The Netherlands is a world player when it comes to the head offices of multinational companies. But a new report warns that the country must improve its commercial climate or risk losing its position. *By Wendy Braanker.

The Netherlands is a world player when it comes to the head offices of multinational companies. But the Boston Consulting Group (BCG) warns that the Netherlands could lose its position, not just as a result of mergers and takeovers, but also because businesses actively seek out the best location to base their headquarters. And that is not always the Netherlands.

The Netherlands takes second place, right behind Switzerland, when it comes to the number of head offices of internationally operating companies in its cities. According to the report by the Boston Consulting Group sixteen multinational companies have their headquarters in the Netherlands and another fourteen have their European head office here.

This means the Netherlands does much better than Great Britain, Germany and many other large European countries. However, the question is whether the Netherlands will be able to keep its prime position. According to the BCG report:
"The Netherlands relies heavily on the past and has few new top locations on offer."
Mobile employees
The new world players in recent decennia mainly come from Asia. The list of the 500 largest companies in the world increasingly includes businesses from India and China. Within Europe, the Netherlands feels the competition from London and southern European countries. BCG researcher Kirsten Nienhuis says that these places are more attractive to mobile employees.

The data in the report are somewhat out-of-date, as the Netherlands no longer has sixteen, but fourteen headquarters of multinationals. The largest Dutch bank ABN Amro has meanwhile been taken over by bank consortium Fortis, Bank of Scotland and Santander. The head office of steel company Mittal Steel relocated at the end of 2007 from Rotterdam to Luxembourg. Of the sixteen multinational head offices listed in the report two have therefore already left. And BCG fears more may follow.

The departure of these head offices results in a painful "transitional period" according to the international operating consultant BCG.
"People have to look for a new job, buildings are left empty and service companies get into difficulties."

There is a lot at stake: jobs, employment, economic growth and therefore tax income as well. BCG has calculated that the sixteen international head offices and fourteen European ones are worth more than 13 billion euros. That is around 2.5 percent of the Dutch national income, providing 150,000 jobs directly and indirectly.

Seduce
So it is high time the Netherlands did something about it. The Boston Consulting Group wants to see a "new industrial policy to seduce companies into keeping or basing their head offices here". The commercial climate has to be structurally improved.

In concrete terms, the consultant means measures to encourage the clustering of companies (according to sector or expertise). Successful clusters are very attractive. For instance the region of Wageningen has been called interesting to companies involved in developments in the food industry, partly because of the university of agriculture in Wageningen.

Unorthodox approach
The region of Eindhoven is attractive to companies developing new technologies, and Amsterdam has grown into a decision-making centre. Ahold, Philips, Akzo Nobel, ING and several other companies have their head office in the capital.
Sometimes an unorthodox approach is needed to effectively stimulate clustering within the Netherlands. One of the ideas BCG has is to concentrate certain university courses in one city in the Netherlands to make the location more attractive to businesses.

"When courses are spread out, there is less concentration of expertise."
Another point for improvement, according to BCG, is a better social climate. The Netherlands could be made much more attractive to internationally mobile employees. Then businesses would be more inclined to locate their head offices here. After all, highly trained well-educated employees are scarce.

"When you improve the social climate, you have to think of the things that are important to everybody, such as good education, plenty of greenery, an accessible housing market and little pollution."

To further improve the social climate for expats, the consultant believes a subsidised school should be set up for certain groups of expats. For example a Chinese school could be opened. Many fast-growing companies come from China and these companies usually need a European head office.

"The Netherlands would be an attractive location if Chinese expats could send their children to school here for a few years."

 *RNW translation (nc)

2 April 2008

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