Investing in the Netherlands
The business climate for the Netherlands
Summary Paper-The Netherlands
History - The Netherlands has a rich history of being a center for trade on the European continent, and has subsequently been continental Europe’s maritime link with the Americas, Africa and Asia.
Current Political Situation - The government of the Kingdom of the Netherlands is formally considered a "constitutional and hereditary monarchy" (Hunter, p.989), with the central executive power belonging to the Crown, currently held by Queen Beatrix. The legislative parliament working in concert with the Crown enforces and regulates the Dutch Constitution created in 1814. As stated in the Statesman’s Yearbook, "the Kingdom is divided into 12 provinces and 636 municipalities...each province has its own representative body, the Provincial States...Each municipality is governed by a Municipal Council" (p.989).
The current political environment has a three party coalition currently in the parliamentary majority. These parties, the Labor Party, the Liberal Party and the Democrats have held power since the 1998 elections, and per the USATrade.gov-Country Guide, these parties are "implementing a coalition agreement aimed at fiscal consolidation, restructuring the social welfare system, and improving the business climate" (USATrade.gov/Netherlands). This moderate pro-business approach appears to bode well for investors considering business in the Netherlands; a reelection in 2002 and subsequent continuation of the coalition’s majority appears imminent.
Current Economic Situation - The Dutch economic climate has progressed dramatically since the European recession in the early-to-mid 1980’s, "During this period, 100,000 jobs were lost every year, partly due to the sharp rise in labor costs. Furthermore, public finances had got completely out of hand" (http://www.bz.minbuza.nl/). This "Dutch Miracle" of economic recovery, dubbed the Polder [Dyke] Model, borrowed a centuries-old Dutch gentry tactic for increasing taxes and levies (purported to be for dyke repairs), by reminding the local constituents that without these increases or economic sacrifices, the sea will wash away their homes and villages. The late 20th century version of this tactic reminded the Dutch that without the sacrifices of decreased wages, pensions and health benefits, the sea of international competition would wash away their current quality of life. Since these reforms were implemented the Dutch economy has responded quite positively. According to the Dutch Ministry of Foreign Affairs, the average growth rate in the Netherlands since 1994 has been 3.2%, this growth is equivalent to the phenomenal US growth during this period, while exceeding the EU average of 2.5%. Because the Dutch coalition government has placed a high priority on job creation, the Dutch employment growth average of 2.1% since 1994 (vs. the EU average of 0.4%) is also a positive indicator of the Polder Model’s success (http://www.bz.minbuza.nl/english). Although the Dutch inflation rate of 2.1 % is slightly higher than the EU average of 1.75 %, the increase is attributed to same recent increase in oil prices experienced in the US.
External Influences - One of the most notable external influences American entrepreneurs should consider when looking towards trade relations with the Netherlands, is the country’s participation in the European Economic (EU) community. Although the US and the Netherlands have privately registered relatively few trade-related complaints, there have been a number of instances where the US and the EU have had discernible disagreements in recent years. As stated in the USATrade.gov Country Guide for the EU, the EU has levied restrictions, "on flights by hushkitted aircraft, and on imports of bananas, beef produced with growth hormones, genetically modified agricultural and food products, biotechnology, and a range of...other products containing items the EU described as Specified Risk Materials" (USATrade.gov/EU).
Although the previous paragraphs have outlined some of the uncertainties, risks and additional regulations that the Netherlands’ participation in the may introduce into trade relationships with foreign investors, the US and the EU have what may be termed as a mature trade relationship, with obvious benefits, such as the $325 billion in total trade dollars recorded in 1998. A greater framework and platform for continued trade growth between the US and the EU was solidified by the newly created Transatlantic Economic Partnership (TEP) (USATrade.gov/EU). An additional benefit of the Netherlands’ participation in the EU’s commonization for foreign investors, are the potential inroads into other western and central European areas once trade relations within the country have been approved and initiated. Economic forecasters also predict "lower transaction costs, reduced risk of political interference in interest and exchange rate management" and higher growth rates stimulated by the circulation of the Euro (USATrade.gov/EU). These benefits, in my opinion, far outweigh the potential risks of EU regulations against US productions, and should accelerate business and investment growth with the EU.
Cultural Considerations - On the surface, the Dutch culture appears to be a clear and homogenous arrangement, with one common language, and a rich, shared history of trading, seafaring, and battling against the waters of the North Sea. The Dutch legend of the boy with his finger in the dyke, sacrificing himself to protect his village from total disaster is world renown, and embodies a traditional Dutch respect for the welfare of neighbors and the community. This balances with the respect for hard-work, competition, and success suggested in the legend of the Silver Skates (http://www.bz.minbuza.nl/english).
Business Environment - The Dutch penchant for trade, commerce and an outward-reaching mentality, combine to make the business environment in the Netherlands a dynamic experience. In May of 2000, the Economist magazine’s Intelligence Unit (EIU) predicted that "the Netherlands will be the best country in the world to conduct business over the next five years. Unlike many other economies, the Netherlands has no obvious weakness in its business environment" (http://www.store.eiu.com) In another recent EIU study on e-commerce in the 21st century, the Netherlands was ranked 5th (out of 60 countries) in e-commerce readiness, the highest rating for an EU country (http://www.ebusinessforum.com).
Strategic Value - The strategic value of conducting business in a country with the world’s largest shipping port cannot be understated. As cited in Britannica.com, "The amount of sea-transported goods that pass through Rotterdam's harbor and that of its out-port, Europoort, is the largest in the world in terms of capacity... Rotterdam is also one of the largest grain and general-cargo harbors on the continent. It is a major transshipment port for inland Europe, with tens of thousands of Rhine River barges using its facilities". Additionally, Amsterdam’s Schipol International Airport, "ranks among the top European airports in volume of passenger and freight traffic" (www.brittanica.com). The Netherlands’ compact size and superb infrastructure make business and logistic travel from anywhere within the country to these strategic trade centers possible in less than one hour.
Business Incentives - It is worth repeating that the expected growth and improved ease of business that will be facilitated by the predictable success of the EU, will represent the most appreciable business incentive that foreign entrepreneurs trading with the Netherlands should expect to enjoy.
Conclusion - In the previous sections I have provided an overview of the business climate for the Netherlands, and discussed various aspects of the country’s economic, cultural and political climate. Based on the current levels of economic and political stability, the dynamic business environment, and the strategic values and added benefits for entrepreneurs, I believe the Netherlands should be considered as a primary location for US companies considering future trade with the European Economic Community.