January 1971

Establishing a Business

in the Netherlands

Supersedes OBR 67-31

Prepared by Claude Clement Western Europe Division

APR +5 1971

Office of International Commercial Relations

Investment Climate

Government Policy on Investment

The Netherlands has a long record of hospitality toward foreign investment in general and American investment in particular. Although the Government does not actively seek such investment, as was the case in the early postwar years, the Dutch door has always been open to foreign enterprises, and this traditionally liberal attitude is just as strong today as ever.

The Netherlands Government does not apply any discriminatory provisions to the establishment of foreign enterprises; such establishments have the same rights and obligations as any other Dutch enterprise. The Netherlands recognizes the importance of foreign investment in sustaining the country's industrial expansion and welcomes such investment in connection with its general policy of promoting balanced economic growth and ensuring full employment for its rapidly expanding labor U.S.S.D.

might give an impression of discrimination against foreign investors.

The Government's liberal policy toward investment is based on hard economic facts. The population growth rate is the highest in Western Europe. The country is relatively poor in natural resources and depends upon its processing and service industries to earn foreign exchange for foreign imports. In addition, structural changes in certain parts of the economy have led the Netherlands Government to offer various financial incentives to firms, both domestic and foreign, planning to establish operations in areas of the country where the level of industrialization is comparatively low.

The Netherlands offers an excellent location for foreign firms. The following favorable conditions have been pointed out in official Dutch statements:

• a national policy of free enterprise • generally competitive cost and price levels • excellent labor-management relations

The information supplied in this report is not intended to serve in lieu of legal counsel. Such advice may be obtained from attorneys in the United States who specialize in foreign law.

A list of attorneys practicing in the Netherlands may be obtained from the Commercial Intelligence Division, Bureau of International Commerce, U.S. Department of Commerce, Washington, D.C. 20230, or from the field offices of the U.S. Department of Commerce.

• stable labor relations

relatively moderate taxes

• a Government policy of reducing interna-

tional trade barriers.

Economic Growth.-Although the Nether-

lands Government has no formalized long-range

economic development plans, the Central

Planning Bureau, a Government agency, makes

annual forecasts which are used as guideposts

in the development of the country's financial

and commercial policy. The plans have no

compulsory character but are issued to supply

the authorities, trade, and industry with scien-

tifically justified information regarding future

economic opportunities, which can, if so de-

sired, be counted with in management decisions.

A medium-term plan, covering the period

1970 to 1973, was recently drawn up by the

Central Planning Bureau. Extensive breakdown

of data according to branches of industry was

included for the first time. Table 1 indicates

past and future trends of Dutch economic

growth based on the following assumptions: a

Source: Central Planbureau, De Nederlandse Economie in 1973,

1970. The Hague, Netherlands.

Government's role in industry.-Historically,

the Netherlands Government has never played

a strong regulatory role in the economy. Rather,

it has generally worked to maintain a sound

monetary system so that private enterprise

might operate in an atmosphere of economic

stability.

While official policy cannot be described as

one of nationalization, the Netherlands Gov-

ernment has determined that the national inter-

est occasionally requires some degree of Gov-

ernment participation in industry. Examples

of this participation are found in coal mining,

salt, transportation and communications, steel,

arms and munitions works, and natural gas

industries.

Commercial treaty with the U.S.-A treaty

of Friendship, Commerce, and Navigation be-

tween the United States and the Netherlands

became effective on December 5, 1957. The

treaty aims at the promotion of the flow of

trade and investment, and it lays down the sig-

natories' mutual rights and privileges. Basi-

cally, each of the two countries: (1) agrees

to accord within its territories to citizens and

corporations of the other, treatment no less

favorable than it accords to its own citizens

and corporations with respect to engaging in

commercial, industrial, and financial activities;

(2) formally endorses standards regarding the

protection of persons, their property, and inter-

ests that reflect the most enlightened legal

and constitutional principles; (3) recognizes

the need for special attention to stimulate the

international movement of investment capital;

Mandatory controls providing a limited basis for continued U.S. direct investment overseas were initiated by the President on January 1, 1968, as part of a broad program to improve the U.S. balance of payments.

To ascertain whether they are subject to direct investment controls, and to insure their compliance with them, direct investors should consult the text of the Foreign Direct Investment Regulations. Compilations of the Regulations, as amended, are available at any Department of Commerce field office.

The direct investment controls are administered by the Office of Foreign Direct Investments, U.S. Department of Commerce, Washington, D.C. 20230. Preliminary inquiries regarding the direct investment controls should be directed to the nearest Department of Commerce field office or directly to the Director Office of Foreign Direct Investments.

and (4) reasserts its adherence to the principles of nondiscriminatory treatment of trade and shipping.

Trade Factors Affecting Investment

Foreign exchange.-The Netherlands foreign exchange system is based on the Foreign Exchange Decree of 1945, as amended. In principle every international financial transaction is subject to license from the Netherlands Bank's Exchange Control Division, including payments from the Netherlands to a foreign recipient and all payments received by a Netherlands resident from abroad. In practice, however, most types of transactions can now be carried out under general license.

No special license is required for the transfer of profits, dividends or earnings accruing to foreign nationals or enterprises. Also, nonresidents who have invested foreign capital in enterprises established in the Netherlands may retransfer their proceeds from sale or liquidation without a special license.

License fees and royalties may be transferred to the United States under general license if the original licensing agreement was approved by the Netherlands Bank. Any authorized bank may perform this transfer.

U.S. Investment in the Netherlands

U.S. direct investment continues to flow into the Netherlands. By 1969, the value of American investment totaled more than $1,218 million in that country, mainly in the metal manufac

(X)-less than $500,000. Source: U.S. Department of Commerce, Survey of Current Business, August, September, or October issues as appropriate, 1966-70. turing, petroleum, and chemical industries, representing an increase of 75% in value since 1965. Table 2 illustrates the growth of U.S. direct investment in the Netherlands and the trends by sector.

Of the 376 American manufacturing firms established in the Netherlands in 1969, 276 operate through wholly-owned subsidiaries and 100 through joint ventures or minority participations with Dutch-owned firms. Of all the foreign industrial establishments in the Netherlands, the United States is by far the leader with 40% of the total, as shown in table 3.

Advantages of locating in the Netherlands.— The advantages of establishing a business in the Netherlands are significant, whether the country is looked on as a market itself or as a location from which to reach other world markets. The Netherlands' rapidly growing population rose to slightly over 13 million in September 1970; its population density is among the greatest in the world. The standard of living is high and improving steadily. The acceptance of American products and rising demand for both consumer and capital goods portends an excellent market for all categories of U.S. commodities. The country also offers substantial existing manufacturing facilities and extensive transportation and communication networks.

The Netherlands should also be particularly attractive to businessmen interested in doing business on a European and international scale. The Netherlands has long been an important trading nation, and Dutch experience in shipping and commerce is centuries old. In addition, the Netherlands' membership in the European Economic Community (EEC) permits increasingly free access to a market of 188 million people. Customs duties between members were eliminated on July 1, 1968; virtually all quantitative restrictions on goods moving between the EEC members have been removed. On the other hand, the level of tariffs on imports of industrial goods into the Netherlands