When Luc and Jean-Pierre Dardenne’s “Rosetta” snatched the Palme D’Or from under Pedro Almodóvar’s nose in 1999 — the Spaniard was considered the hot favorite with “All About My Mother” that year — it was one of the biggest upsets in Cannes history. At the time, the David Cronenberg-led jury was accused of favoring, and possibly even patronizing, the underdog, just to snub commercial European arthouse cinema.

Fast-forward 17 years and not only are the Dardennes eyeing the prospect of an unprecedented three-time win, but Belgium’s Wallonia region has become a fertile breeding ground for talent, with a star system that has brought us Benoît Poelvoorde, François Damiens, Cécile de France and Bouli Lanners.

Today, the importance of “Rosetta” to the French-speaking film industry cannot be overstated.

“There was hardly an industry in Wallonia before this amazing Palme d’Or win,” says Philippe Reynaert, CEO of funding body Wallimage and executive director of “business angel” Wallimage Enterprises. “After that, everything went very fast. Our fund was created in 2000 and we started to finance movies and series in 2001. We were lucky, in that this coincided with the development of digital technologies. Therefore the Walloon companies created at the time have been, and remain, at the cutting edge of technology — nowadays, you can get all the services you need in the region.”

This latter point is very important. Although the indigenous film industry has exploded — last year, Jaco Van Dormael’s absurdist religious comedy “The Brand New Testament” scored big at home and became a breakout hit in France, Italy and Germany — the region has embarked on an atypically proactive strategy to find new and innovative producing partners.

“Usually we co-produce with our neighbors,” says Eric Franssen, director at promotion agency Wallonie-Bruxelles Images. “Mainly France, but also with Germany, Luxembourg and also Quebec, as we share the same language, because here, we are obliged to co-produce, because we cannot gather all the budget in Belgium. Luckily, in this country we have a good combination of cultural support, economic support and also we have the tax shelter, which works pretty well.”

By itself, the tax shelter — which provides up to 25%-30% of the total qualifying expenses in the European Economic Area and allows the finance of up to 40%-45% of the Belgian-eligible expenses — has proven attractive enough.

“In 15 years, Wallonia has become a hot spot for international co-productions,” Reynaert says. “In Wallonia, a smart producer can systematically take advantage of what we call the Walloon ‘double dip’ opportunity to finance their movies. This means that €1 ($1.14) spent by a producer in our region entitles them to apply for funding from both Wallimage and the federal tax shelter, allowing that same producer to cover up to 66% of their regional costs.” He laughs. “It’s like you’d never have to choose between mayo and ketchup on your Walloon fries but could always go for both.”

The situation developed further earlier this month with the unveiling of screen.brussels, an umbrella company that comprises four separate bodies including the film commission (currently the Brussels Film Office).

“The general philosophy behind screen.brussels fund brings it in line with the shift towards a ‘Europe of the regions,’ based on the principle of cultural diversity,” says its managing director Noël Magis. “Indeed, it involves providing the Brussels-Capital Region’s audiovisual industry with a structure that can benefit all European filmmakers. One of the specific goals of screen.brussels fund is, indeed, to attract and invest in international, multicultural co-production.”

Increasingly, then, the country is looking further and further afield. Last year the country accommodated 331 shooting projects — 113 foreign — including 37 feature films and 25 shorts. One might assume that recent headline-making terror attacks in March would have had an impact on visiting productions, but the industry does not seem overly concerned with courting more.

“I don’t think we need any more than we have,” says Jeanne Brunfaut, director-general of the film fund of the CCA (Centre du Cinéma et de l’Audiovisuel). “The tax shelter is so attractive, it’s working quite well. So we’re not trying to attract more shoots to Belgium, we’re just trying to get more projects made that involve Belgian co-producers.

“We have our traditional co-production partners and now we think it’s time to diversify a little bit, to push our producers to get to know other countries. There is also an artistic value that we’re looking for.”

Brunfaut notes progress in Latin America, citing co-production negotiations with Brazil, Mexico and Chile. “We have common views on cinema,” she says. “It’s artistic and technical co-production, not only financial.” In return, “co-production with Belgium means having a foot in Europe, in terms of distribution and everything.”

In addition to the strong presence of majority-financed French-language Belgian films in the Cannes Official Selection — the Dardennes brothers’ “The Unknown Girl” in competition, Joachim Lafosse’s “After Love” in Directors’ Fortnight and Alexandre Gilmet’s short “Poubelle” in Cinefondation — the diversity of this year’s co-productions shows the enormous potential of this strategy. Besides two French projects (the Critics’ Week veterinarian horror pic “Grave” and Un Certain Regard biopic “The Dancer”), there is “The Red Turtle,” a Studio Ghibli movie directed by the Dutch-born, London-based Oscar winner Michael Dudok de Wit and, also in Un Certain Regard, the Israeli returning-soldier drama “Beyond the Mountains and Hills” by Eran Kolirin.

Meanwhile, the Dardennes’ company, Les Films du Fleuve, has production ties with competition entries “I, Daniel Blake,” by the U.K.’s Ken Loach, and “Graduation,” by Romania’s Cristian Mungiu, as well the Un Certain Regard title “Pericles the Black Man,” by Italy’s Stefano Mordini. Perhaps even more unexpected is American journalist Jonathan Littell’s debut film, “Wrong Elements,” a Wallonie-Bruxelles Images-supported documentary about wanted Ugandan guerrilla Joseph Kony, included in Special Screenings.

At a time when one might expect the Brussels film industry to be bruised, cautious and introspective after the horrific terrorist attack in March, the very opposite would seem to be true.

“We are always present in Cannes,” Franssen says. “Some years are better than others, but this one is very strong.”