March 2009 Flanders Economy and Public Finances

2 Agenda I.Economy II.Public Finances III.Financing

3 CapitalBrussels LanguageDutch Surface km² Population (2007) Density447 hab./km² (2007) CurrencyEuro N° of Companies Nominal GDPEUR 200 bn (2008) GDP/CapitaEUR (2008) Income/CapitaEUR (2008) Economy Main Facts & Figures

4 Economy Strong Economic Fundamentals Flanders benefits from very strong economic fundamentals. Despite the current virulent economic crisis, most economic indicators should remain sound and encouraging in the coming years. FlandersFranceGermanyNetherlandsEU - 27 Unemployment Rate* 4,0% 7,3%7,9%2,8%7,0% Real GDP Growth Rate 1,3% 0,7%1,0%2,1%1,1% (*) Q figures Source: Eurostat

5 Economy Stands Out from its Peers (2007 figures)FlandersBaden- Wuerttemberg BavariaCatalonia (region of) HesseMadrid (region of) North Rhine- Westphalia Credit rating (S&P/M/F) AA+AA+/Aaa/AAAAAA/Aaa/ AAA AA/Aa2/A+AA/-/AAAAA+/Aa1/AAAA-/Aa1/AAA CountryBelgiumGermany SpainGermanySpainGermany Population6,0 m10,7 m12,5 m7,2 m6,0 m 18,0 m Unemployment rate 4,4%4,9%6,2%6,6%7,7%6,3%9,4% Operating balance (% of operating revenues) 7,8%3,5%9,0%7,8%-1,0%14,4%-1,0% Balance after capital exp. 2,7%-1,4%1,4%-6,5%-2,3%3,1%-8,4% Total Revenues (EUR billion) 22,87534,26738,25322,10920,38617,58347,514 Direct debt (% of operating rev.) 1,2%129,1%65,9%59,1%160,1%31,1%254,9% Source: S&P, Moodys, Dexia Capital Markets Research Government

6 Economy An Economy based on Trade and Services Source: Institute of National Accounts (2006) Real Estate and Business Services: 24% Wholesale and Retail: 14% Transport: 8% Health Services: 7% Construction: 6% Chemicals: 4% Iron, Metal & Steel: 3% Food & Tabacco: 3%

7 Economy Strong GDP Evolution Source: Eurostat, Study Office of the Flemish Government, nominal figures EUR (billion)

8 Economy High GDP per Capita (2008) Source: Eurostat, Study Office of the Flemish Government EUR (thousands)

9 Economy Low Unemployment Rate Source: Eurostat, Study Office of the Flemish Government %

10 Economy Flanders Employment: Resilient in Periods of Crisis Source: Eurostat, Study Office of the Flemish Government %

11 Economy Flanders Key Strengths Located in the heart of Europe Unique European hub Strong export-driven economy Diversified base of trading partners Foreign direct investment figures & trading partners Diversified economy Highly qualified workforce R&D competence center

12 Economy Located in the Heart of Europe Flanders lies at the center of the EUs wealthiest and most populated area – and Flanders has the highly developed transport and communications systems required for companies to take full advantage of this fact.

13 Economy A Unique European Hub Flanders offers companies rapid and efficient supply and distribution links with other major European centers and beyond. Leading portsAntwerp, Ghent, Ostend, Zeebrugge Airport freight & logistic hubs Brussels, Ostend Extensive inland waterway system Linking into the European system High density of freeways Connecting directly to other European countries High density rail network Dedicated freight lines to other parts of Europe

14 Economy Strong Export-Driven Economy The Flemish economy is strongly export-oriented, in particular in the areas of food, beverage, automobiles, iron and steel. Flanders exports represent over 80% of Belgiums total export in volume. Source: Institute for the National Accounts (National Bank of Belgium)

15 Economy Diversified Base of Trading Partners The Flemish export markets have traditionally been focused on Western Europe and more particularly on Germany. Source: Eurostat, Study Office of the Flemish Government

16 Economy Foreign Direct Investment Figures & Trade Partnerships Top 10 biggest investors (in 2007, total =100) 1USA22,8% 2Netherlands16,9% 3UK9,1% 4Germany5,8% 5France5,2% 6Sweden5,2% 7Japan4,6% 8India3,9% 9China3,9% 10Denmark3,2% Flanders has a proven track record of welcoming foreign businesses to its region. Life SciencesJohnson & Johnson, Pfizer, Schering-Plough, AstraZeneca,... AutomotiveFord, General Motors, Volvo, … ICTAlcatel Lucent, British Telecom, Philips, ST Microelectronics,... ChemicalsBASF, Total, Suez-GDF, Bayer, Kaneka, Nippon Shokubai,... Food ProductsHeinz, Procter & Gamble, Tropicana,... LogisticsCaterpillar Logistics, Deutsche Post, NYK,... Source: Eurostat, Study Office of the Flemish Government

17 Economy R&D Competence Center Source: Eurostat, Study Office of the Flemish Government (2006)

18 Economy Education: Flanders on Track for the Future Source: PISA 2006, Average country scores

19 Economy Flanders in Action A well-defined plan to make sure that Flanders will be in the top five of the European regions by the year 2020 carried by all social groups in Flanders To ensure and assure the regions future by developing it into an innovation-driven, ecologically sustainable and socially welcoming society Vision & Ambition Goal 20 Concrete Objectives Examples: Increase of R&D from 2,1% to 3,0% of GDP Double number of participants in lifelong learning programs

20 Economy Countering the Economic Crisis in the Nearby Future Measures already taken Capital injection in financial sector (KBC, Dexia, Ethias) total investment of EUR million Restore Confidence plan Strengthen the granting of credit and capital to companies - new SPV set up which provides company guarantees (EUR 300 million) - launch of XL-fund to provide growth capital for companies Enhancement of the activation policy on the labour market Speed up investments - accelerated release for investments in infrastructure (EUR 180 million) -strengthening of the public-private investments (e.g. school buildings) total indicative budget of EUR 842 million Special measure to increase purchasing power (in February 2009) total budget of EUR 710 million

21 Agenda I.Economy II.Public Finances III.Financing

22 Public Finances Belgium Federal Structure Federal State 10 Provinces 3 Regions: Flanders Wallonia Brussels 589 Towns and Cities 3 Communities: Flemish French German The Flemish Community and the Flemish Region decided to merge their competences. As a result, Flanders has one Flemish Parliament, one Flemish Government and one public administration, responsible for community and regional matters.

23 Federal State Public Finances Competence Distribution Public Finances Defense Security Justice Social Security Public Health Domestic & International politics Transport & Communication Flanders Flemish Community Education Culture Public health (prevention) Welfare Language issues Child protection Flemish Region Economic development & co-operation Public infrastructure Town & country planning Environment Energy Employment Agriculture Foreign Trade Regional transport Control & organization of local governments

24 Public Finances Revenues by Segment Source: Flemish Community, Department of Finance and Budget (2008) Combined taxes are part of Belgiums personal income tax levied in Flanders. Shared taxes are part of Belgium VAT and transferred at endowment to Flanders. EUR (million)

25 Public Finances Breakdown of Public Spending Source: Flemish Community, Department of Finance and Budget (2008) EUR (million)

26 Public Finances Flanders Sustaining Belgian Financial Stability Source: Institute of National Accounts (National Bank of Belgium) EUR (million)

27 Public Finances History of a Healthy Budget… Source: Flemish Community, Department of Finance and Budget EUR (billion) EUR (million) (*) Without redemption of local debt (EUR 650 million) and capital injection in Dexia & Ethias (EUR million) in 2008

28 Public Finances …has led to zero-debt in 2008 Flanders debt management policy has achieved remarkable debt reduction in the past two decades to virtually no debt at regional level at the end of In addition: extra redemption of local debt (EUR 650 million). Source: Flemish Community, Department of Finance and Budget EUR (billion)

29 Agenda I.Economy II.Public Finances III.Financing

30 Financing Credit Profile: Key Points and Major Strengths Flanders benefits from: Solid financial position on a consolidated level Prudent and sophisticated management Low regional debt. The total debt/total revenue ratio has constantly decreased from 44% of the revenues in January 1999 to nearly 0% in December A strong taxable basis with a GDP around EUR 200 bn. A wealthy and diversified economy Sound budgets despite cyclical economy A strong educational system Strong financial ratings

31 Financing Main Terms & Conditions IssuerFlemish Community (and Region) RatingAA+ (S&P) Rating OutlookStable (S&P) CurrencyEUR AmountUp to EUR 2 bn Coupon FormatFixed Rate Issuance FormatEMTN Programme EMTN Programme SizeEUR 10 bn Issue dateMarch 2009 Maturity[3-5-8] yr ListingEuronext Brussels DocumentationICMA Standard Governing LawBelgian Joint-BookrunnersDEXIA, HSBC, ING, KBC, SG

32 Contacts Hedwig Van der Borght Secretary – general Flemish Community, Department of Finance and Budget Luc Keereman Head of financial management division Flemish Community, Department of Finance and Budget

33 Disclaimer This presentation has been prepared by Flanders for informational purposes only. Although the information in this presentation has been obtained from sources which Flanders believes to be reliable, we do not represent or warrant its accuracy, and such information may be incomplete or condensed. This presentation report is not intended to provide the sole basis for any evaluation of the transactions discussed herein. All estimates and opinions included in this presentation constitute our judgment as of the date of the presentation and may be subject to change without notice. Changes to assumptions may have a material impact on any recommendations made herein. Flanders will not accept any liability whatsoever for any loss howsoever arising, directly or indirectly, from the use of this presentation or the information provided for in this presentation or otherwise arising in connection with this presentation. This presentation is confidential and is provided to you for information purposes only and does not constitute a public offering or an investment service in Belgium. This presentation is being submitted to selected recipients only and neither this presentation nor any other offering materials may be distributed, published or made available to the public in Belgium. This presentation may not be reproduced or passed on (in whole or in part) to any other person than the selected recipients. Neither this presentation nor any offering materials may be used in relation to any investment service in Belgium unless all conditions of directive 2004/39/EC, as implemented in Belgium, are satisfied. Neither this document nor any offering materials can be used to publicly solicit, provide advice or information to, or otherwise provoke requests from, the public in Belgium in relation to the offering. Any offering in Belgium is made exclusively on a private basis in accordance with article 3 of the Belgian law of 16 June 2006 on the public offering of investment instruments and the admission of investment instruments to the trading on a regulated market. © March 2009 Flanders. All rights reserved.