sustained and the emerging economies should continue their recovery. Belgian export markets should then grow faster in 2000 than in 1999. Moreover, the depreciation of the euro during the 1999-2000 period and the new cuts in non-wage costs should boost the price competitiveness of the Belgian economy. For the first time for more than 10 years, Belgium should even slightly increase its market shares.
The contribution of stockbuilding towards economic growth should be largely positive, the rate of investment by companies should rise again and household investment should recover. The growth in household disposable income should reach 2.3% in real terms in 2000 (1.4% in 1999), thanks to a new strong creation in employment, a slightly higher growth in real wages and an increase in capital income. Private consumption should rise by 2.1% leaving the savings rate quasi unchanged.
All in all, Belgian GDP growth should reach 3.2% in 2000, thanks to dynamic domestic demand (2.9%) and a net contribution from exports (0.4%).
Oil prices more than doubled between December 1998 and December 1999. Energy prices are not, however, expected to continue rising in 2000, while underlying inflation should accelerate somewhat in the course of the year. The consumption price index should increase by 1.5% in 2000 (compared with 1.1% in 1999) and the health index by 1.3%.
Growth prospects for 2000 should allow a further reduction of the public deficit.
A multitude of institutions and market driven interventions
A multitude of statutory differences exist in classifying public organisations. One can distinguish quoted and unquoted public limited corporations, institutions of public utility, specific public corporations for railway, postal and telephone services, intercommunales and mixed intercommunales (public/private joint owners), social dwellings corporations and others.
The whole picture has recently been formalised in law by the establishment of management agreements between the government and institutions or companies whereby the latter receive autonomy to contractual obligations laid down by regulations and a system of control. These agreements were necessary in order to clarify the duality of control and corporate governance. According to the new definitions in the national accounting system, the government has control over a company whenever its share is more than 50%, but in practice there are exceptions to this general principle.
The first exception to this principle occurs when public corporations are limited (and certainly when they are quoted); in this case, the Board of Directors, even when appointed by the government, must decide in the interest of the company what limits the potential for full governmental control. On the other side, extra governmental control can be given by means of issuing a golden share, and also recently by creating an autonomous public corporation ruled by the management contracts.
The study takes into account the general principle of more than 50% participation, and distinguishes participations of more than 10% of the capital, special minority participations permitting a change of the Board of Directors, majority-ownership, and finally a 100% ownership. The number of corporations as well as their economic importance is also given.
STU 1-00 was finalised on February 21, 2000.
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