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Luc Wygaerts CEO of KPMG in Belgium

Specific challenges of small countries in the financial crisis

With a small national market, local Belgian businesses depend heavily on exports and have been hit hard by the recession. In an interview with KPMGnews, Luc Wygaerts, CEO of KPMG in Belgium, says that a recovery is not expected before the autumn of 2010.

Luc Wygaerts
Luc Wygaerts
What are the major challenges that the Belgian economy is encountering in the current crisis ?
Like many other economies, the Belgian economy is in recession. Forecasts predict a further decrease in domestic demand and a drop in exports, despite the rise in public consumption and public investment. Belgium has a small internal market, and many local businesses are heavily dependent on exports. 75% of exports are directed to the European Union, which is also being affected by the recession.

Is there any light at the end of the tunnel ? How do you see the forthcoming 6 to 12 months ?
The monthly Business Barometer of the National Bank of Belgium showed rising business confidence in the economy in August, for the fifth consecutive month. However, even though the market is showing small signs of improvement, most observers do not expect a recovery to happen until next year, and more likely in the autumn of 2010. The Belgian Federal Planning Bureau for example does not expect Belgium to record positive economic growth before 2011.
This growth will be driven by the international economy.

Against this backdrop, where are the best opportunities for KPMG, particularly in Belgium ?
We see great opportunities in helping organizations and companies cope with this changing world. Through a tailored approach we can help our clients secure and optimize financing, work in a cost efficient way, reduce risk, strengthen their cash and working capital position, achieve greater control, and prepare for growth. Our aim is to help our clients make sure they are in the right position to make a head start when the world starts turning again.

From a regulatory point of view, the past few months have seen fundamental changes in the financial market. What are your expectations regarding the financial industry ?
In my opinion, it is too early to make statements about how regulation of the Financial Industry will look like when the crisis is over. One thing is for sure though: the nature, scope and purpose of regulation will change fundamentally. It is clear that the current systems have failed to prevent the financial crisis from happening. All parties involved are now convinced that more effective regulation and transparent systems should be implemented.

These days, there is a lot of talk about regulation. Some claim that there is not enough, some say there is too much of it. Do we need more rules or more confidence to restore trust in the market ?
Restoring both consumer and business confidence is absolutely essential. As far as rules are concerned : too few can lead to chaos, while too many permit the rules to become an end in themselves. However, with rules and systems almost exclusively in the spotlight, we sometimes forget to look at people’s reactions. After all, it is people who drive risks and not the other way around.

What is necessary to bring back trust to our daily life, as well as to our economy ?
The government has an important complementary role to play, first in enhancing stability in the financial sector, second in ensuring there is sufficient ‘breathing space’ for businesses, and third in improving businesses’ competitiveness. Financial institutions are currently trying to strike a difficult balance. On the one hand, they need to ensure that sufficient funds are provided to individuals and businesses in these turbulent times, so the economy keeps going. On the other hand, they have to recapitalize themselves and become stronger financially, which means taking fewer risks. Striking that balance is crucial. If everyone is convinced that our financial system is stable, then confidence will return.

The European Union has tried to find a common policy to deal with the crisis. From your point of view: Did it meet the expectations ?
The current crisis, with no real precedent, has triggered responses from both the EU and EU Member States. The EU attempted to play a leading role against the crisis by launching initiatives to stabilize the financial markets. However, their role was somehow jeopardized by some massive Member States’ interventions into failing banks. Responses were agreed mostly among these bigger Member States, irritating some of the smaller countries. Besides, they approved various national plans while failing to consider a truly European approach to the crisis. In this particular context, we are seeing some progress now and it shows that some of the actions launched by both levels did have an impact on starting to reverse the trend. However, the overall impression is that the EU did too little too late.

What are the European Union’s next challenges ?
I think the main challenge for the EU is to reflect a common European view, as opposed to moderating between Member States’ views.

Where do you see Belgium’s role in tomorrow’s Europe ?
As a rather small country, Belgium has played some critical roles in the European concert. Belgium will remain one of the most solid pillars of the European Union and will play a critical role bridging interests of smaller EU Member States with the larger players.

KPMG Belgium has become a member of KPMG Europe LLP as of 1 October, 2008. What was crucial in the decision of the Belgian practice joining KPMG Europe LLP ?
By joining KPMG Europe LLP, the Belgian practice will be able to successfully pursue its growth strategy. It will facilitate the sharing of resources, knowledge and best practices for the benefit of both global and national clients. Building a common vision around services, training, methodologies and processes will make us even stronger. All this will also create a more challenging work environment for our people.

Interview :
Andreas Hammer, Brand & Communications
September 30, 2009

© 2009 KPMG Holding AG/SA, a Swiss corporation, is a subsidiary of KPMG Europe LLP and a member of the KPMG network of independent firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. Printed in Switzerland.

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