Goede Oud Netherlands

If surprises were factors for deciding interest generated in a country, the Netherlands would walk away with top honours. For starters, how many would know that the Dutch are actually the third largest investors – after the US & Mauritius – in India! And that Hindustan Lever Limited is as Indian as the Pope is American; and that... Well, didn’t we say, if surprises were factors...

Home of classics of Rembrandt, windmills and the beautiful tulips, the surprises don’t stop here as Netherlands is also the country where the world’s largest steel producer, Laxmi Narayan Mittal, set up his first steel plant. Today, Netherlands stands tall in the business arena, and why not, for it has some of the most famous companies in the world – Unilever, ABN AMRO, Shell, and ING, to name a few. Th e truth is that this old hero has always been a frontrunner when it comes to taking responsibilities and carrying them out. One of the founder members of NATO and EU, Netherlands has always been a major contributor in the Millennium Development Goal Fund. Over the years, it has proved that it is no less than a gem in the European crown.

The Old Hero

Netherlands is an age old country, standing on the geographical map of the world since the ice ages. Over the years, it was attacked and controlled by many dynasties, including the Romans and the Spanish rulers. It was only in 1568 that the people of this ‘low country’ waged a war of independence, known as the ‘eighty years war’. The Dutch finally got freedom in 1648. Thereafter, Netherlands grew as a trading power in the 17th century, till their dominance was overshadowed by the British. The gloomy period was broken after a civil war during the 18th century.

The 19th century, particularly the second half, saw liberalization paving its way. During both the world wars, Netherlands supported the Allied nations and faced heavy destruction. It was even occupied by the Germans during the period of the Second World War. It has the International court of Justice at Hague, and has entered into more than 6,000 treaties. At present, Netherlands’ Prime Minister, Jan Peter Balkenende, has been caught in the midst of a nuclear upheaval, because Iran, which is currently the focus of nuclear testings, gained its very expertise in the field from Netherlands.

The Dutch Economy

Once the ruler of global trade, through the Dutch East India Company, Netherlands is still no less by any means. The country boasts of the world’s 16th largest GDP ($577 billion in 2005, IMF World Economic Outlook). Imports and exports are the lifelines of the country, accounting for 60% of its GDP.

As per the Central Bank of Netherlands, the Dutch economy had total exports of $338.73 billion and imports worth $294.9 billion, in 2005. Although backed by strong exports of petroleum, food and chemical industry, manufactured goods control more than half of the total exports pie. Further, the rapidly growing financial services sector (with over 10% growth rate, as per Central Bureau of Statistics, Netherlands) is turning out to be the cherry on the pie. And this cherry, along with other high-growth service sectors, is driving Netherlands away from the economic slowdown it had experienced during 1992-2002.

As per UNCTAD’s World Investment Report 2005, Netherlands is ranked 11th in the Inward FDI Potential Index. The country attracted FDI inflows of worth $44.22 billion in 2005, as compared to $0.38 billion in 2004. Undoubtedly, a remarkable increase. The major FDI is pumped into sectors like pharmaceuticals, IT, life sciences, financial services and chemicals. Top investing countries include France, UK, Luxembourg and Belgium. Companies like Polaroid, Fuji, Nissan, Mittal Steel, Dow Chemicals and Johnson & Johnson are already success stories in Netherlands.

Dutch MNCs have established a strong foothold in almost every country. The list includes Unilever, Philips Electronics, ABN Amro, Ikea, ING Group and Fortis. Energy giants like Suzlon and Royal Dutch Shell also come from Netherlands. Not surprisingly, the FDI outflow from Netherlands in 2005 remained at a high of $121.29 billion, gaining the 11th rank in the UNCTAD report. A prosperous economy that has a strong and developed port infrastructure, coupled with a midsized market, makes Netherlands a very suitable destination for starting new ventures. As per the “Doing Business In 2005” report by the World Bank, it takes only 11 days on an average to start a new enterprise in Netherlands.

Indo-Dutch Trade Relations

Indo-Dutch trade relations can be traced back to the beginning of the 16th century, when the Dutch East India Company and the Portuguese signed a trading agreement in 1604. At present, Netherlands is one of the 65 countries which have a Double Taxation Avoidance Agreement with India. When it comes to the bilateral trade between the two countries, DS Rawat, Secretary General, ASSOCHAM, India comments, “There is a vast trade potential for both India and Netherlands; and at the pace it is growing now, it should become three times of what it is now.”

Exports to Netherlands from India touched $1.533 billion in financial year 2005, representing 1.9% of India’s total exports (Ministry of Commerce and Industry, India). The buoyancy in exports continued in 2005, reaching $976 million during April-November 2005 (a rise of 20%). Imports from Netherlands are also on an upswing. There has been a record increase of 43% in imports during the period April-November 2005. Textile goods, machineries, electronic goods & agricultural products are amongst the major export items to Netherlands. Imports mainly comprise electrical & machinery equipments, organic chemicals, optical & photographic accessories.

Netherlands is the third largest investor in India, next only to Mauritius and USA. India received FDI inflow of $196 million during 2004-05 from Netherlands (Reserve Bank of India) – mainly into sectors like telecom, financial services and petroleum (especially oil refining and agro processing). Netherlands’ Consulate General Hans Ramaker, at a seminar jointly organised by the Royal Netherlands Embassy and FICCI on April 8, 2006, said that the Netherlands is keen on facilitating corporate collaboration with India, placing strong emphasis on biotechnology and pharmaceuticals.

India is amongst the favourite hunting grounds for corporate majors of Netherlands, which include ABN Amro, Philips Electronics, Unilever and Royal Dutch/ Shell. Lugt Givommai Vander, Department Head, Economic Affairs, Royal Dutch Embassy, said, “IT is the key area, which Indian IT giants should look at in Netherlands. Already, many Dutch companies have outsourced work to Indian companies like Infosys and Wipro.” He further mentioned that Nasscom and CBI (Center for the Promotion of Imports from Developing Countries) have signed an agreement to help smaller Dutch companies find outsourcing contracts in India.

Though Netherlands offers tremendous opportunities, it is quite clear that this gateway to Europe has not been properly leveraged. Indian companies cannot and should not overlook the most amazing business potential in the Dutch economy; or as we mentioned, in our Goede Oud Netherlands!!

Ports to Anchor

Netherlands’ geographically strategic position, with a long history of sea activity, has helped it to develop a chain of 17 sea ports, which is a chain of the most developed ports in the world. Rotterdam is the second largest port in Europe. Other important ports include Schiedam, Vlaardingen and Maassluis. These ports are the key drivers of the economy and are not just transportation hubs, contributing over $24.96 billion to the national income every year.

They have also helped in the growth of its maritime industry, which today comprises 11 sectors & around 12,000 companies, besides providing employment to over 200,000 people (2% of the workforce). The total cargo carried through these ports was 450 million tonnes in 2004-05. Besides these, the equipment industry is also highly developed. The annual production volume of the Netherlands equipment industry was $2.34 billion in 2004-05. With Netherlands and its ports being a gateway to Europe, the Indian companies have much to gain from them; and perhaps nothing to lose...

The chronicles of ‘Hollow’land?
Netherlands outlook

Overview: The Dutch economy
The Dutch economy has gone through a long period of below-trend growth in the past five years. With improving cost competitiveness and stronger export market growth, a recovery is now underway. Real GDP is expected to grow by 2.2% in the year 2006, as compared to 0.7% in 2005. Domestic demand is expected to pick up in 2006 and is expected to increase by 1.5%. Unemployment rate continued to grow alarmingly at 6.2% in 2005.

Foreign trade: Exports and imports
Exports grew at an impressive rate of 10% in 2005, compared to 9% in the previous year. Imports also registered a growth of 9.3% in 2005, as compared to 10.3% last year. Exports and imports for 2005 were €281 billion and €249 billion, respectively. Trade surplus also witnessed a sharp increase of 17% in 2005.

Balance of payments: Surplus
The international investment position of Netherlands is satisfactory. Current account surplus contracted to €32 billion in 2005, compared to €43 billion in 2004. Net capital transfer also increased to €1,175 million in 2005. Net financial account also decreased from €42 billion in 2004 to €23 billion in the year 2005. Official reserves increased from €772 million in 2004 to €2 trillion in 2005. Gross external debt increased from €1,237 million in 2004 to €1,406 million in 2005.

CPI: Cost of living
Cost of living, measured by Consumer Price Index (CPI), increased from 107.6 in 2002, to 113.1 in 2005. On a year-on year basis, CPI increased by 1.7% in 2005, as compared to 1.2% in 2004. Derived CPI also increased from 106.4 to 110.9 in 2005. Headline inflation has increased due to rising energy prices, but core inflation is likely to remain moderate.