This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 09 THE HAGUE 000126 
 
SIPDIS 
 
STATE FOR EB/IFD/OIA (JNHATCHER) 
 
STATE ALSO FOR EUR/UBI, EUR/ERA 
 
TREASURY FOR OASIA/IMI/VATUKORALA 
 
USDOC FOR 4212/USFCS/MAC/OWE/DCALVERT 
 
PARIS FOR USOECD 
 
E.O.  12958:  N/A 
TAGS: EINV EFIN ETRD ELAB KTDB NL OPIC USTR
SUBJECT: 2006 INVESTMENT CLIMATE STATEMENT - THE NETHERLANDS 
 
REF: STATE 202943 
 
¶1.  The following transmits the draft 2006 Investment Climate 
Statement (ICS) for the Netherlands.  This update corresponds with 
Chapter VI in the FY 2006 Country Commercial Guide.  The full text 
of the ICS has been forwarded by e-mail to EUR/IFD/OIA to the 
attention of J. Nathaniel Hatcher and Paul A. Brown.  Any 
questions regarding the Netherlands ICS should be directed to 
Jasper Jorritsma in Embassy The Hague's Economic Section, at 011- 
31-70-310-2276, or by e-mail at jorritsmaj@state.gov 
 
----------------------------------- 
A.1. Openness to Foreign Investment 
----------------------------------- 
 
¶2.  The Netherlands' trade and investment policy is among the most 
open in the world.  With combined merchandise exports and imports 
virtually equal to GDP, the Dutch economy is one of the most 
internationally oriented in the world.  The Netherlands remains 
among the world's five largest suppliers of investment capital in 
terms of outward FDI stock.  The Netherlands also ranks fifth 
among global recipients of FDI (in terms of inward stock).  The 
government of the Netherlands maintains liberal policies toward 
foreign direct investment and adheres to OECD investment codes. 
 
¶3.  The only Dutch exception to the principle of national 
treatment is in air transport.  As in the U.S., nationality and 
ownership requirements apply for licenses to operate an airline, 
and the right to cabotage is reserved to national carriers.  With 
the exception of a few public and private monopolies from which 
foreign and domestic private investment is banned, foreign firms 
are able to invest in any sector and are entitled under the law to 
equal treatment with domestic firms.  These monopolies include the 
Netherlands Central Bank, the Netherlands railways, and public 
broadcasting.  While the national airport Amsterdam Schiphol is 
currently included in this list, the Dutch state intends to 
privatize a minority share of the airport in the course of 2006 
 
¶4.  The Dutch comply with European Union reciprocity provisions in 
banking and investment services and in a few other areas. 
Provisions related to government incentives, national rules of 
incorporation, and access to the capital market are administered 
on a non-discriminatory basis.  Business laws and regulations 
conform to international legal practices and standards and apply 
equally to foreign and Dutch companies.  Companies established in 
the Netherlands are advised to follow the accounting guidelines 
published by the Dutch Accounting Standards Board (DASB) 
(www.rjnet.nl).  Companies listed in the Netherlands are required 
to follow the International Financial Reporting Standards (IFRS) 
issued by the International Accounting Standards Board 
(www.iasb.org).  Companies currently are not authorized to use 
U.S. accounting rules (US GAAP) in the Netherlands.  Companies 
looking to invest in the Netherlands are advised to contact the 
tax service's APA/ATR ruling department (www.belastingdienst.nl) 
to get an advance ruling on the application of pertaining tax 
laws. 
 
¶5.  Structural and regulatory reforms have long been an integral 
part of a major reorientation of Dutch economic policy.  Product 
market competition is strengthened through programs aimed at 
stimulating market forces, liberalization, deregulation and 
legislative quality combined with a tightening of competition 
policy.  The government has reduced its role in the economy by 
introducing market forces in formerly public utility sectors. 
While the gas and electricity production sectors are gradually 
being opened up to foreign competition, government-controlled 
entities retain dominant positions in gas and electricity 
distribution, rail transport and the water sector.  The government 
is reducing its share in the country's leading telecommunications 
provider and sold its controlling ('golden') share on December 
16th, 2005. 
 
¶6.  Despite relatively high Dutch labor costs and labor market 
imperfections (complex labor laws resulting in restrictive hiring 
and firing practices for employers), foreign investors have found 
the Netherlands a favorable location for their European investment 
projects.  The Dutch actively solicit foreign investment through 
the Netherlands Foreign Investment Agency (NFIA) (www.nfia.com) 
and related regional economic development companies.  Foreign 
direct investment is concentrated in growth areas including 
information and communication technology, biotechnology, medical 
technology and food processing.  Investment projects are 
predominantly in contract manufacturing (high-tech assembly), 
distribution, and value-added logistics.  International annual 
benchmark studies identify the Netherlands as one of the most 
popular locations for foreign Information and Communication 
Technology (ICT) in Europe, while also ranking the Dutch 
biotechnology sector among Europe's elite. 
 
¶7.  The Netherlands ranks among the countries with the largest 
number of broadband connections and the highest Internet 
penetration in the European Union.  According to the Economic 
Intelligence Unit (EIU) e-commerce readiness survey (www.eiu.com), 
the Netherlands ranks eighth in the world thanks to continued 
rollout of broadband services, internet-related legislation and 
government broadband programs.  In 2004, the government embarked 
on a broadband action program aimed at creating a regulatory 
framework that will stimulate and facilitate broadband 
development. 
 
¶8.  The Netherlands is particularly attractive for the 
establishment of European headquarters, European distribution 
centers, call centers and shared services centers.  The port of 
Rotterdam serves as a link between international shipping lines 
and the European hinterland.  Investment surveys indicate that 
U.S. investors favor the Netherlands as a location for European 
Distribution Centers (EDCs).  An estimated 60 percent of U.S. 
companies with a distribution center in Europe have located it in 
the Netherlands.  Examples include Cisco, Honeywell, IBM, ABM, 
Seagate, Western Digital, 3M, Amgen, Cannondale, Polaroid, Rank 
Xerox, and Medtronic.  Following the introduction in the late 
1990s of a more friendly tax regime, the number of European 
headquarters established in the Netherlands increased sharply to 
nearly ninety. 
 
¶9.  Foreign investors find the Netherlands attractive because of 
its stable political and macroeconomic climate, highly developed 
financial sector, the presence of a well-educated and productive 
labor force, and the high quality of the physical and 
communications infrastructure. 
 
¶10.  Various international surveys rank the Netherlands among the 
countries in the industrialized world with the most competitive 
economies and most favorable business and investment climate.  The 
World Economic Forum (WEF) Growth Competitiveness Index puts the 
Netherlands eleventh among the world's most competitive economies. 
The Netherlands continues to rank ninth on the WEF Business 
Competitiveness Index.  The Economist Intelligence Unit (EIU) 
ranks the Netherlands sixth on its 2005 global business 
environment ranking for the period up to 2009.  The World Bank 
ranks the Netherlands twenty-fourth in terms of the ease of doing 
business in its Doing Business report, noting it as one of the top 
dozen reformers in the world. 
 
¶11.  The Netherlands is known for its favorable fiscal climate. 
Precise tax guidance given to foreign investors provides 
transparency with regard to long-term tax obligations.  To this 
end, Advanced Tax Rulings (ATR), in combination with Advanced 
Pricing Agreements (APA), are guarantees given by local tax 
inspectors with regard to long-term tax commitments for a 
particular acquisition or green field operation. 
 
¶12.  Despite predominantly favorable business and investment 
conditions, other international organizations, including the World 
Economic Forum, flag an erosion of its competitive position as a 
major challenge confronting the Netherlands.  More specifically, 
relatively high wage costs, relatively heavy administrative 
burden, structural imperfections in the road infrastructure, and a 
less than flexible labor market are cited as potential bottlenecks 
in attracting foreign direct investment to the Netherlands. 
 
¶13.  Sharper tax competition among EU Member States and measures 
by the European Commission aimed against national tax incentives 
with a subsidy element are also likely to affect the Dutch 
competitive environment.  To this end, the Corporate Financing 
Arrangement (CFA) will be abolished in 2007 as a government 
subsidy harmful to EU tax competition. 
 
¶14.  There are no formal foreign investment screening mechanisms, 
and 100 percent foreign ownership is permitted in those sectors 
open to foreign investment.  The rules on acquisition, mergers, 
takeovers, and reinvestment are nondiscriminatory.  All firms must 
conform to certain rules of conduct on mergers and takeovers.  The 
Social Economic Council (SER), an official advisory body composed 
of representatives of government, business and labor, administers 
Dutch merger and takeover rules.  SER rules are intended, first 
and foremost, to protect the interests of stakeholders and 
employees.  They include requirements for the timely announcement 
of merger and takeover plans and for discussions with trade 
unions.  Surveys among European companies rank the Netherlands 
second after the United Kingdom for the transparency of its 
corporate governance practices.  Despite the supposedly open 
policy, elaborate corporate protective measures against hostile 
takeovers may de facto block acquisitions or takeovers by Dutch 
and foreign investors.  The Dutch are working to further reduce 
these barriers within the framework of the EU's Financial Services 
Action Plan (FSAP) within the next few years.  A corporate 
governance code of conduct that seeks to improve transparency in 
shareholder/management relations, as well as the structure and 
accountability of management, took effect in 2004.  The code of 
conduct provides for a marginal reduction of takeover defenses. 
 
¶15.  The Netherlands maintains no preferential or discriminatory 
export or import policies with the exception of those that result 
from its membership in the European Union.  The Dutch also abide 
by all internationally agreed strategic trade controls, (e.g. the 
Wassenaar Agreement).  In summary, Dutch domestic restrictions on 
foreign investment remain minimal and no new ones are being 
planned.  The Dutch investment climate should continue as it is, 
but will increasingly be influenced by EU policies. 
 
A.2. Conversion and Transfer Policies 
------------------------------------- 
 
¶16.  There are no restrictions on the conversion or repatriation 
of capital and earnings (including branch profits, dividends, 
interest, royalties), or management and technical service fees, 
with the exception of the nominal exchange license requirement for 
non-resident firms. 
 
A.3. Expropriation and Compensation 
----------------------------------- 
 
¶17.  The Netherlands maintains strong protection on all types of 
property, including private property, and the right of citizens to 
own and use property.  Expropriation would only take place in the 
public interest and with adequate compensation.  We have no reason 
to believe that it would be undertaken in a discriminatory manner 
or in violation of established principles of international law. 
Post is unaware of any recent expropriation claims involving the 
Dutch government and U.S. or other foreign-owned property. 
 
A4. Dispute Settlement 
---------------------- 
 
¶18.  Post is not aware of any investment dispute involving the 
Dutch government and U.S. or other foreign companies.  The 
Netherlands is a signatory to the International Convention on 
Investment Disputes and a member of the International Center for 
the Settlement of Investment Disputes (ICSID).  Although the 
central government has no rules regarding withdrawals of 
investment, occasionally trade unions go to court over company 
closures.  This has occurred in the case of both domestic and 
foreign-owned firms. 
 
A.5. Performance Requirements and Incentives 
-------------------------------------------- 
 
¶19.  There are no trade-related investment performance 
requirements in the Netherlands.  General requirements to qualify 
for investment subsidy schemes apply equally to domestic and 
foreign investors.  There are no requirements for employment of 
local capital or managerial personnel.  In practice, however, 
almost all chief executives of major U.S. subsidiaries in the 
Netherlands are Dutch or other EU nationals, because skilled 
managers are available at a cost less than that of posting an 
American abroad.  In the case of staff personnel, however, Dutch 
(or other EU nationals) must be employed unless firms can 
demonstrate that a Dutch national cannot perform the job in 
question.  This burden is eased by an existing provision that 
prior employment with the firm of at least two and a half years 
amounts to a presumption of unique qualifications for the job. 
 
¶20.  Limited, targeted investment incentives have long been a well- 
publicized tool of Dutch economic policy to facilitate economic 
restructuring and to promote energy conservation, regional 
development, environmental protection, R&D, and other national 
socio-economic goals.  Subsidies and incentives are available to 
foreign and domestic firms alike and are spelled out in detailed 
regulations.  Subsidies are in the form of tax credits that are 
usually disbursed through corporate tax rebates or direct cash 
payments in the event of no tax liability. 
 
¶21.  Reflecting the European Union's limits on direct government 
support, the Regional Investment Projects Subsidies Scheme (IPR) 
currently is the only major regional investment incentive still 
available to investors.  The IPR aims to encourage corporate 
investment in parts of the country with a weaker economic 
structure (predominantly in the North, the East and the far South 
of the country) by giving an investment grant for new investments 
(industrial buildings and fixed assets) or the acquisition of 
land.  Investment costs qualifying for IPR grants include costs 
incurred for the acquisition of land, necessary buildings and 
durable equipment.  IPR cash grants of up to twenty percent of 
actual investment costs for new manufacturing operations, and 
fifteen percent on expanding operations, are available up to a 
maximum of approximately $15 million per project for new projects 
and $19 million for expanding operations.  Because different 
criteria for regional economic development apply in an expanded EU- 
25, Dutch investment subsidies under the IPR will be phased out in 
2006 (for more information on regional investment grants consult 
www.bakernet.com, www.nom.nl, www.oostnv.nl or www.liof.nl). 
 
¶22.  Local investment subsidies are sometimes also available from 
regional development companies.  Regional non-tax incentives are 
available in the form of cash grants, low-interest loans, and 
local government participation and export guarantees for selected 
areas.  The growing number of tax incentives offered to investors 
in other EU countries has prompted the government to look into the 
possibilities of expanding existing tax instruments to improve 
aggressively the Dutch fiscal climate vis-a-vis that in competitor 
countries like Belgium, Germany and Ireland. 
 
A.6. Right to Private Ownership and Establishment 
--------------------------------------------- ---- 
 
¶23.  There are full rights of private ownership and establishment 
of business enterprises in the Netherlands, except in the monopoly 
sectors noted in the introduction.  Despite the fact that service 
providers must often meet stringent licensing requirements, 
numerous enterprises in the Netherlands are 100 percent owned by 
foreign firms, including many from the United States.  Licenses 
are granted on the basis of competitive equality. 
 
A.7. Protection of Property Rights 
---------------------------------- 
 
¶24.  The Netherlands has a generally good set of legislation and 
regulations that protect intellectual property rights (IPR). 
However, the enforcement of anti-piracy laws remains a concern to 
producers of software and digital media (see below).  The 
Netherlands belongs to the World Intellectual Property 
Organization (WIPO), is a signatory of the Paris Convention for 
the Protection of Industrial Property, and conforms to accepted 
international practice for the protection of technology and 
trademarks.  The Dutch have been slow in implementing EU 
directives bringing domestic legislation in line with the WIPO 
1996 Copyright Treaty (WCT), the WIPO Performance and Phonogram 
Treaty (WPPT), and the EU 98/44/EC directive.  There is consensus 
among policy makers on the need for measures aimed at raising 
awareness of IPR rules and regulations and to strengthen 
enforcement. 
 
¶25.  Patents for foreign investors are granted retroactively to 
the date of the original filing in the home country, provided the 
application is made through a Dutch patent lawyer within one year 
of the original filing date.  Patents are valid for 20 years. 
Legal procedures exist for compulsory licensing if the patent is 
inadequately used after a period of three years, but these 
procedures have rarely been invoked.  Since the Netherlands and 
the United States are both parties to the Patent Cooperation 
Treaty (PCT) of 1970, patent rights in the Netherlands may be 
obtained if a PCT application is used.  The Netherlands is a 
signatory of the European Patent Convention, which provides for a 
centralized Europe-wide patent protection system.  This convention 
has simplified the process for obtaining patent protection in EU 
Member States.  Infringement proceedings remain within the 
jurisdiction of the national courts, which could result in 
divergent interpretations detrimental to U.S. investors and 
exporters. 
 
¶26.  The enforcement of anti-piracy laws remains a concern to 
producers of software, audio and videotapes and textbooks from the 
United States.  Organized optical disc software piracy and 
ecommerce piracy are also of major concern to the Dutch.  Annual 
losses to the U.S. motion picture industry due to audiovisual 
piracy in the Netherlands have been estimated at tens of millions 
of dollars annually.  The Dutch government has recognized the need 
to protect intellectual property rights and law enforcement 
personnel have worked with industry associations to find and seize 
pirated software.  Dutch IPR legislation currently in place 
explicitly includes computer software as intellectual property 
under the copyright statutes. 
 
A.8. Transparency of Regulatory System 
-------------------------------------- 
 
¶27.  Laws and regulations that affect direct investment, such as 
environmental rules, health and safety regulations, etc., are non- 
discriminatory and apply equally to foreign and domestic firms. 
Dutch tax law facilitates attracting non-Dutch personnel to live 
and work in the Netherlands.  Currently, expatriate staff 
transferred to the Netherlands on a temporary contract can make 
use of the 30 percent ruling.  The ruling provides that 30 percent 
of his/her gross employment income in the Netherlands is not 
taxable under Dutch personal income tax laws.  This treatment is 
granted for a maximum of ten years.  Furthermore, the expatriate 
is considered a non-resident, meaning that only income from Dutch 
sources is taxed in the Netherlands. 
 
¶28.  Dutch corporations and branches of foreign corporations 
currently are subject to a corporate tax rate of 29.6 percent 
(profits of up to 22,689 euros (roughly $27,500) are taxed at a 
rate of 25.5 percent) on taxable profits, which puts the 
Netherlands in the top half of the corporate tax bracket in the 
EU.  Dutch corporate taxation generally allows for the exemption 
of dividends and capital gains derived from a foreign subsidiary 
(participation exemption).  Surveys into the corporate tax 
structure of EU Member States observe that both the corporate tax 
rate and the effective corporate tax rate in the Netherlands are 
higher than the European average.  Nevertheless, the Dutch 
corporate tax structure ranks among the most competitive in Europe 
given other beneficial tax measures.  The corporate tax rate will 
be reduced further to 29.1 percent (25 percent respectively) by 
¶2007.  No local Dutch income taxes are levied on corporations. 
Furthermore, the Netherlands maintains an extensive network of tax 
treaties with a large number of countries.  A protocol amending 
the U.S.-Netherlands 1992 tax treaty took effect on December 28, 
¶2004.  The protocol modernizes anti-abuse rules to prevent 
exploitation of the treaty by third-country nationals.  The 
protocol also eliminates source-country withholding taxes on 
certain inter-company dividends, thereby removing a remaining 
barrier to cross-border investment in both directions. 
 
A.9. Efficient Capital Markets and Portfolio Investment 
--------------------------------------------- ---------- 
 
¶29.  Dutch financial markets are fully developed and operate at 
market rates, facilitating the free flow of financial resources. 
The Netherlands is an international financial center for the 
foreign exchange market and for eurobonds and bullion trade.  The 
flexibility that foreign companies enjoy in conducting business in 
the Netherlands extends into the area of currency and foreign 
exchange.  There are no restrictions on foreign investors' access 
to sources of local finance. 
 
A.10. Political Violence 
------------------------ 
 
¶30.  The Netherlands is noted for its stable political 
environment.  Although political violence rarely occurs in the 
highly consensus-oriented Dutch society, a number of politically 
and religiously inspired acts of violence have recently led Dutch 
politicians to review integration policies.  The Dutch economy 
derives much of its strength from a stable industrial climate 
fostered by partnership between unions, employers' organizations 
and the government.  Strikes are rarely regarded as the primary 
means to settle labor disputes, and labor strikes in recent 
decades have been very rare. 
 
A.11. Corruption 
---------------- 
 
¶31.  New anti-bribery legislation, implementing the 1997 OECD anti- 
bribery convention, became effective in 2001.  The new anti- 
bribery law reconciles the language of the OECD anti-bribery 
convention with the EU fraud directive and the Council of Europe 
convention on fraud.  It makes corruption by Dutch businessmen in 
landing foreign contracts a penal offense, and bribes are no 
longer deductible for corporate tax purposes.  At a national 
level, Dutch Justice and Interior Ministries have taken steps to 
sharpen regulations to combat bribery in public procurement and in 
the issuance of permits and subsidies.  Corruption scandals in the 
building sector have led NGO Transparency International to lower 
Dutch ranking on its Corruption Perception Index in 2005 from 
tenth to eleventh place. 
 
---------------------------------- 
¶B. Bilateral Investment Agreements 
---------------------------------- 
 
¶32.  The Netherlands has signed bilateral investment agreements 
with a large number of countries including: Albania, Argentina, 
Armenia, Bangladesh, Belarus, Belize, Benin, Bolivia, Bosnia 
Herzegovina, Brazil, Bulgaria, Burkina Faso, Cambodia, Cameroon, 
Cape Verde, Chili, China, Costa Rica, Croatia, Cuba, Ecuador, 
Egypt, El Salvador, Eritrea, Ethiopia, the Gambia, Georgia, Ghana, 
Guatemala, Honduras, Hong Kong, India, Indonesia, Ivory Coast, 
Jamaica, Jordan, Kazakhstan, Kenya, Kuwait, Laos, Lebanon, 
Macedonia (FYROM), Malawi, Malaysia, Mali, Mexico, Moldova, 
Mongolia, Morocco, Mozambique, Namibia, Nicaragua, Nigeria, Oman, 
Pakistan, Panama, Paraguay, Peru, the Philippines, Rumania, 
Russia, Senegal, Serbia and Montenegro, Singapore, South Africa, 
South Korea, Sudan, Sri Lanka, Surinam, Tajikistan, Tanzania, 
Thailand, Tunisia, Turkey, Uganda, Ukraine, Uruguay, Uzbekistan, 
Venezuela, Vietnam, Yemen, Zambia, and Zimbabwe. 
 
¶33.  The Netherlands adheres to OECD codes on capital movements 
and invisible transactions, with the exceptions mentioned earlier. 
It maintains a treaty of Friendship, Commerce and Navigation with 
the United States that generally provides for national treatment 
and free entry for foreign investors, with certain exceptions. 
The Netherlands is also a member of the EU single market. 
 
--------------------------------------------- -- 
¶C. OPIC and Other Investment Insurance Programs 
--------------------------------------------- -- 
 
¶34.  Dutch companies investing in developing countries through the 
establishment of subsidiaries or joint ventures can insure their 
investment against non-commercial risks with the privately-owned 
credit insurance company Atradius (formerly Gerling NCM) under the 
1969 Investment Reinsurance Act (WHI).  Atradius reinsures its 
political risks with the Ministry of Finance.  Dutch investors 
have not heavily utilized this insurance program, however, and 
efforts are underway to find ways of making the program more 
effective. 
 
¶35.  According to Article 7b of the WHI, reinsurance of investment 
in LDC's (Less Developed Countries) can be provided only if a 
satisfactory agreement has been reached with the recipient country 
regarding regulations that will apply to Dutch investment in that 
country.  The act covers procedures that will be followed in the 
case of a dispute between the investor and the host country on 
recovery of indemnity resulting from the insurance of the 
investment.  Investment in countries with which the Netherlands 
has concluded a bilateral investment treaty is eligible for 
coverage under the Investment Reinsurance Arrangement (IRA).  The 
Netherlands is a member of the Multilateral Investment Guarantee 
Agency (MIGA). 
 
-------- 
¶D. Labor 
-------- 
 
¶36.  The Dutch workforce is well educated and multilingual.  As a 
result of the current economic downturn, employment growth has 
been decelerating, resulting in an increase in the level of 
unemployment.  With an unemployment rate of 6.0 percent in the 
fourth quarter of 2005 (down from 6.3 percent during the same 
quarter in 2004), the official unemployment rate remains well 
below the EU average. 
 
¶37.  The Netherlands currently has the highest part-time work rate 
in the OECD, which has contributed to greater labor market 
flexibility.  A substantial increase in the participation of women 
in the workforce led the share of part-time workers in the total 
working population to increase to more than 40 percent.  Labor 
market participation, especially by elderly workers, is slowly but 
gradually growing from a low of 60 percent in the early 1990s to 
more than 70 percent of the potential labor pool in 2005. 
Increased labor market participation is regarded as critical to 
ensuring continued economic growth and to coping with the impact 
of a rapidly aging population. 
 
¶38.  The Dutch government's job creation policy is focused on the 
following elements: reducing the general burden of taxes and 
social security contributions, moderating growth in wage levels, 
improving productivity, strengthening the economic structure, 
reducing the regulatory burden on business, and promoting 
innovation.  In addition, the Dutch government has taken measures 
to improve labor market flexibility.  This combination of greater 
(but not full) labor market flexibility, consensual wage 
restraint, and a lowering of the tax burden and social security 
contributions is seen as the key to economic recovery. 
 
¶39.  Workers may be found through government-operated labor 
exchanges, a rapidly growing number of private employment firms, 
or directly through, for example, newspaper advertisements.  The 
official average workweek has long been 38 hours, but work- 
shortening programs (ADV) have effectively reduced the average 
workweek in some sectors of the economy (notably in banking and 
insurance) to 36 hours.  The trend towards shorter working hours 
(and early retirement) with the objective of creating jobs or 
avoiding layoffs was reversed in 2004.  Faced with sharply rising 
costs related to the rapidly aging Dutch population, government 
labor market polices are increasingly geared toward higher 
contributions by the productive labor force by expanding working 
hours.  In 2004, Parliament thus reached agreement to amend 
current labor laws, allowing the maximum workweek to increase from 
an average of 50 hours to 60 hours.  In a related move, workers' 
rights for working breaks are likely to be curtailed.  New 
legislation has also been adopted which will increase the 
flexibility in the operating hours of companies and shops. 
 
¶40.  The average contract wage increased in 2005 by 1.3 percent, 
the same as in 2004.  Average per unit wage costs in 2005 grew by 
0.4 percent after an average 2.25 percent wage cost decline in 
2004 and are expected to decrease by 0.9 percent in 2006.  The 
average wage cost rise in the Netherlands is among the lowest in 
the European Union after Germany and Austria.  Surveys of average 
annual labor costs (base pay plus employers' social security 
costs, mandatory benefits and voluntary benefits) across the EU 
rank the Netherlands ninth after countries such as the UK, 
Germany, France, Sweden and Denmark. 
 
¶41.  Benchmark reports by the European Industry Federation (UNICE) 
observe that, despite relatively high wage costs, the Netherlands 
has one of the highest levels of labor productivity in 
manufacturing.  In order to reduce growth in unit labor costs, the 
Dutch government has significantly reduced employers' costs for 
workers who earn the $1,531 per month minimum wage or slightly 
above by providing tax breaks.  It has also called on 
organizations of employers and workers to create jobs at the 
lowest end of the wage scale. 
 
¶42.  Labor/management relations in both the public and private 
sectors are generally good in a system that emphasizes the concept 
of social partnership.  Although wage bargaining in the 
Netherlands is increasingly decentralized, there still exists a 
central bargaining apparatus where labor contract guidelines are 
established.  About 75 percent of all Dutch workers are currently 
covered by union contracts that are negotiated on a sector basis 
with employers associations and, if accepted by the government, 
are extended by law to the entire sector.  Some sector labor 
contracts (e.g., road transport and haulage) are relatively 
inexpensive, while others (e.g., metal) are more costly.  To avoid 
surprises, potential investors are advised to consult with local 
trade unions to determine which, if any, labor contracts apply to 
workers in their business sector prior to making an investment 
decision.  Collective bargaining agreements negotiated in the past 
few years have, by and large, been accepted by the rank and file 
without much protest, despite only moderate wage rises.  Days lost 
to strikes are relatively low. 
 
¶43.  The Dutch economy derives its strength from free trade and a 
stable industrial climate fostered by partnership among unions, 
employers' organizations and the government.  There is substantial 
labor involvement in corporate decision-making on matters 
affecting workers.  Each company in the Netherlands with at least 
50 workers is required by law to institute a Works-Council, with 
which management must consult on a range of issues including 
investment decisions.  Legislation implementing the EU Work 
Council Directive came into effect in 1998.  The Dutch government 
also agreed to introduce legislation governing employee 
participation of European companies (companies operating in at 
least two EU member states).  Under this legislation, company 
founders and its workers must conclude an agreement on employee 
participation.  Trade unions and management are generally 
receptive to foreign investment, especially where this leads to 
improved employment possibilities and related benefits.  U.S. 
companies generally perceive works councils as contributing to 
better management-worker relations and a benefit to the company. 
 
--------------------------------- 
¶E. Foreign-Trade Zones/Free Ports 
--------------------------------- 
 
¶44.  The Netherlands has no free trade zones or free ports in the 
sense of territorial enclaves where commodities can be processed 
or reprocessed tax-free.  There are, however, a large number of 
customs warehouses (EU category A through E, but no category A and 
F or "free zones") and free warehouses at designated places and 
international airports where goods in transit may be temporarily 
stored under customs supervision.  Goods may be repacked, sorted 
or relabeled. 
 
--------------------------------------- 
¶F. Foreign Direct Investment Statistics 
--------------------------------------- 
 
¶45.  Cumulative U.S. direct investment in the Netherlands totaled 
$202 billion in 2004, according to the U.S. Bureau of Economic 
Analysis, the third highest such total worldwide (industry 
breakdown in paragraph 50 below).  The U.S. data, which include 
reinvested earnings, show an FDI inflow from the U.S. to the 
Netherlands of $13 billion in 2004. 
 
¶46.  Official Dutch government statistics on the level of FDI in 
the Netherlands (by country of origin and industry sector), and 
comparable data covering the stock of Dutch FDI abroad, are 
compiled by the Netherlands Central Bank (NB) on an ad hoc basis 
(http://dsbb.statistics.nl).  The NB's FDI inflows are based on 
sources of capital transactions rather than on actual "by country" 
investment outlays; the NB's FDI data differ substantially from 
those published by the U.S. Bureau of Economic Analysis. 
 
¶47.  The NB's FDI statistics reveal that the total stock of FDI in 
the Netherlands amounted to 368 billion euros (roughly $440 
billion), about 75 percent of GDP, at the end of 2004.  The FDI to 
GDP ratio in the Netherlands continues to be among the highest in 
the EU.  According to NB data, total net FDI inflows into the 
Netherlands continue to drop sharply, down from 13 percent of GDP 
in 2001, 6 percent in 2002, 4 percent in 2003, and almost 0 
percent in 2004.  This last figure is due to a significant 
decrease in investment from other European countries and a 
negative flow from the US of almost 8 billion euros. 
 
¶48.  Foreign companies established in the Netherlands account for 
roughly one-third of industrial production and employment in 
industry.  At the end of 2004, an estimated 31.5 percent of 
foreign establishments in the Netherlands came from the U.S., 19.5 
percent from Germany, 14 percent from the UK, 7 percent from 
Scandinavia, 17 percent from the rest of Europe, 9 percent from 
Asia and the remaining 2 percent from other non-OECD and non-EU 
countries. 
 
¶49.  The top fifteen U.S. investors in the Netherlands, ranked by 
sales (investment outlays are protected) include: Cisco Systems 
International BV, Sara Lee/DE NV, Phillip Morris Holland BV, 
Cargill BV, Esso Nederland BV (Exxon Mobil Corp.), Lucent 
Technologies Nederland BV, Sun Microsystems Nederland BV, Merck 
Sharp & Dohme BV, Dow Benelux NV, Alcoa Europe Holding BV, IBM 
Nederland NV, Daimler Chrysler Nederland NV, Hewlett-Packard 
Nederland BV, Du Pont de Nemours Nederland BV, Masterfoods Veghel 
BV. 
 
¶50.  Other prominent U.S. investors in the Netherlands include 3M 
Nederland BV, Amgen BV, Abbott Labs, Lyondell Chemical Nederland 
BV, and Starbucks, General Electric Plastics Europe BV, Honeywell 
BV, Eastman Chemical Europe BV (for testimonials, see 
www.nfia.com) 
¶51.  Extent of U.S. Investment in Selected Industries - U.S. 
Direct Investment Position in the Netherlands on a historical cost 
basis - 2004 (Millions of U.S. Dollars) 
Category (Amount) 
All Industries (201,918) 
Total Manufacturing (24,997) 
Of which: Chemicals & Allied products (12,069) 
Of which: Food & Kindred products (4,075) 
Of which: Primary & Fabricated Metals (2,591) 
Of which: Electric & Electronic Equipment (1,718) 
Of which: Transportation Equipment (1,216) 
Of which: Industrial Machinery & Equipment (851) 
Finance incl. Depository Inst. (22,529) 
Wholesale Trade (13,397) 
Information (4,431) 
Petroleum (3,850) 
Services (1,573) 
Utilities (102) 
Other Industries (131,095) 
Source: USDOC, BEA 
 
¶52.  Web Resources 
 
http://www.bakernet.com 
http://www.bea.gov 
http://www.belastingdienst.nl 
http://www.cbs.nl 
http://www.cpb.nl 
http://dsbb.statistics.nl 
http://www.eiu.com 
http://www.iasb.org 
http://www.imf.org/external/country/nld/index .htm 
http://www.nom.nl 
http://www.liof.nl 
http://www.nfia.com 
http://www.oecd.org 
http://www.oostnv.nl 
http://www.rjnet.nl 
 
BLAKEMAN