Walloons – inhabitants of the region of Wallonia in Belgium – are understandably a bit tired of the poor-cousin label that was once hung at their door by their northern neighbours in Flanders. But, as the global economy recovers health, they can at least console themselves with the fact that they are reaping the dividends of rapid economic growth, ahead of regions that are more saturated with foreign investment.

Thanks to its location, rapidly improving transport infrastructure and ready supply of land and labour, Wallonia is becoming one of the pre-eminent logistics centres for corporate Europe. The region is fast leaving behind its reputation for decaying steel mills and coal mines of a former industrial heartland.

A 2003 report by international property advisers DTZ on Wallonia’s industrial and logistics centres concluded: “There are many clearly visible signs that Wallonia’s semi-industrial performance will soon come to rival those on the peripheral Brussels and Flemish markets.”

Incoming money

Foreign investment is rising each year and reached E1.8bn in 2003. According to government statistics, foreign investment in Wallonia has directly created more than 6200 jobs and many more in small and medium-sized local companies that work alongside their international counterparts.

Economic rejuvenation is being driven by low land prices and a constantly improving infrastructure mix of road, rail, air and water transport. Infrastructure constraints and higher costs in neighbouring regions are pushing a growing number of companies, particularly those with large-scale logistics operations, to look again at setting up a distribution centre in Wallonia.

Measured by the 2002 take-up of semi-industrial floor space, Wallonia’s logistics and semi-industrial sector is growing 40% faster than the national average. Across the region, the take-up in storage and distribution facilities reached more than 521,000msq in 2002, equivalent to 9.5% of the total stock of available facilities. This is significantly higher than the national figure of 6.8%.

Flagship foreign investments include Californian shoe company Skechers and express mail company TNT, which have centred their European logistics operations in the region. In 2003, 48 foreign companies arrived in Wallonia, investing E132m between them. A further E446m was invested by foreign companies with existing operations in the region.

Distribution centres

After opening retail stores in the UK, France and Germany, Skechers wanted to centralise its European distribution network. It chose to set up its distribution base in Wallonia as part of a drive to double its non-US sales within five years.

Michael Jones, managing director of Skechers’ European distribution centre, says: “Ličge offered us a centralised location with easy access to barge, road, rail, truck and air services.” Skechers uses trucks and barges to move shoes from Rotterdam to Ličge.

Like many foreign companies attracted to Wallonia, Skechers negotiated an option to expand onto land adjacent to its existing site. It is also working to become a “bonded” facility. Under Belgian law, this would allow it to defer payment of government duties. “Once we have met with the internal compliance issues, we should be able to defer payment of duties from the time of import,” says Mr Jones.

Word is spreading among major companies that it is possible to increase efficiencies and reduce costs by relocating their logistics and distribution operations. And Wallonia has been making a strong case for investment. Its largely uncongested motorways, inland ports, rail network and two airports (one passenger and one dedicated to freight), are ideal for companies with large-scale logistics needs.

A growing number of foreign companies have created distribution centres – warehouses fitted with item tracking and rapid dispatch technology – along Wallonia’s transport and logistics corridor, which runs from Tournai, in the north western corner of the region, through Garocentre and Courcelles, and on to Ličge in the north east.

DTZ recently referred to this arc as Belgium’s “Golden Crescent”, confirming the fact that Wallonia is no longer a post-industrial backwater but an integral part of Europe’s transport infrastructure. Among the fastest growing centres for logistics in the region are those at Moucron, Tournai (where US company Baxter Healthcare has its regional distribution centre), La Louviere, Charleroi and Liege.

Growing trend

So successful have the northern industrial provinces of Hainaut, Namur and Liege been in attracting investment in logistics, that the largely rural southern Wallonian province of Luxembourg, where unemployment is about 10%, has also started to seek foreign investment in the logistics sector. It wants to attract investors in green-field projects designed to serve markets to the south, such as Switzerland, Barcelona, Milan and Lyon. There have already been some green-field developments in the logistics sector in Athus, in the province of Luxembourg.

Real estate consultancy firm KingSturge and DTZ both think that Wallonia’s prospects in the logistics arena are good. DTZ real estate broker Christophe Nihon says that the region’s strategic location, its web of railways, motorways, airways and waterways, and its large bank of available industrial land mark it out for rapid post-industrial economic development. He says that the development of the area surrounding Liege airport in the next three or four years into a dedicated logistics zone, including a high-speed train link (TGV) with Paris and other cities, will put Ličge near the heart of Europe’s logistic network.

“We have not yet officially started talking to private companies. But big international groups, mainly English and American, are willing to come to [the airport zone] and help government agencies to create an integrated logistics centre here in Liege,” says Mr Nihon.

There has already been considerable growth in logistics activity in Liege in previous years. Take-up of semi-industrial and distribution facilities in the Ličge and Bierset area reached more than 160,000msq in 2002, largely in conjunction with the growing air traffic flying through Liege’s dedicated air-freight terminal.

Economic development around Wallonia’s other regional airport at Charleroi has also been rapid following the arrival in 2001 of low-cost passenger carrier Ryanair. Although the airport accounts directly for about 700 jobs, the University of Liege estimates that more than 3000 jobs have been created indirectly by the expansion in passenger traffic at the airport.

Pierre Fernemont, communications manager for Charleroi Airport, says: “Charleroi Airport can be regarded as the second national airport in Belgium and we want to go on developing low cost air routes, charter flights and links to eastern Europe and other countries entering the EU.”

Charleroi Airport’s future is not yet clear, however, following a landmark European Commission (EC) ruling at the end of January that Ryanair has received illegal state funding from the publicly-owned airport. Before the decision was announced, Ryanair chief executive Michael O’Leary said that his company could pursue links with privately-owned airports instead if it is asked to repay financial incentives. This would have serious implications not just for Charleroi, but for low cost travel across Europe.

The airport has been working on a feasibility study for a E65m project to build a new terminal that would open in 2006-2007. “There are still a few administrative issues that have to be closed first before work can begin in 2005,” Mr Fernemont told fDi magazine before the EC decision was announced. Stage one of the project would allow a further three million passengers to travel through the airport each year.

Liege’s reputation as a logistics centre does not solely rest on its two busy airports and road infrastructure, however. Improvements to the railway infrastructure, including a planned TGV terminal close to the airport, and the airport’s close relationship with the Paris Airports Authority (which is a stakeholder) will also help to increase the region’s logistics capacity. Liege’s also boasts a direct canal link with Antwerp, which is running at only a fraction of its capacity (see waterways box).

Better infrastructure

Growth in Wallonia’s logistics sector has come hand-in-hand with investment in transport infrastructure. In recent years, the region has continued to upgrade its canals, railways, airports and roads. Plans to build a TGV terminal devoted to rail freight next to Liege Airport are under way. A new ship elevator in Strepy-Thieu and the associated canal bridge in Houdeng have increased the capacity of the waterways. Other developments include plans for a new harbour at Clabecq on the Charleroi Canal plus attendant road and rail connections.

The region also has a good supply of cheap semi-industrial land. A recent report by KingSturge said: “Because Flanders is saturated, as soon as the economy takes off, industrial development will take place in Wallonia, where there are lots of available blocks of land at reasonable prices.”

Land availability

At the last count, there were about 11,000 hectares of brown-field land available for development.

Marc Arno of Igretec, a development agency that promotes the Wallonian province of Charleroi, says: “We are working on a long-term strategy review for the regeneration of old industry and the decontamination of land.”

Igretec manages 11 business parks that cover about 700 hectares, including more than 500,000msq of occupied buildings. About 354 companies now occupy these buildings and employ more than 17,000 people.

Across the region, the logistics sector continues to attract more FDI than any other sector. To date, a quarter of all foreign investment into the region has involved logistics operations, ranging from express delivery to warehousing and distribution centres. The next biggest sector for FDI is electro-mechanical subcontracting, followed by information communications technology, biotech, chemistry, agrofood and services.

There is no sign that investment in logistics in Wallonia is about to slow down. During the previous economic peak, foreign commercial activity created a high premium on resources such as people, infrastructure and land – resources that are abundant in Wallonia. Skechers’ Mr Jones says: “Unemployment levels aren’t something you would normally factor into the equation, but if we get into a tight labour market, we may run into problemsat the peak [of market activity].”

Skechers’ decision to locate in Liege was supported by figures from the National Statistics Office showing a labour force of 426,200, with about 70,200 people unemployed – just over 16%. However, because the equipment involved in logistics activities is often expensive, operators must possess certified skills.

“Many items of equipment are more expensive than the cost of people’s cars,” says Mr Jones. As part of its location package, the government training agency Forem Logistique has helped Skechers to train workers both on-site and off-site at the skills academy in Liege-Bierset.

Skills availability

This training facility has helped many foreign companies to develop the skills needed to run their distribution centres. Depending on the job specification, it takes between one week to over one year to train staff in logistics skills. The academy has links with local colleges and the university of Ličge and its graduates are now working for foreign logistics operations across the region.

Jean-Christophe Marchal of Forem Logistique says: “We want to offer companies a total human resources package through our extensive skills network. This includes setting up, organising and advising on best practice, the latest technology and regulation. Many of our teachers come from the private sector.”

Mr Marchal says that Forem Logistique’s training facility works like a real warehouse. “We give people the chance to use equipment. For example, we have a new simulator for HGV training and safety procedures. Basic warehousing skills take 12 weeks and 90% of job-seekers find a new job after receiving this training,” he says. Training in more advanced technical skills, for example those needed to become a supply-chain manager, takes up to 40 weeks. The training for workers is customised to the individual companies’ needs.

Forem Logistique is training more staff each year. It trained more than 3000 people last year, up from 2795 in 2002, including job seekers (669), workers already in employment (2251), and students, teachers and professors (142).

Many of the region’s educational institutions have also become closely involved in promoting the logistics sector. Luc Partoune, managing director of Liege Airport, says: “For example, the high school in Liege started promoting logistics at least five years ago, alongside biotechnology and mechanics.” And Ličge University runs courses devoted to logistics and associated topics, such as customs clearance.

According to Mr Marchal, demand for logistics skills is increasing. “Very often we go on-site, going into factories to analyse their training needs. We aim to provide all skills, from the most basic operations up to management.”

Training is free for job seekers but companies are also expected to contribute a modest amount towards training costs. Companies generally pay the difference between the government’s cost of unemployment benefit and the minimum wage. “The goal of the Forem is not to make money; it’s a public service company set up to adapt people to the job,” says Claire Ghyselen of Wallonia’s Office for Foreign Investors. “Companies generally save 10% of their employment costs over three years, including a rebate on social charges, a cash subsidy and subsidised training programmes.”