POLICY-MAKERS in the Benelux countries have their eyes firmly fixed on developments within the EU, where the Belgium-Luxembourg Economic Union (BLEU) and the Netherlands have recently been co-operating on policy issues more closely. Their aim is to influence the next stage of European integration, the intergovemmental conference (IGC), to be held later this year which will prepare the way for European monetary union (EMU).

The three countries which came together as the Benelux group after the second world war see themselves at the centre of the new Europe. The Treaty of European Union is named after Maastricht in the Netherlands, while the agreement reducing EU border controls is named after Schengen in Luxembourg.

The administrative centre of Europe itself is the Belgian capital, Brussels.

'The Benelux idea may have been bypassed by history, but we still see common cause and we need to avoid the giant member states like Germany, France and the UK pushing through their ideas at the expense of smaller countries,' a Dutch official says.

Politicians and business leaders in all three countries are also looking beyond Europe as they plan for the future. Officials see the promotion of a stable Middle East, based on free trade, sustained growth and a more equitable distribution of wealth as one of their main priorities. These ambitions are also central to the foreign policy of the EU: last November saw the launch of the Euro-Mediterranean partnership, an initiative to unite the EU and Arab world in a free trade zone.

In mid-January, Dutch Prime Minister Wim Kok visited Jordan, Syria, Gaza and Israel.

Foreign Trade Minister Anneke van Dok-van Weele also visited Egypt. The Netherlands has long maintained close relations with Israel and the Arab world, and is looking to play a leading role in the economics of Middle East peace.

'Dutch industry still sees the Gulf as its biggest market. Saudi Arabia and the UAE continue to be our strongest markets,' says Aernout Boot, secretary of the Netherlands Middle East Business Council (NMEBC). 'We have identified (Jordan, Syria, Egypt and their neighbours) as the region with most opportunities for new projects in the light of the peace initiative,' Boot adds.

Boot also points to Yemen as offering potential for the NMEBC's 180 member companies. The Hague co-hosted an international conference on financing the Aden free port.

'Holland has a strong history of providing development aid to Yemen,' Boot says.

'Unlike many countries, it continued even during the Gulf war. This gives us credibility in a country where we see genuine prospects for growth.' Belgium remains a centre for trade with North Africa and the Middle East. Leading companies such as Besix and Tractebel are strong in Gulf contracting, while smaller firms are present in niche markets across the region.

Belgian senator Robert Urbain, foreign trade minister until 1995, is a firm believer in the need for close ties. 'Europe and the Mediterranean countries must together build a global and multi-dimensional partnership,' he told a symposium on EU-Mediterranean relations in Tunis last year. 'The first factor in the success of this partnership must be much closer political and security co-operation.' Concern that upheavals in North Africa would affect EU countries were underlined by Belgium's former Foreign Affairs Minister Willy Claes who, as then secretary-general of the North Atlantic Treaty Organisation (NATO), made headlines by saying that, following the collapse of communism, the West must maintain its defences against the new threat of 'Islamic fundamentalism.' Closer to home, Luxembourg is among the most enthusiastic supporters of a closer union in Europe and the population is staunchly pro-European. The rest of Europe would certainly envy the Grand Duchy's record on unemployment, which is the lowest in the EU.

Jean-Claude Juncker, prime minister of Luxembourg, is a strong advocate of European integration and keen that the EU's smallest state pulls its weight in the union.

The Grand Duchy is alone in fulfilling all the convergence criteria demanded for EMU in 1999.

Belgium is also a Euro-enthusiast, but faces problems meeting the EMU convergence criteria. If Europe cannot agree over a united approach to EMU, Luxembourg may find itself in the group adopting the Euro in 1999, analysts say. The BLEU monetary union, established in 1921, will come to an end if Belgium is unable to participate in EMU this century.

The Netherlands also has problems meeting the public sector debt targets necessary for EMU in 1999. Kok's coalition succeeded in passing a budget for 1996 which includes a reduction in debt while offering incentives for new job creation.

In a global economy this will be difficult to achieve, even in the wealthy heart of Europe.

The decision of Philips Electronics to move its monitors business unit from the Netherlands to Taiwan, and the crisis facing aircraft-maker Fokker may say more about the future than any amount of macroeconomic targets for achieving EMU.