1st Assignment On IBE

SPENT ANALYSIS ON NETHERLANDS

Social and 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 Statesmans 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). These provincial and municipal bodies are entitled to issue ordinances, bylaws and levy taxes over their respective domains, with final approval being reserved for the Crown in each instance. 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 coalitions majority appears imminent. Current Economic Situation - The Dutch economic climate has progressed dramatically since the European recession in the early-tomid 1980s, "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 Models 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. Environmental factors and external influences - One of the most notable external influences American entrepreneurs should consider when looking towards trade relations with the Netherlands, is the countrys 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). Additional growth in electronic commerce may also be potentially hampered by EU restrictions on personal data transmissions that have been in effect since 1998. Because of the Netherlands membership in the EU, these restrictions would of course prevent and undermine trade of Specified Risk Materials between US companies and the Netherlands. An additional concern with Dutch membership in the EU is the apparent hesitancy of many EU counties such as Great Britain and Denmark to fully participate within the original design outlined in the Treaty of Maastricht. This has delayed the full participation by qualified EU member states in the European Monetary Union (EMU), and the subsequent acceptance and widespread use of the Euro currency. The Netherlands is however, a leading member and supporter of a common EU economic structure and currency, and has already begun the threeyear transition from the Dutch Guilder (fl) to full Euro currency usage and circulation (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 EUs 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). Dutch Web-Entrepreneur, Rob Franken felt that these two legends in particular, weigh heavily in the mind-set and business attitude of the Dutch, because they embody the average individuals concern for the greater society, while remaining fully cognizant of the importance of being individually successful and competitive. Franken also feels that Dutch religious beliefs and attitudes have also played a large role in shaping the business climate in the Netherlands. This may be attributed to the unanimous Protestant victory over Catholicism in the Netherlands in the 1600s, which helped to create and solidify a staunchly conservative and rigid Protestant work ethic. Because the Dutch protestants truly believed that hard work was its own (and only) reward, earnings were heavily reinvested instead of squandered. It is widely perceived that the wealth and successes of large Dutch multinational corporations such as Unilever, Phillips, and

Royal Dutch Shell can be attributed to these unwavering Protestant beliefs (Franken, 2000).