Presention by Rudi Thomaes during the ADM reception on 23 June 2011.

1. Challenges and opportunities
for our companies in a changing world,
a changing Europe and a changing Belgium
ADM
23 June 2011
Rudi Thomaes
CEO FEB

2. Overview of the presentation
• We need to move forward in a new world.
• Policies to cope with the challenges of public
finance, growth and our ageing population?
• Climate change and natural resources: change
the way we live and see opportunities.
2

3. From a unipolar world to a multipolar world
3

4. New players on the world market
50.000 48,571 The largest economies in 2050
15.000 The largest economies in 2005
12.454
40.000 37,666
10.000
30.000 27,235
5.293
20.000
5.000
3.062
2.314 2.261 1.918 1.885
10.000 8,040 8,028 7,838
6,162
0
0
US Japan Germany France UK China Italy
China US India Japan Brazil Mexico Russia
4

5. The BRIC countries surge ahead
35
30
%-share of world GDP (PPP)
25
20
15
10
B USINESSEUROP E
pro jectio ns
5
0
1980 1985 1990 1995 2000 2005 2010 2015 2020 2025
Source: BRIC Euro area EU USA
BUSINESSEUROPE
based on IMF 5

6. Currency reserves 2001-2010 (in $ billions - Source: IMF)
6000
5000
4000
3000
2000
1000
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
EU US Japan Latin America Saudi Arabia China

7. China: yesterday the world’s factory…
Leading world banks by market capital in $ billions (Source: FT, 2 July 2009)
300
250
200
150
100
50
0
Ind. & Com. China Con. Bank of HSBC JP Morgan Wells Banco Bank of Mitsubishi BNP
Bank of Bank China Chase Fargo Santander America UFJ Paribas
China Financial
…but tomorrow your banker?

8. 0
20
30
10
-40
-30
-20
-10
jan/05
mrt/05
mei/05
jul/05
World
sep/05
nov/05
jan/06
mrt/06
mei/06
jul/06
sep/06
nov/06
jan/07
mrt/07
mei/07
Advanced economies
jul/07
sep/07
nov/07
jan/08
mrt/08
mei/08
jul/08
sep/08
nov/08
jan/09
mrt/09
Emerging economies
mei/09
jul/09
sep/09
nov/09
The crisis will amplify the contrast
jan/10
Industrial production (annual growth rate; Source: IMF)
mrt/10
mei/10
jul/10
Emerging Asia
sep/10
nov/10
8
jan/11

9. Conclusions
• The crisis has turned a page in the economic
world order.
• The EU Member States will have to work as a
team to stay in the race.
9

10. • 4 rules for team EU:
• No doping nor cheating
• Fit team mates
• Motivation to work hard
• Solidarity
10

11. Policies to cope with the challenges
of public finances, growth and
our ageing population?
11

12. 40 years of public finances…
Interest rates (as a percentage of GDP)
Primary balance (as a percentage of GDP)

13. 40 years of public finances…
Interest rates (as a percentage of GDP)
Primary balance (as a percentage of GDP)

14. 40 years of public finances
Interest rates (as a percentage of GDP)
12
10
8
6
4
2
0
-8 -6 -4 -2 0 2 4 6 8 10
Primary balance (as a percentage of GDP)

15. 40 years of public finances…
Intrest rates (as a percentage of GDP)
1970
Primary balance (as a percentage of GDP)

16. 40 years of public finances
Interest rates (as a percentage of GDP)
12
10
1981 8
1970-1981
oil crisis + growth of 6
government apparatus
(various Martens
governments) 4
1970
2
0
-8 -6 -4 -2 0 2 4 6 8 10
Primary balance (as a percentage of GDP)

17. 40 years of public finances
Interest rates (as a percentage of GDP)
1990
12
1982: 10
devaluation of the
Belgian franc
1981 (Martens – Gol) 8
1970-1981
oil crisis + growth of 6
government apparatus
(various Martens
governments) 4
1970
2
0
-8 -6 -4 -2 0 2 4 6 8 10
Primary balance (as a percentage of GDP)

18. 40 years of public finances
Interest rates (as a percentage of GDP)
1990
12
1993: Global Plan
1982: 10
1992-1999: Dehaene
devaluation of the
governments
Belgian franc
1981 (Martens – Gol) 8
1998
1970-1981
oil crisis + growth of 6
government apparatus
(various Martens
governments) 4
1970
2
0
-8 -6 -4 -2 0 2 4 6 8 10
Primary balance (as a percentage of GDP)

19. 40 years of public finances
Interest rates (as a percentage of GDP)
1990
12
1993: Global Plan
1982: 10
1992-1999: Dehaene
devaluation of the
governments
Belgian franc
1981 (Martens – Gol) 8
1998
1970-1981
oil crisis + growth of 6
government apparatus 1999-2008:
(various Martens Verhofstadt governments
governments) 4
1970 2008
2
0
-8 -6 -4 -2 0 2 4 6 8 10
Primary balance (as a percentage of GDP)

20. 40 years of public finances
Interest rates (as a percentage of GDP)
1990
12
1993: Global Plan
1982: 10
1992-1999: Dehaene
devaluation of the
governments
Belgian franc
1981 (Martens – Gol) 8
1998
1970-1981
oil crisis + growth of 6
government apparatus 1999-2008 :
(various Martens Verhofstadt governments
governments) 4
1970 2008
2008-2015: unchanging policy
2
0
-8 -6 -4 -2 0 2 4 6 8 10
Primary balance (as a percentage of GDP)

21. Scenario of the Belgian High Council of
Finance (CSF/HRF)
Interest rates (as a percentage of GDP)
2008-2015: unchanging policy 2009-2015: towards a balanced budget
Primary balance (as a percentage of GDP)

22. How to finance the ageing and foster growth?
A few ideas:
1. Pensions and activation
2. Combining State reform with better organised,
more efficient government
3. Competitiveness, a political priority
4. Abolish nonsensical automatic mechanisms

23. 1. Pensions and activation:
 Phase 1: Raise the effective age of retirement by
drastically reviewing early retirement schemes.
The statutory age of retirement must then be
raised.
 Adapt the Generation Pact law.

24.  First pillar: differentiated weighting of years worked
 Second pillar: choice between cash or a delayed
payout and the introduction of an optional
supplementary pension for working people
 Third pillar: maintain the incentives for savers!
 Align civil servants’ pensions with the principles
governing private sector pensions

25. 2. Combining State reform with better
organised, more efficient government
• Compared with 3 neighbouring countries:
70,000 excess civil servants and expenditure
totalling €5 billion
• Responsibility at all levels of power
• The next few years will provide a historic
opportunity to replace only some of the civil
servants who retire
25

26. EMPLOYMENT IN THE PUBLIC ADMINISTRATION IN
ITS STRICT SENSE: BENCHMARKING WITH
BELGIUM‘S THREE NEIGHBOURS
Number of employees in the public administration in a strict narrow sense of the term per 100 inhabitants
(including the Army, but excluding teachers and carers)
4,50
4,00
3,50
3,00
2,50
2,00 1995
1,50 2007
1,00 2008
0,50
0,00
NL DE Weighted average FR BE
in Belgium‘s three
neighbours
Change in absolute terms between 2007 and 2008:
NL -1,900 people
DE -14,000 people
FR -14,000 people
BE + 4,040 people
Source: Eurostat – NACE activity “Public administration“

27. 3. Competitiveness, a political priority
 Show the discipline required to continue to reduce the
wage cost handicap
 The example to follow is the German model designed
to safeguard competitiveness

28. ESTIMATED COST OF CABLES AND GREEN
CERTIFICATES FOR OFFSHORE WIND FARMS
(GENERATING 2,300 MW OF POWER)
900
€ Millions
800
700
600
500
400
300
200
100
0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Source: Elia and estimated timing and capacities

29. For competitive energy, but also security of supply and
respect for the environment
 Need for an open, detailed debate on the federal
electricity levy and the costly and old-fashioned
mechanism for supporting new offshore wind turbines
 Extending the working life of nuclear power stations can
help to finance the major expense of offshore wind
farms in the North Sea

30. Towards more beneficial taxation for businesses
 Re-establish stability and confidence by maintaining the
notional interest deduction system
 R&D is crucial and must be boosted by greater tax
incentives (France has a 30% R&D tax credit)
 A green fiscal instrument? Yes, but:
1. based on the European model
2. double neutrality: tax burden and index
3. intelligent green taxation will finance competitiveness
 New recipes?
 Don’t undermine growth!
 No wealth tax

31. Towards a more efficient labour market
 Intensify the follow-up on job-seeking by unemployed
people aged over 50
 Make labour law more flexible
 Curb the proliferation of leave systems
 Gradually phase out early retirement schemes
 Review the system of waiting allowances to enhance
young people’s employability

32. 4. Abolish nonsensical automatic mechanisms
 80% of cost-cutting is indispensable!
 Implement the reforms essential for making savings on
the labour market and on our social security system
(e.g. standard 4.5% increase in healthcare costs)
 Make sure that indexation is no longer a taboo subject

33. Climate change and natural resources: change
the way we live and see opportunities
33

34. From an economic to an environmental crisis?
• If China continues to grow at 8% per annum, by
2030 it will have a GDP similar to that of the
USA today (and a population of 1.46 billion).
• Assuming that lifestyle and efficiency remain the
same as today, this will mean:
• 1.1 billion cars (compared to a current worldwide total
of 860 million)
• double the amount of paper being manufactured
today
• 98 million barrels of oil produced per day (as opposed
to 85 million today)
34

35. The answer: A ‘resource-efficient Europe’
GROWTH ECONOMISING
of the economy & on raw
trade materials, water
& energy
→ intelligent more through less policy
≠
without obligations
35

36. Climate change: all hands on deck!
Source: IEA, 2008
36

38. Offshore wind farms? Yes, but...
Estimated cost of cables and green certificates for an offshore wind farm
generating 2,500 MW
1.000
€ millions
3200 h/a 3500 h/a
900
800
700
600
500
400
300
200
100
0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

39. The good news: clean technologies, a new
growth sector for Europe
Country share of renewable energy patents Country share of motor vehicle abatement patents
others
4%
others
19% USA
EU 16%
USA 45% EU
18%
Japan 51%
Japan 29%
18%
Source: Insead Source: Insead
39

42. The next boom after ICT?
ICT Clean
technology
• PUSH (nice to have) • PULL (need to have)
• - e.g. electronic banking, • - Oil price
text messaging, mobile • - CO2 targets
internet
• Gradual • On a massive scale
• - G7 + BRIC + next eleven
• Moderate government • Massive support from
support on the demand media and politicians on
side the demand side

43. But who will provide the risk capital?
Clean technology venture capital investments
7
6
5
$ billions
4
3
2
1
0
2005 2006 2007 2008 2009 2010 (3Q)
Europe&Israël North America Source: cleantech.com
43

44. Thank you for your attention
44