Dutch Experience Can Be Useful to Kazakhstan

The Netherlands continues to be very attractive for foreign companies, which either choose our country as a location to do business from and/or to establish research centres. What is behind this?

1372257615We offer stability and predictability of legislation: rule of law must prevail, which is appreciated by international investors. In addition, we have concluded treaties on investment protection and double taxation avoidance with most countries in the world. This makes us a destination favourable for the registration of holdings. In fact, we put “headquarters” as a priority of our investment attraction policy.

This “headquarters” priority is important for the nine top sectors of the Dutch Government (Agri-food, Chemicals, Creative industry, Energy, High Tech, Horticulture and propagation materials, Life sciences and health, Logistics, Water). Similar to Kazakhstan we have priority sectors receiving special attention from the Government. Some are the same as Kazakhstan: chemicals industry, energy sector, transport and infrastructure, agriculture and food.

Other priority sectors in the Netherlands include creative industries, high tech, life sciences and water compared to tourism industry, light industry, metallurgy, and construction industry enjoying preferential treatment from the Kazakhstan Government.

In a rivalry for an investor, Holland underlines a number of competitive advantages it offers to its partners:

• Strategic location in Europe serving markets within Europe, the Middle East and Africa. The central geographical position of the Netherlands, combined with accessibility and an excellent infrastructure, are only some of the reasons why numerous European, American and Asian companies have established their facilities in the Netherlands.

• A competitive fiscal climate, which may be very beneficial in international tax planning. Our rates are comparable to those offered by Kazakhstan: a corporate income tax rate of 20-25 percent. In addition, the Dutch ruling practice provides clarity and certainty in advance on future tax positions. Furthermore, in respect of research and development (R&D), companies can benefit from an effective corporate tax rate of only 5 percent, as well as an R&D allowance taking the form of wage tax and social security contribution deductions.

• A superior logistics and technology infrastructure. We are proud to offer our partners the services of the Port of Rotterdam, Europe’s largest seaport, and Schiphol Airport, Europe’s best airport for both cargo and passenger transport.

• A conducive innovation environment. Our tax system, well organized public-private partnerships offer a favourable environment for companies looking for business acceleration. One study our experience with Eindhoven, an equivalent of Silicon Valley in Europe, to get the idea.

• A solid workforce. Various studies and surveys praise highly educated, flexible and motivated workforces in Europe. Dutch professionals are also among the most multilingual in the world, enabling them to successfully operate in companies across any industry, serving customers throughout the continents.

We have also worked to create the necessary mechanisms to promote investments. The Netherlands Foreign Investment Agency was established for the specific purpose of helping and advising companies by providing them with advice, information and practical assistance, quickly and on a confidential basis, as well as providing them access to a broad network of business partners and government institutions, all free of charge.

Founded 35 years ago, the NFIA is an operational unit of the Dutch Ministry of Economic Affairs. Throughout the years it has supported thousands of companies from all over the world to successfully establish their business in the Netherlands.

NFIA support starts in the country of origin. To that end, the NFIA has offices in Europe (HQ in The Hague, London, Istanbul), the US (New York, Boston, Chicago, Atlanta, San Francisco), Asia (Tokyo, Osaka, Taipei, Shanghai, Beijing, Guangzhou, Seoul, Delhi, Mumbai, Singapore and Kuala Lumpur), the Middle East (Dubai, Tel Aviv) and Brazil (São Paulo). In addition, the NFIA closely cooperates with Dutch embassies, consulates-general and other organizations that represent the Dutch government around the world.)

I have described what makes the Dutch environment attractive for foreign investors and I would like to add that the Dutch economy is structurally based upon the “triangle” dialogue between government, employers and employees. This social agreement allows creating optimal cooperation between the three social partners.

The Netherlands have a strong services sector and excellent industries like life sciences, electronics, food, flowers, chemical industry, water technology and engineering. However, it did not happen overnight. I would say it is rather a result of a pragmatic policy with continuous commitment to sustainability founded on history-built tradition of trade and international commerce. In addition, the Netherlands developed its economy more rapidly when the huge Groningen gas field was discovered in 1959. The Netherlands has developed for centuries through industrial revolutions and difficult and historic times. Kazakhstan has started only since 21 years, but can favour, learn and adopt of industrial development of other nations.

What could Kazakhstan do to improve the investment climate?

• Develop Corporate Social Responsibility (CSR) along the OECD guidelines: CSR covers a broad range of modalities contributing to society’s long-term prosperity by a cautious balance between Profit, People and Planet. CSR respects human rights, obeys international labour standards and bans forced labour, child labour, corruption, discrimination, and connects business with important issues of the society, like transparency and waste recycling.

• The Foreign Investors Council under the President is a high profile and respected institution. It is a good platform for a dialogue, however, question is whether it could be improved as a platform to contribute more concretely to the investment climate.

• I have heard of the plans to establish a National Investors Council under the President. I have also heard of the plans to merge the Chamber of Commerce and the Union of Entrepreneurs into one entity. This is a positive development, but the companies should be free to make their own decision about the membership. If the new entity proves its efficiency, companies will join.

• Introduction of an investment ombudsman is a good idea. Enforcement is, however, important for a central body to oversee the application of the legislation, with authority to overrule, also in matters of visa, corruption and administrative problems.

• Organize a free discussion platform for employers, government and employees, and between employers and employees to establish an environment conducive for negotiations and compromise and step aside letting the parties to work out mutual goals and commitments.

• In anticipation of accession to the WTO, ensure application of their standards.

• Develop the service sector in a proactive way.

• Provide English language training nationwide.

• Remove visa obstacles.

We have to realize that the most important issue remains a change in mentality; this is always the biggest challenge, because the human nature is prone to stubbornness.

The Dutch have an expression “The farmer doesn’t like what he doesn’t know”. We have something with farmers and farming, but this is not only applicable to farmers, but very much to anybody. To overcome this, we need a learning process.

Investors want to feel comfortable and at ease. It is important to realize that to attract them, you need to serve. To provide adequate services and to have real policy implementation are the main and most important challenges.

The author is the Dutch Ambassador to Kazakhstan.

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