Information and communication technology (ICT) has become a significant economic activity in most industrialized countries as well as an important engine of innovation and changes in the rest of the economy. It has been recognized as one of the key factors boosting productivity growth and hence business sector competitiveness. Various initiatives have been recently adopted at regional, national and European levels in order to meet quickly the new challenges of ICT use and diffusion in Europe. A growing number of indicators are now available in order to assess the position of each country or region in terms of ICT development and to guide policy decisions in that field. The aim of this report is to provide a clear and succinct view of the relative development of ICT in Belgium by analyzing both the production and the diffusion of ICT in our economy 1 and to highlight the main weaknesses and strengths of the Belgian economy in that area. Even if the sector has been recently characterised by stock markets ups and downs and numerous bankruptcies, production of ICT goods and services has contributed significantly during the nineties to the growth of economic activity and employment in some industrialised countries as for instance in Anglo-saxon and Scandinavian countries. Has Belgian economic activity benefited from the boom in the ICT sector to the same extent as other industrialised countries? What kind of development can be expected in the future? These are the main questions addressed in the part of the report devoted to the analysis of the Belgian ICT production sector.
As in other countries, the ICT production sector has been dynamic in the second part of the nineties but on the whole, its importance in terms of value added or employment remains small in Belgium compared to the leading countries. ICT manufacturing is the weakest part of the sector. Only 1% of Belgian business sector value added comes from this sector, which is similar to the level observed in Italy or Portugal. On the other hand, the telecommunication sector and the IT services are well developed and contribute to value added and employment in a similar proportion to the OECD average. On the whole, the ICT production sector now accounts for 5.5% of GDP in Belgium, employing approximatively 200,000 workers, nearly 5% of wage earners in Belgium.
As expected, this sector has been one of the most dynamic of the economy. Value added in current prices for the ICT sector has increased by 30% from 1995 to 2000. Showing an annual growth rate close to 15%, computer activities are by far the most dynamic part of the sector. Telecommunication services are also on a rapid growth trend (almost +10% of annual growth). Since 1993, the ICT sector has contributed 10% to the net creation of employment in the Belgian economy (15,000 new jobs out of a total of 145,000 in the economy as a whole).
The future of ICT development in Belgium is contingent on a number of elements which may differ depending on whether ICT products are more oriented to international markets or to local demand. For some of these elements, Belgium is in a good position, notably for the source of financing, while others such as R&D capacities, labour qualifications and in some cases, market structures may impede a more rapid development of the sector. The main conclusion of the analysis is therefore that the position of the Belgian ICT sector on international and local markets is not expected to change radically in the near future and the growth trend should continue to follow mainly the evolution of local demand.
Among the main factors determining the future of the ICT production sector, the control of firms and the related question of their autonomy of decision, are important especially when it comes to future investments. In the manufacturing industry, the autonomy of Belgian producers appears quite limited. The future of this market will mainly depend on decisions made by international groups and therefore on the attractiveness of the Belgian economy in that field. As far as telecommunication services are concerned, local demand remains the main driving force in this market at present, which means that the origin of firms may be of little importance for future developments. It is also the case for IT services, dominated by foreign firms with limited individual market share, which reduce the impact of their decisions. Finally, the content activities market is much more open and dependent on multiple Belgian decision centers.
In a high- tech sector as ICT, R&D capacities are crucial in order to remain innovative and to maintain market shares. Unfortunately, in the field of ICT, R&D indicators remain weak in Belgium compared to most of the OECD countries. A highly qualified labour force, especially engineers, is also necessary to support the development of new high-tech industries. According to the latest figures of the European innovation scoreboard, Belgium has a high rate of tertiary education among the working age population (27.1% compared to 21.2% in average in the EU). Meanwhile, the supply of scientists and engineers in Belgium is significantly below the EU average and below the most advanced countries in ICT sectors.
Finally, the availability of enough capital to launch activities is also a prerequisite for the development of a sector. High-tech venture capital investment is on a whole at a high level in Belgium (0.165% of GDP) compared to the EU (0.108%), especially for early stages. Belgium has the highest share of venture capital going to the communication sector and computer related sector in percentage of GDP. Funding supply seems therefore not to be a binding constraint for existing firms and starters in the ICT sector in Belgium.
The second part of the report analyses the diffusion of ICT in Belgium in comparison with the European Union average and the United States. This diffusion is closely linked to the availability of efficient and cheap information and telecommunication infrastructures. However, the use of the worldwide web mainly depends on its potential applications of which an interesting one is e-commerce. Belgium seems to occupy an intermediary position in Europe as a country with both a satisfactory infrastructure and a good business environment but also with some lags in the use of the internet opportunities. In terms of internet diffusion measured by the number of users, Belgium has managed to catch up with and then surpass the European average although it is still a long way from American performance levels. This development was due to a combination of different factors.
In terms of computer infrastructure, Belgium is relatively well equipped, slightly better than the European average. In terms of the telecommunication infrastructure traditionally used (fixed telephony), Belgium fell somewhat behind in the past in comparison with its European partners and the United States. Telecommunication pricing levels and structures are important to understand the Belgian position. The main system in Belgium, as in most other European countries, is, indeed, internet connection pricing calculated per hour of connection with a distinction between peak and off-peak times. This pricing system makes the internet clearly less attractive than the fixed-price system used in Anglo-Saxon countries. Moreover, for a long time, Belgium was one of the most expensive European countries in terms of internet charges discouraging potential users. Since 2000, these charges have been sharply reduced. At the same time, the basic telecommunication infrastructure has been upgrated. The recent evolution of broadband puts Belgium at the top in Europe in terms of the penetration of broadband connections. Moreover, its position in alternative connection technologies (mobile, cable TV, fibre optic networks) is relatively good, allowing progressive generalization of rapid and “always on” type connections and thus boosting the development of internet services.
The other key element accounting for internet diffusion is the development of sufficient content to attract a great number of users. In this field, it clearly seems that Belgium is lagging behind in the development of domestic internet content, not only in comparison with the average European situation but mainly in comparison with the United States which, in February 2000, had almost 7 times more sites per 1000 inhabitants. Looking at this in more detail, the multimedia content of Belgian sites is also less developed than in other European countries. Various reasons could be given to explain this relative lag, one of them being that the Belgian multimedia market is segmented and small as three national languages coexist in our country.
Another important aspect of internet content is the availability of e-commerce. This availability requires secured web servers which allow the encryption of confidential data. Based on the evolution of the number of secured servers, the conclusion is that Belgium, like the rest of Europe, is far behind the United States and, more worryingly, that this gap has increased during recent years. The development of B2C in Belgium took relatively longer than in other European countries but Belgium is catching up. Companies in Belgium have been much slower in adopting B2B than in most European countries, and hence also in the United States. The number of companies using the internet for sales or procurement is more than 30% lower than the European average. But, as in other European countries, the use of the internet by Belgian firms is gradually being extended to all industries even if the development of internet market places organized by Belgian firms is not yet visible.
The development of ICT and its integration in the production process also requires firms to be able to mobilize a qualified labour force with ICT skills. The European Union estimates the deficit to be 800,000 jobs currently vacant in the European area. This figure could reach 1.7 million in 2003 if no action is taken. To respond to this challenge, the education system has to be adapted in order to integrate an e-learning dimension. One of the top priorities in this field is to provide the required infrastructure in terms of computers and connection to schools. The current Belgian position is in a similar range to most neighbouring countries but a long way from the US position. The awareness of the importance of early familiarisation with new technologies emerged relatively late in Europe in general and in Belgium in particular.