Growing Beyond
The Netherlands, increasingly attractive Ernst & Young’s 2012 attractiveness survey The Netherlands
The Netherlands, increasingly attractive
Ernst & Young’s 2012 attractiveness survey The Netherlands
Index 3 Editorial 4 Management summary
6
The Netherlands, increasingly attractive
7 9
European investments Investment trends in the Netherlands
12 13 16
Outlook for the Netherlands
Why do companies decide in favor of the Netherlands? The future of the Netherlands
18 Recommendations 20 Appendix: Methodology and sources
Ernst & Young’s 2012 Netherlands attractiveness survey The Netherlands, increasingly attractive
1
Editorial
2
Ernst & Young’s 2012 Netherlands attractiveness survey The Netherlands, increasingly attractive
Editorial Pieter Jongstra
Caroline Rodenburg
Managing Partner Ernst & Young
Senior Manager Ernst & Young
Globalization is mutating and maturing. Companies from east and west, north and south, now strive to be global, and local. Supply chains designed to bring low-cost production from emerging economies to Western consumers are becoming webs with mirror-image functions in many key markets. And national champions from the BRICs (Brazil, Russia, India, China) are seeking to replicate their domestic success in developed economies, adding research and manufacturing to investments once spearheaded by sales and marketing functions. In this new global order, market opportunities and stability are key. Europe may have the market, but how does it fare in terms of stability? The financial crisis exposed a seismic fault underlying European construction and the common currency. But has the prospect of a potential eruption eroded the confidence of foreign investors? According to the Ernst & Young 2012 European attractiveness survey, this is certainly not the case. The number of foreign direct investments in Europe has risen by 4%. It would seem that not everyone sees slow growth, enormous sovereign debt and a fragmented political system as insurmountable obstacles to their projects. For many investors, uncertainty is normal in business. This confidence and willingness to invest is also reflected in Ernst & Young’s annual study on foreign direct investments in the Netherlands and the country’s attractiveness as a business location. The figures show a record of 170 direct crossborder investments in the Netherlands by foreign companies and the country ranks fifth among the top
European countries that attract the largest number of foreign direct investments. Interviews with over 200 senior executives from international companies show that the Netherlands is increasingly regarded as an attractive country. Does this mean that the Netherlands is "earthquake-proof"? On the contrary. We will have to work hard to withstand the problems ahead and the risks inherent to a stagnating economy. This includes the social effects of government cutbacks and the risk that financial institutions and the real economy will default. On top of that, investors have been pointing to another troubling issue: the ongoing challenge of making the Netherlands more attractive in terms of education, entrepreneurship and innovation. What efforts should the Netherlands make in order to improve the country’s appeal in these areas? How can it enhance its performance in terms of realizing its research and development (R&D) potential? And what would be the most effective way to bring this to the attention of prospective investors and to entice them to invest in the Netherlands? Even though there are no ready-made answers to these questions, it is important to find new ways and opportunities to secure and reinforce the Dutch position in the global competitive foreign direct investment market. This requires a clear, inspirational vision and strategy, supported by the Dutch Government, business sector and knowledge institutions. We hope that the Ernst & Young 2012 Netherlands attractiveness survey will contribute to and inspire the development of effective policies in this area.
Ernst & Young’s 2012 Netherlands attractiveness survey The Netherlands, increasingly attractive
3
Management summary
Management summary The Ernst & Young 2012 Netherlands attractiveness survey is based on two main sources:
1.
2.
►The “facts” with respect to proposed cross-border corporate investments in Europe, as recorded in the Ernst & Young European Investment Monitor. The main findings of this monitor are described on pages 6 to 11.
►The “views and perceptions” of 205 decision-makers of international corporations in the Netherlands and abroad, who were interviewed by Ernst & Young and asked to share their perception and expectations about the Dutch investment climate. Their insights are described on pages 12 to 17.
Growing confidence in Europe
The Netherlands holds a robust position
Despite the ongoing euro crisis, 2011 saw a growing number of foreign companies express their confidence in Europe by announcing a total of 3,906 cross-border investment projects. This represents an increase of 4% compared with 2010 and a continuation of last year’s increase (+14%) following the major decline in 2009. The largest number of cross-border investment projects in Europe in 2011 took place in and between European countries (46%). And with a 26% score, the United States remains an important investor in Europe as well. More than 7% of all registered cross-border investments in Europe originate from the BRIC countries.
With a 48% rise in the number of investment projects over 2011, the Netherlands benefited disproportionally from the growing number of cross-border investments in Europe. As a result, the country climbed from 8th to 5th position in the European top 10 of the most attractive investment destinations. In absolute numbers, this is the highest level the Netherlands has achieved since the launch of the Ernst & Young European Investment Monitor in 1997. This year, the Netherlands attracted 4.4% of the total number of cross-border investments in Europe. Investment in the Netherlands by companies from the BRIC countries more or less equals the European average, at 6.5%. The rise in the number of cross-border investments in headquarters failed to consolidate in 2011. However, the Netherlands did succeed in attracting a larger volume of logistics operations, underlining its reputation as “Gateway to Europe”. The country also managed to attract a larger number of sales and marketing and production facilities. The number of R&D centers rose in absolute terms, but lagged behind in terms of overall share. As a result, the Netherlands has not yet achieved its ambitions in terms of attracting knowledgeintensive activities. However, the Netherlands did manage to more or less maintain its position in terms of attracting internet datacenters.
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Ernst & Young’s 2012 Netherlands attractiveness survey The Netherlands, increasingly attractive
Perception of the Netherlands remains stable
The Netherlands in 2020
In the perception of international decision-makers, the Netherlands offers a number of strengths. As in previous years, these include a high quality of life and strong telecommunications, transport and logistics infrastructure. Despite the country’s increasingly dynamic political situation, 85% of respondents rated its stable social environment as attractive.
In the view of potential investors, the Netherlands continues to live up to its reputation as “Gateway to Europe.” In addition, major companies in particular consider the Netherlands capable of pioneering in green technology and growth, whereas smaller businesses regard the Netherlands as a leader in the area of high value-added services.
Foreign investors consider the Netherlands less attractive when it comes to labor costs, real estate costs and the limited size of the Dutch domestic market. Many investors also regard limited labor law flexibility regarding hiring, termination and duration of work as an unattractive aspect. As many as 27% of respondents claim to have concrete plans to establish new, or expand existing, facilities in the Netherlands. Amsterdam is the leading investment destination (25%).
Ernst & Young’s 2012 Netherlands attractiveness survey The Netherlands, increasingly attractive
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The Netherlands, increasingly attractive The Netherlands climbed from 8th to 5th position in the European top 10
48%
rise in the number of foreign direct investment projects in the Netherlands over 2011
27%
of respondents have concrete investment plans in the Netherlands
The Netherlands increasingly attractive
European investments In the wake of the sharp decline of 2009, the number of cross-border investment projects has been rising for the past two years. Clearly, the number of investments has not been affected by the economic crisis and the unstable climate across Europe.
Figure 1
Total number of foreign direct investment projects in Europe 3906 3757
3721
2011 2010
3303
The figures presented in the European Investment Monitor show an approximately 4% increase in the number of cross-border investment projects relative to 2010. Currently, the number of cross-border investment projects totals 3,906, which is the highest figure since Ernst & Young started conducting this research in 1997. The largest number of cross-border investment projects in Europe in 2011 took place in and between European countries (46%). And with a 26% score, the United States remains an important investor in Europe as well. More than 7% of all registered cross-border investments in Europe originate from the BRIC countries.
0%
-11%
+14%
2009
+4%
2008
This year’s top 10 most popular investment destinations saw some notable shifts. For example, Germany managed to replace France as the holder of second place. The Netherlands saw its position rise substantially, while Russia did the opposite. Belgium remained stable, in sixth place. There are, however, strong differences between the countries in the extent to which the number of investments has increased or dropped. The following countries in the top 20 saw a significant rise in the number of foreign investment projects: Spain,
the Netherlands, Turkey, Romania, Serbia, Finland and Denmark. In contrast, Russia, Poland, Italy, Hungary and Slovakia all witnessed a significant decline, while Austria and Lithuania even dropped out of the top 20 investment countries. The 48% rise in the number of investment projects in the Netherlands helped the country rise three places in the ranking, from eighth to fifth position.
Table 1
Number of foreign direct investment projects in Europe Rankings 2011
Rankings 2010
Number of projects in 2011
Number of projects in 2010
Difference between 2010 and 2011
1
1
United Kingdom
679
728
2
3
Germany
597
560
-7% 7%
3
2
France
540
562
-4%
4
5
Spain
273
169
62%
5
8
Netherlands
170
115
48%
6
6
Belgium
153
159
-4%
7
4
Russia
128
201
-36%
8
7
Poland
121
143
-15%
9
9
Ireland
106
114
-7%
10
11
Switzerland
99
90
10%
11
15
Turkey
97
64
52%
12
13
Sweden
81
77
5%
13
10
Italy
80
103
-22% 15%
14
16
Romania
71
62
15
18
Serbia
67
55
22%
16
12
Czech Republic
66
88
-25%
17
14
Hungary
66
71
-7%
18
25
Finland
62
23
170%
19
24
Denmark
52
26
100%
20
17
Slovakia
45
58
-22%
-
-
Other
353
289
22%
3906
3757
4%
Total
Ernst & Young’s 2012 Netherlands attractiveness survey The Netherlands, increasingly attractive
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The Netherlands, increasingly attractive
Interview
The Netherlands’ international orientation makes it easier to do business Samir Awad, Managing Director, Petrobras Nederland The Netherlands is centrally located and easily accessible by both land and sea. We have had operations in the Netherlands since 2001, and opened our Rotterdam office in February 2010. Our decision to come here was prompted by strategic reasons. This country has the largest port and industrial complex in Europe, which is a great benefit to us as an oil company. This is an ideal location when it comes to buying, renting, leasing or chartering the equipment and facilities we need for our gas and oil operations. In short, Rotterdam is a strategic business location. The city offers a great deal of the high-quality expertise and technology our sector needs. Petrobras works with local Dutch companies to build facilities such as oil platforms. These companies also provide support to our Brazilian parent company’s offshore activities, which
8
includes maintenance to ships and oil platforms.
The Dutch have an excellent command of the English language Before deciding to set up our European headquarters in the Netherlands, we also considered other countries, such as Ireland, Spain, Hungary and Austria. We opted to come here because this country offered both stable legislation and a favorable tax climate due to the tax treaty between the Netherlands and Brazil. The Netherlands also has an outstanding infrastructure network, and the Dutch speak excellent English. After
all, communication is key to an international company such as ours, and English is far more accepted as a working language here in comparison with other European countries. In my view, the Netherlands is well ahead when it comes to welcoming foreign companies. Both the Mayor of Rotterdam and the State Secretary for Economic Affairs attended the opening of our Rotterdam office. That’s certainly a telling gesture, in my view. The Netherlands is internationally oriented, which makes it much more easy to do business. I feel welcome here; you have short lines of communication and we cooperate effectively with both the Dutch business sector and government.
Ernst & Young’s 2012 Netherlands attractiveness survey The Netherlands, increasingly attractive
Investment trends in the Netherlands Figure 2
Foreign direct investments in the Netherlands by type of activity 84 2011 61
2010
55 48
2009 2008 29 23 12
Sales and marketing
19 12
Logistics
23 14 13
Manufacturing
20 12
15
6
4
Headquarters
In 2011, the Netherlands managed to attract a total number of 170 foreign direct investment projects. In practical terms, this concerns the establishment of specific facilities in our country, such as headquarters, sales organizations, and logistics centers. As a result, the Netherlands managed to secure fifth place on the list of countries that attracted the largest number of investments. The growth of sales and marketing activities is especially significant in this regard: from 55 to 84 investments in 2011. Every year, this is the most common type of investment, and this year is no exception. Last year’s rise in the number of investments in headquarters was not sustained in 2011. With a current total of 15 investments, the Netherlands is outranked in absolute numbers by the United Kingdom (29), Germany (17), Spain (16) and France (16). However, the Netherlands is not the
3
R&D
5
6
3
3
6
5
Internet data center
3
7 2
5
Testing and servicing
only country to see a decline in the number of investments in headquarters. Europe as a whole witnessed a decline of 10%. This year, the Netherlands lived up to its reputation as the “Gateway to Europe”, with a strong rise in the number of investments in logistics facilities: from 12 to a total of 29. This rise follows a sharp decline in 2010 (from 23 to 12). The Netherlands managed to strengthen its competitive position in comparison with countries such as Germany and France. Over the past few years, the Netherlands’ ambition to attract knowledge-intensive activities seems to have yielded a rise in the number of research & development centers setting up store in the Netherlands. However, the increase is limited to one project per year, so it is relatively insubstantial in terms of the total number of investments. Nevertheless, the country does have a great
0
0
1
2
Contact center
deal of potential in this area, which was further stimulated over the course of the past year as a result of the Government's top sectors policy and other initiatives. Unfortunately, these efforts have yet to yield a rise in the number of investments. The Netherlands remains a popular investment destination for internet data centers, having successfully attracted 5 of the 36 European data center investments. However, the competition is doing even better: where the Netherlands and the United Kingdom both attracted the largest number of data center investments over the course of last year, the United Kingdom (8) and Germany (7) have since managed to surpass this number.
Ernst & Young’s 2012 Netherlands attractiveness survey The Netherlands, increasingly attractive
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The Netherlands, increasingly attractive
Figure 3
Foreign direct investments in the Netherlands by country of origin 2011 2010 2009 62
44 46 26 21
6
United States
13
10 5
3
United Kingdom
9
12 6
7
7
8 1
Japan
Germany
France
• Investments in “greenfield operations” by sector Foreign companies mainly invest in greenfield operations in the Netherlands (79% in 2011). This involves the development of entirely new activities. Foreign investments in this area are mainly concentrated in the area of business services and software development. Compared with countries such as Belgium, Germany and France, the number of foreign investor expansion projects in the Netherlands is relatively low (15% on average in the past three years compared with 30%, 21%, 35% on average in Belgium, Germany and France, respectively).
4
India
5
7 3 China
5
6 2
5
Canada
1
2
4
Switzerland
2
2
3
Denmark
1
1
3
Ireland
0
1
3
Norway
1
3
0
0
Israel
2010–11
• Investments by region In the Randstad conurbation, and particularly the Amsterdam region (including Schiphol Airport), we find the largest concentration of foreign direct investments. The increase in the number of projects in the western part of the Netherlands can mainly be attributed to the province of South Holland, which managed to attract a total of 38 investments (compared with 21 in 2010). North Brabant also saw significant growth: from 26 to a total of 40 investments. Although North Holland managed to attract more investments than last year (49 versus 45), its relative share in the Netherlands dropped from 39% to 29%.
% of European foreign direct investments (2010–11)
2008–09
% of European foreign direct investments (2008–09)
Difference in share
49
4,6%
36
4,2%
0,5%
Software
30
4,3%
33
5,6%
-1,2%
Transport services
24
8,2%
12
4,7%
3,6%
Financial intermediation
16
5,7%
8
2,7%
3,0%
Electronics
11
4,7%
10
4,3%
0,4%
Machinery and equipment
10
2,7%
10
3,6%
-0,9%
Food
9
6,5%
4
2,5%
4,0%
Scientific instruments
7
5,2%
5
4,9%
0,3%
Pharmaceuticals
6
5,5%
4
3,0%
2,5%
Electrical
5
2,4%
4
2,2%
0,2%
Computers
5
9,6%
5
7,4%
2,3%
Publishing
4
4,2%
4
4,2%
0,0%
Retail
4
5,6%
0
0,0%
5,6%
Telecommunications and post
4
5,5%
3
4,1%
1,4%
Automotive components
4
7,0%
1
2,1%
4,9%
Clothing
4
10,8%
2
6,1%
4,8%
42
-
37
-
-
10
234
Other
The United States is still by far the largest foreign investor in the Netherlands in terms of the number of investment projects. Although that number rose dramatically in comparison with last year, the relative share of the United States declined (36% in 2011 versus 40% in 2010). The number of investments from countries including the United Kingdom, Japan and Germany also increased substantially. Those from BRIC countries are on the rise, although their relative share is declining (from 8.3% in 2009 and 7% in 2010 to 6.5% in 2011).
Business services
Total
3
• Investments by country of origin
Foreign direct investments in "greenfield operations" by sector in the Netherlands Sector
0
New Zealand
Table 2
Miscellaneous
20
20
178
Ernst & Young’s 2012 Netherlands attractiveness survey The Netherlands, increasingly attractive
Interview
The appeal of a pragmatic and solution-oriented approach Pauroos Karkaria, Executive Vice President/Global Head of Taxation, Tata Consultancy Services One of the first things I noticed about the Netherlands is the high quality of the infrastructure network. I lived in Amstelveen for four years, and I could get to Amsterdam Airport Schiphol in twenty minutes. There are direct daily flights between Amsterdam and Mumbai. In other countries, it tends to take a lot longer to reach an airport. Thanks to its high-quality infrastructure, the Netherlands is regarded as a gateway to the European market. Tata Consultancy Services (TCS) is part of Tata Group, India’s largest conglomerate. TCS mainly specializes in ICT consultancy and services and has been active on the Dutch market since 1992. The Netherlands has a high standard of living, and people speak excellent English. One of the things I like most about this country is the pragmatic and solution-oriented approach of it's
• Investment plans
people. That also extends to situations where a project doesn’t go according to plan, and that is a great advantage in the ICT sector.
Thanks to its high-quality infrastructure, the Netherlands is regarded as a gateway to the European market I’m not aware of any special tax credits for Indian companies that set up offices in the Netherlands. The country has a good business climate, but I think there's still room for improvement. For example, the corporate income tax rate isn’t among the lowest in Europe and it has a
of respondents indicated that they were seeking to invest in a manufacturing The findings from our interviews show that facility, despite the perception that the decision-makers from foreign companies consider the Netherlands to be an attractive Netherlands has relatively high labor business destination. Of all respondents, 27% costs. Amsterdam is the investment destination they mentioned most often even claim to have concrete plans to set up or expand operations in the Netherlands. This (25%). Investors already established in the Netherlands are more likely to expand mainly concerns investments in marketing and sales offices (34%), but also extends to or set up new activities in the Netherlands than those who are not yet established in shared service centers (12%) and logistics the Netherlands. centers (11%). Interestingly enough, 23%
relatively high personal income tax rate too. Although Indian managers get a 30% exemption, tax rates are still high. I think the Government would do well to ease some of that tax burden. The Dutch tax system is stable, so you don’t have to worry about any sudden major changes. I do feel there’s room for improvement when it comes to the level of bureaucracy. For example, my Indian passport isn’t enough to get me a work permit; the Government also requires my official birth certificate. A lot of information, correspondence and the websites of local and national government agencies, banks and airlines are mainly in Dutch. Making this information available in English would certainly make life easier for foreign employees living in this country. I think the Dutch Government would do well to show a little more understanding in that area.
Figure 4
Does your company consider to expand or set up operations in the Netherlands? Yes, definitely
10% 6%
Yes, probably
17%
6% Definitely not
13% 59%
42%
16%
Can’t say
15%
Probably not
Ernst & Young’s 2012 Netherlands attractiveness survey The Netherlands, increasingly attractive
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Outlook for the Netherlands The Netherlands in 2020
60%
of respondents view the current Dutch business climate as stable
37%
expect the Netherlands to become a more attractive business location over the next three years
12
Ernst & Young’s 2012 Netherlands attractiveness survey The Netherlands, increasingly attractive
Outlook for the Netherlands
Why do companies decide in favor of the Netherlands?
Figure 5
Figure 6
Perception of the Dutch climate for establishing or developing activities in the Netherlands
Respondents’ satisfaction with the Dutch climate for establishing a business
Significantly deteriorated Can’t say Slightly deteriorated
11%
3% 3%
6%
27% 33%
Transport and logistics infrastructure
57%
13% 59%
18%
65% Telecommunication infrastructure
56%
6%
Significantly improved
5%
Quality of life
60%
Neither improved nor deteriorated
Slightly improved
29%
A stable social environment
49%
36%
Clear and stable political, legislative and administrative environment
37%
46%
Local labor skills level
44%
The Netherlands is not entirely immune to changing perceptions of its business climate that result from the current economic circumstances. Although international decision-makers generally view the current business climate as stable (60%), the percentage that feels there has been a deterioration (14%) is higher than last year (9%). This perception of a deteriorated climate is stronger among businesses that are not yet established in the Netherlands than among those that are.
• Strengths In the perception of international decisionmakers, the Netherlands has a number of annually recurring strengths. These include a high quality of life, the stable social environment and the telecommunication, transport and logistics infrastructure. The clarity and stability of our political system and laws and regulations is quoted as another strength, as are the skills of Dutch employees. However, the latter perception differs greatly in geographical terms. For example, 82% of Western European and 87% of North American investors rate the Dutch education level as fairly to highly attractive, whereas this only applies to 60% of Asian investors. Of this group of
respondents, 22% actually perceive the level of education as unattractive, compared to 12% and 7% of Western European and North American investors, respectively.
Very attractive
35%
Fairly attractive
Figure 7
Respondents’ dissatisfaction with the Dutch climate for establishing a business Labor costs 35%
Since a few years, the Netherlands has attractive tax schemes for foreign companies investing in innovation: the “Innovation Box”, the “RDA” (Research and Development Deduction) and the “WBSO” (Research and Development Promotion Act). Remarkably, an average of 27% of participating companies are unaware of the existence of these facilities. However, as regards the companies that are aware of these schemes, their existence did play a key role in deciding to opt for the Netherlands in 17% (Innovation box), 12% (RDA) and 11% (WBSO) of all cases. The schemes thus appear to offer potential for further strengthening the Dutch business climate in terms of R&D, provided that their existence can be communicated more effectively on an international scale.
• Points for improvement Naturally, foreign investors would like to see improvement in certain areas. Labor costs and real estate prices are quoted as the Netherlands’ least attractive aspects.
Real estate costs 26%
10% 9%
Labor law flexibility regarding hiring, termination and duration of work 26% 7% The Netherlands’ domestic market 24% 8% Access to the Netherlands’ investors 5% 14% The Netherlands’ special expertise with regard to your industry 15%
3%
Little attractive Not attractive at all
Furthermore, respondents are also less enthusiastic about the (in)flexibility of the labor laws, the small scale of the Dutch domestic market and the accessibility of Dutch investors. Doubts regarding expertise in specific industries are mainly common among businesses in the chemical, pharmaceutical and automotive industries, as well as the energy and business services sectors.
Ernst & Young’s 2012 Netherlands attractiveness survey The Netherlands, increasingly attractive
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Outlook for the Netherlands
Figure 8
Figure 9
Main competitors for the Netherlands
Projects and initiatives launched by Dutch cities in order to attract foreign investors
Germany
Innovative business parks 29%
49% 41%
Existing international investment track record
India
20%
6% 1%
International promotion campaigns
United Kingdom
19%
4% 10%
Targeted international investment strategies 19%
Luxemburg 4% 1%
International sports or cultural events
United States
Major urban infrastructure projects
19%
3% 5%
18%
Hong Kong 3% 1% France 3% 1%
2012 2011
• Competition Respondents still – and increasingly – regard Germany as the Netherlands’ main competitor. Whereas in 2010 and 2011, Germany was mentioned as the main competitor for the Netherlands by 35% and 41% of all respondents, respectively, this year the share climbed up to nearly 50%. Germany’s strength covers all of the themes presented: attracting capital, companies, talent, headquarters and innovative activities, as well as the formation of world class clusters. The gap between Germany and other potential competitors is large: India holds second place at 6%. Whereas last year’s survey mentioned China as our only Asian competitor, India and Hong Kong have now entered the top 6. Countries such as Belgium and Switzerland have even disappeared entirely from the top ranking. Despite the fact that Germany is regarded as the Netherlands’ main competitor, respondents do not indicate that they are considering relocating all or part of their Dutch activities to Germany. 65% of all respondents established in the Netherlands indicate that they have no plans to
14
relocate business units to other countries. Respondents that are considering such a move mention Switzerland, the United Kingdom, Germany, Thailand, India and Poland as potential destinations. Typical reasons given for this consideration were cost savings, tax benefits and access to new markets or expansion in existing markets.
• Profile of Dutch cities In some cases, businesses seeking to establish a new location directly focus on specific cities instead of first looking at countries. Projects and initiatives launched by Dutch cities in order to attract foreign investors play a key role in this regard. As our study shows, investors regard “innovative business parks” as an important factor in ensuring an attractive business climate. They also assess the Dutch track record in terms of attracting foreign businesses, which demonstrates the importance of communicating current successes in attracting businesses as well as emphasizing the strong points of the Dutch business climate. This can be achieved through efforts such as international promotion campaigns. One in five investors
Ernst & Young’s 2012 Netherlands attractiveness survey The Netherlands, increasingly attractive
regard such campaigns as an important factor in developing the attractiveness and visibility of Dutch cities.
• Attractiveness of Dutch cities Amsterdam (70%) and Rotterdam (51%) are considered the two most attractive Dutch cities, followed at a distance by The Hague, Eindhoven and Utrecht. Most respondents tend to mention Amsterdam (52%) before Rotterdam (22%) when asked to name the most attractive Dutch city. Both cities are mainly regarded as attractive locations on the basis of their transport and logistics infrastructure (Amsterdam 47%; Rotterdam 68%). Respondents also mentioned Amsterdam’s high quality of life (29%), its concentration of businesses/headquarters, its status as the Netherlands’ capital city and its international allure (a joint score of 28%). Rotterdam is praised for its “mainport function” (serving as a major sea port and gateway to Europe) and entrepreneurial climate (both mentioned by 12% of the respondents).
Interview
Remaining innovative is key Henk Slaats, Partner Advisory Services, Ernst & Young Accountants LLP Based on our experience as a supply chain consultant to the business sector, we are well aware that the Netherlands remains an interesting prospect to companies from the BRIC countries seeking to do business in Europe. Companies from those countries often start off on a small scale by setting up a holding company in the Netherlands rather than transferring the operational aspects of their business. They then tend to launch various import and distribution activities. Most companies seeking to set up a manufacturing location in Europe start by assessing the options in Eastern Europe. We will have to keep maintaining and improving the Netherlands’ position as an attractive investment destination. For example, we could communicate our role as a distribution country and “Gateway to Europe” more effectively to the outside world. We need to demonstrate our
resolve by making targeted investments in innovation and education, thus further consolidating our position as an attractive investment destination. The port of Rotterdam is and remains one of our key strengths. However, further investments in infrastructure and other
It’s important to keep focusing on the Netherlands’ strengths solutions will be necessary in order to offer better access to the hinterland. For example, we tend to run into difficulties when it comes to upscaling our infrastructure. In the past, a lot of good ideas have run aground during the planning phase, and actual implementation is often less than
effective. We will have to keep innovating in order to maintain our leading position in terms of infrastructure, one of our key priorities. The general attractiveness of this country in terms of living and working also plays a role in a business’ decision to establish offices here. It’s important to keep that in mind and make sure we don’t get bogged down in legislation. The Government should work with the business sector to achieve these goals. It’s also crucial that we keep promoting our knowledge and experience, and remain innovative in terms of aspects such as taxation. The Netherlands is a relatively expensive country. Securing the flow of foreign investments for the future will require a continued focus on our future as a country, and an innovative approach to the development of our country’s strengths.
Ernst & Young’s 2012 Netherlands attractiveness survey The Netherlands, increasingly attractive
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Outlook for the Netherlands
The future of the Netherlands International decision-makers have positive expectations about the attractiveness of the Netherlands in the next three years as a possible location for their activities. For example, 37% of respondents expect the Netherlands to become a more attractive business location over the course of this period. Companies that are already established in the Netherlands are more optimistic about the country’s future attractiveness than those that are not yet established in the Netherlands; 41% versus 30% expect the Netherlands to become a more attractive business location over the next three years. Figure 10
The attractiveness of the Netherlands as a business location in the next 3 years
• The Netherlands in 2020
Figure 12 a
In the view of potential investors, the Netherlands continues to live up to its reputation as a “Gateway to Europe”. In addition, they consider the Netherlands capable of playing a leading role in the field of green technology and growth and for high value-added services. The former role is mainly perceived by large companies (turnover > € 1.5 billion), whereas smaller businesses (turnover < € 150 million) expect to see the Netherlands play a leading role in the area of high value-added services. In comparison with last year, businesses perceive a greater risk that the Netherlands will suffer as a result of its social model and government debt. Scores for the remaining points are almost identical to those from the 2011 survey.
Measures the Netherlands should take to stimulate growth in the next two years
Slight deterioration Significant improvement
4%
8%
3% 6%
6%
6%
Gateway for European market
29% 59%
Global leader in green technology and growth
17%
16%
33%
Global center of high value-added services
46%
Neither improvement nor deterioration
12% R&D hot spot
12% Crippled by a heavy social model and debt
5% Exporter of the leading global social model
4%
In light of the above expectations, it is crucial to determine which measures the Netherlands should take to achieve economic growth and retain its strong position as an attractive business location for foreign investors in Europe.
16
Mentioned first
What is your outlook for the Netherlands in 2020?
Can’t say
13%
Slight improvement
Facilitate access to credit 11% 22% Encourage environmental policies and attitudes 11% 17%
Mentioned in total
Figure 11 Significant deterioration
Support high tech industries and innovation 17% 31% Lower tax burden 12% 26% Lower labor costs 10% 26% Support small and medium sized enterprises (SMEs) 9% 25%
Ernst & Young’s 2012 Netherlands attractiveness survey The Netherlands, increasingly attractive
In order to achieve growth over the next two years, respondents feel the Netherlands should focus on supporting its high-tech industries and innovation and decreasing the tax burden and labor costs. In 2011, 43% of respondents highlighted lowering the tax burden as the most important measure. This year, the measure was mentioned by 26% of respondents, thus qualifying as the second-most popular measure after providing support to the high-tech industry. According to the respondents, growth of the Dutch economy over the next two years would be best served by stimulating ICT (20%), green technology (18%), logistics and distribution (18%), business services (15%) and the energy sector (11%). Asian
Interview
Chinese entrepreneurs see opportunities in the Netherlands Zhang Weiwu, General Manager, Industrial and Commercial Bank of China the Netherlands In late 2010, De Nederlandsche Bank (DNB) issued us a banking license. ICBC (Industrial and Commercial Bank of China) subsequently opened its first office in Amsterdam in February 2011. We mainly focus on financing trade between Chinese and Dutch companies, but we also welcome private clients. Over the past few years, we have seen a clear trend toward closer ties between the Netherlands and China. The Dutch Government has realized that it will have to deal with China; the initial fear of this enormous country is starting to fade. The Dutch are very open to foreign business activity. Nearly all the major Dutch multinationals now have offices in China. Smaller businesses have also found their way to our country and the Netherlands is now the second-largest European investor in China. On the other hand, Chinese entrepreneurs also see
companies mainly regard the ICT sector (28%) and the transport and automotive industry (36%) as economic drivers. In order to further improve its position as an attractive business location for foreign investors in Europe, the Netherlands should adopt more flexible labor laws. This measure, which failed to rank high on the list of priorities in previous years (2011, 10th place), is now topping the list. Making labor laws more flexible is the subject of current debate in the Netherlands and
opportunities in the Netherlands. This was one of the key factors in our decision to set up offices here.
Learning to understand each other’s culture and customs is both interesting and important Half of our customer base consists of Dutch businesses. We are learning to bridge our cultural differences, no matter how great they may be. An example would be the separation between work and private life. Most Dutch people prefer
Europe, and some mitigating measures are expected to be implemented in the Netherlands in view of the most recent proposals. Lowering the tax burden was mentioned by fewer respondents than last year (29% and 43% last year). The need to stimulate research & development and renew the training and education system remains a key priority on the list of necessary measures. Companies already established in the Netherlands in particular see room for improvement in these areas.
not to receive work-related calls in the evening, so you tend to get their voicemail. In China, the line between those two worlds is far less distinct. In my view, both the Chinese and the Dutch could make more of an effort to understand one another. For example, the Dutch may not always see the importance of sending representatives at the highest level – a minister instead of a lower-level official – to welcome a trade delegation. For the Chinese, however, such factors can be crucial in closing the deal. Learning to understand each other’s culture and customs is both interesting and important. We can learn a great deal from one another. Doing so will help prevent misunderstandings, build mutual trust and create a better framework for doing business.
Figure 12 b
Measures to boost the attractiveness of the Netherlands Labor law flexibility regarding hiring, termination and duration of work 17% 34% Lower tax burden 17% 32% Stimulate R & D 11% 25% Renew the training and education system 11% 20% Promote SME development 6% 17% Encourage companies’ initiatives in environmental protection and sustainable development 3% 16%
Mentioned first Mentioned in total
Ernst & Young’s 2012 Netherlands attractiveness survey The Netherlands, increasingly attractive
17
Recommendations
Recommendations
Development of foreign investments The Netherlands has a strong basis and position when it comes to attracting and retaining foreign investments. However, this advantage should not be taken for granted. Both smaller and larger businesses are under increasing pressure to expand their operations around the world, and are gaining international dynamism. On the one hand, this offers opportunities in terms of attracting foreign businesses. On the other hand, it also represents a threat, especially to an open economy such as the Netherlands: foreign businesses with existing locations in this country may be forced to scale back their operations, or could even disappear entirely. 27% of respondents interviewed for this survey indicated that they will definitely or probably be launching new activities in the Netherlands. Although this score is certainly positive, a far greater percentage (57%) indicated that they will “definitely not” or “probably not” be establishing new activities in the Netherlands.
This means – despite the existing strengths of the Dutch business climate – the Netherlands is facing both new challenges and new opportunities. For example, there is still great potential in terms of the number of international decision-makers that remain to be convinced about the strengths of the Dutch business climate. In order to achieve this goal, Dutch governments, businesses and knowledge institutions will have to work together effectively to communicate the strengths of the Dutch business climate abroad. In addition to communicating those strengths to potential investors, this will include efforts to identify bottlenecks and raise awareness of these problems among Dutch politicians and other decision-makers. Communicating a consistent and clear picture and proposition while providing recognizable and accessible liaisons for potential investors will contribute to the successful future marketing of the Netherlands.
Action points for the Netherlands In order to raise the international profile of the Netherlands and enhance its appeal to foreign investors, the Netherlands should draw on its strengths as identified by the international decisionmakers, by: • Continuing to invest in the quality of living conditions • Drawing attention to the high degree of social stability • Continuing to invest in the quality and good reputation of the transport, logistics and telecommunications infrastructure • Preserving the political and regulatory stability
Decision-makers in the Netherlands will also have to keep focusing on the aforementioned areas for improvement: • Reducing cost levels, with a focus on labor costs and real estate costs • Creating a more flexible labor market in combination with broad, high-quality education • Improving the accessibility of Dutch financiers and investors, a measure that will be especially relevant in terms of making the Netherlands more attractive to smaller businesses
Gateway function remains a key factor The Netherlands is still regarded as a gateway to the European market. Large companies are especially eager to establish logistics and headquarter functions in the Netherlands in order to service the European market more effectively. Both smaller and larger companies establish European sales and marketing operations in the Netherlands. International accessibility and a favorable tax climate have a lasting appeal and are key assets in the competition with other European locations. The great challenge
18
lies in communicating the Netherlands' potential to also serve as a successful “knowledge gateway”, for operations such as research and development centers that can make use of the country’s existing knowledge and facilities. In the view of the respondents interviewed for this survey, the Netherlands has this potential, but has not yet managed to consolidate this advantage in the form of concrete results.
Ernst & Young’s 2012 Netherlands attractiveness survey The Netherlands, increasingly attractive
Interview
Growing interest from the BRIC countries Kees Slump, Partner Transaction Advisory Services, Ernst & Young Accountants LLP In terms of the world market for mergers and acquisitions, the BRIC countries are showing growing interest in the Netherlands. The presence of technology, access to markets and the quality of
Government must be permanently predictable and stable
logistics and distribution services are all key factors in the decision to establish businesses in the Netherlands. India and China are especially active in this regard, with both countries having concluded several deals over the recent period. Businesses from the Middle East also
seem to have found their way to the Netherlands, and are showing growing interest in manufacturing industries such as the food and technology sectors. The Mexicans are also increasingly active on the Dutch market, with previous acquisitions such as Wavin and other concrete interests. The Netherlands is attractive to foreign companies due to its open culture, infrastructure and entrepreneurial spirit. However, unstable government and political unrest have a negative effect when it comes to attracting foreign investment. The situation and concerns surrounding the Eurozone and the euro also play a role in this regard, causing businesses to defer or reconsider their decision to invest in specific countries. The predictability and stability of Dutch government policy is of key importance to foreign investors.
The Netherlands will have to bundle its strengths if it is to attract more businesses. More effective harmonization and cooperation between businesses and government agencies is key in this regard. It is crucial that all parties work toward the same goal: attracting companies to the Netherlands. A case in point would be the ports of Amsterdam and Rotterdam, which could further harmonize their mutual cooperation and strategies in order to attract foreign investment. A more intensive focus on the top sectors defined by the Government will also help us maximize existing opportunities. For example, it is important to assess which foreign companies are best suited to this policy, identify the potential they offer and determine which businesses we want to attract to the Netherlands.
Working together to attract knowledge-intensive activities Amsterdam and Rotterdam are considered the two most attractive Dutch cities. The crucial appeal of transport and logistics infrastructures also applies at city level. The concentration of businesses/headquarters, international allure, capital city status and entrepreneurship are also key in terms of international appeal. Given that the combination of all these factors is not to be found in one single city per se, there are opportunities for individual cities to distinguish themselves on the basis of a clear profile. However, cities will also have to position themselves as a part of the Netherlands. This will require effective and visible cooperation between government, businesses and knowledge institutions (the “Triple Helix”).
The Dutch Government’s top sectors policy contributes to this goal, ensuring that the Triple Helix can jointly develop a clear proposition for the various Dutch sectors and policy areas. This will allow the Netherlands to attract more knowledge-intensive activities, such as the research and development operations of foreign companies. The country has already taken important steps in this direction through the establishment of a growing number of knowledge parks and partnerships. This will allow for close cooperation between government, businesses and knowledge institutions in order to encourage cross-pollination between business and science. In the longer term, these developments will be key to facilitating SMEs that are becoming ever more internationally mobile.
International competitors Almost 50% of respondents identified Germany as the Netherlands’ most important competitor. Germany has an especially prominent reputation when it comes to close cooperation between and the local intertwinement of SMEs. The Netherlands could take this as an example and implement the same partnership model. The Government’s top sectors policy is an important step in this direction, and should be sustained in the long term. This will be
the joint responsibility of businesses, government and knowledge institutions.
Ernst & Young’s 2012 Netherlands attractiveness survey The Netherlands, increasingly attractive
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Appendix
Appendix: Methodology and sources The Ernst & Young 2012 Netherlands attractiveness survey is based on two main sources:
1.
Actual investment project announcements in Europe according to the Ernst & Young European Investment Monitor (EIM). The EIM was created by Ernst & Young and permanently monitors the actual cross-border concrete corporate investments and expansions of international companies in Europe. By excluding portfolio investments and mergers and acquisitions, it shows the reality of investments in manufacturing or service operations by foreign companies.
2.
The perceptions and expectations of international decision-makers with respect to the Netherlands as a prospective investment country. This information was obtained from interviewing 205 decision-makers of international companies. These interviews took place in February and March of 2012. Fifty-one percent of the decision-makers live in the Netherlands, while the other 49% live abroad. Of the latter group, 28% live outside Europe (North America: 20%; Asia: 8%; BRIC: 2%). A total number of 840 international decision-makers were asked to voice their opinion on the attractiveness of Europe.
Information on the sample The selection of companies is representative for those that actually invest in the Netherlands. This was validated by taking into consideration the nationality of the parent companies, the size of the companies and their industry affiliation. In the following pie charts, the respective shares will be presented.
• Nationality of the respondents To ensure that the geographical distance between the respondents and their business location was observed, the companies were categorized into two groups according to their nationality: • Half of the group of decision-makers work for subsidiaries in the Netherlands and were interviewed in the Netherlands. • The other half of the group of decisionmakers were interviewed in their country of origin.
• Size of the companies and sectors
Figure 13
To provide further guarantee for the survey’s representativeness with respect to diversity and international strategies, the study ensured that the views of the following target groups were included as well: • SMEs • Multinational corporations • Industrial companies • Service companies
Surveyed companies by nationality
• Sectors of industry
Figure 14
The five selected and surveyed sectors of industry are representative of the foreign companies that are established in the Netherlands (based on the EIM).
Surveyed companies by size (sales)
Central and Eastern Europe Oceania
4% 1%
Northern Europe
9%
6%
6% North America
13% 59%
40%
18%
Asia
16%
28%
Western Europe
More than €1.5 billion
6%
21% 59%
45%
Less than €150 million
16%
34%
From €150 million to €1.5 billion
Figure 15
Surveyed companies by industry affiliation High-tech and telecommunications
8%
Chemicals and pharmaceuticals
6% 6%
Industry, automotive and energy
Consumer goods
39%
16%
59% 16%
31%
Private and business services
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Ernst & Young’s 2012 Netherlands attractiveness survey The Netherlands, increasingly attractive
Ernst & Young International Location Advisory Services (ILAS) Ernst & Young International Location Advisory Services (ILAS) is part of Real Estate Advisory Services (REAS). Ernst & Young REAS operates in the field of transaction support, strategic real estate advice and project finance. Our service portfolio consists, among other things, of real estate portfolio optimizations, due diligence research, valuations, risk analysis and management, feasibility studies and public-private partnership projects. Additionally, Ernst & Young REAS (more specifically ILAS) supports companies globally with their strategic international investment and relocation decisions. ILAS
also supports investment promotion and development agencies in their targeting, acquisition and after-care strategy and policy formulation aimed at maximizing the volume and quality of investments. Companies are increasingly considering new location and cross-border investment strategies and more and more countries welcome foreign investors. These new options require a sharpened focus on the balance of risks and rewards in economies and industries globally. Today, more than ever, companies look at a complex variety of costs, quality and risk factors before selecting their strategic business locations. The question of ‘where do we (re)locate’
is increasingly becoming an important part of a company’s overall strategy. Ernst & Young ILAS knows why, how and when. Ernst & Young ILAS offers solutions for clients who have questions related to their location strategy, plant and office locations, real estate investments and divestments. After an analysis of an investment project’s specific needs, our teams work with the client’s management on the best long-term options in terms of cost savings, appropriate labor pools, credible service providers, and secure infrastructure.
Contacts • Tristan Dhondt Partner / Real Estate Advisory Services Tel.: +31 88 4071006 E-mail: tristan.dhondt@nl.ey.com
• Caroline Rodenburg Senior Manager / International Location Advisory Services Tel.: +31 88 4070809 E-mail: caroline.rodenburg@nl.ey.com
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Ernst & Young Assurance I Tax I Transactions I Advisory About Ernst & Young Ernst & Young is a global leader in assurance, tax, transaction and advisory services. Worldwide, our 152,000 people are united by our shared values and an unwavering commitment to quality. We make a difference by helping our people, our clients and our wider communities achieve their potential. Ernst & Young refers to the global organization of member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit www.ey.com © 2012 Ernst & Young Real Estate Advisory Services B.V. All Rights Reserved. EYG no. AU1249
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