THE NETHERLANDS remains an important economic partner for Slovakia despite the negative impacts of the global economic downturn. The trade volumes on both sides of the balance have been continuously growing and so has the volume of investment into Slovakia from the Netherlands, even though the crisis has temporarily curbed that inflow.
“Economic ties between the Netherlands and Slovakia cover a broad scope of industries,” Emile M. Roest, president of the Netherlands Chamber of Commerce in the Slovak Republic told The Slovak Spectator. “Trade and investment are focused around metalworking, machinery construction, electro-technical engineering, food and beverages, logistics, financial services and real estate.”
Yvette Daoud, counsellor of the trade department at the Royal Netherlands Embassy in Bratislava, views the traditional economic cooperation as being well-established and maintaining a standard pace.
“Most Dutch companies active in Slovakia are small and middle-sized companies (SMEs),” said Daoud. “All the bigger companies are also active in Slovakia, for example Heineken, Ahold, Shell, SHV (Probugas), ING, Eureko (Union), Philips, Leaf, Aegon, Brinkers Food, and others. And since the economic environment is very much alive, new areas for cooperation are always emerging. Novel areas being explored especially include those with a view towards environmentally-friendly production, for example in reuse of CO2. Many Dutch companies are interested in coming to Slovakia and creating a win-win outcome for both Dutch and Slovak economies.”
Investments
Last year, according to preliminary data from the National Bank of Slovakia, in contrast to previous years, Slovakia posted an outflow of Dutch direct investments from Slovakia. For 2009, the NBS reported negative €14.3 million in the category of foreign direct investment (FDI) inflow and €36.8 million in the FDI outflow category. At the end of 2008, foreign direct investments from the Netherlands in Slovakia had totalled €5.34 billion, the NBS states on its website.
“Of course, the worldwide financial and economic crisis has caused FDI to decrease,” said Roest. “In many cases foreign investors tried to concentrate their financial resources in their headquarters, which may have even caused an outflow, especially if investment projects were halted just before implementation. If I am well informed, the outflow of FDI you mention is not only the case for Holland but also of other countries that have invested in Slovakia.”
According to Daoud, the Netherlands still ranks amongst the highest investors in Slovakia in terms of foreign direct investment.
A principal reason for the Netherlands ranking as the biggest foreign investor in Slovakia is the Dutch taxation system. When companies have their European headquarters based in the Netherlands, their investments in other countries are not taxed in Holland. This has drawn many global companies to the Netherlands. Legally, therefore, some investments from companies which would not otherwise be regarded as Dutch are counted as investments from the Netherlands.
Roest says Slovakia is still an interesting destination for Dutch investors.
“The crisis has put even more pressure on Dutch companies to reduce costs,” said Roest.
“What I see now is that some Dutch SMEs want to relocate, but think that India and China, for example, are too far away for them. They are looking for locations in Europe, and Slovakia is a solid option. The cost advantage is interesting, while the mentality of the people and the business culture is still much closer to the Dutch one than, for example, in Romania or Ukraine. The euro creates stability as well.”
According to Daoud, the economic crisis brought a new focus, especially for SMEs.
“It does not mean that investment would be withdrawn or that investors are not interested in Slovakia,” she said. “Mostly, companies are more hesitant to take new risks and prefer to consolidate. The structure of investors [in Slovakia], to the best of our knowledge, has not changed due to the crisis.
With regards to advantages that Dutch investors see in doing businesses in Slovakia, Daoud lists competitive labour costs, a favourable tax system, and easy and quick requirements for establishing a company.
“However, due to language problems it is important for a Dutch investor to find a Slovak counterpart or an employee to guide them through the system,” Daoud said. “Since this is easier for bigger investors who can manage this by themselves, our embassy here mainly guides SMEs successfully into the Slovak economy.”
Roest said that when doing business in a foreign country it is more difficult than in the investor’s home country to assess whether a potential business partner is reliable. This especially matters for SMEs which in the Netherlands do a lot of business on the basis of mutual trust. Many companies work together for many years through generations of owners, and even do business based on verbal agreements only. He said that when working internationally it is more difficult to check references and to completely understand another person by his or her language or manners.
The Netherlands Chamber of Commerce is also helping its members to face the challenges flowing from the economic crisis.
“We organise a lot of activities where our members – managers and entrepreneurs – can meet each other and other business people from outside the chamber,” said Roest. “This provides opportunities for exchanging experiences on how they are dealing with the crisis. Further, we also organise seminars on this topic. Finally, this networking can help in finding new customers.”
Prospects for cooperation
Daoud sees logistics, warehousing, and transport services connected with the Port of Rotterdam as strong points of Dutch companies and as prospective for further cooperation between the two countries. But she adds that the Netherlands also has a tradition in energy-saving production systems, robotics and water management and these also have good prospects.
“The aim is always to define a need in the Netherlands or in Slovakia and to see if the other can offer the solution, so that both economies profit,” said Daoud.
Roest thinks that all established sectors of Slovak-Dutch cooperation continue to offer good prospects, as do several areas that require further advancement in Slovakia, such as tourism, clean energy, information and communication technologies, business services, and research and development.
“Slovakia is eager to develop these sectors and has a great potential, not only as a market but also as a location with a qualified labour force,” said Roest. “In the Netherlands a lot of know-how is available, but it is often difficult to find technically qualified labour, especially for small and medium-sized companies. So cooperation could be fruitful for both.”
Bilateral trade
The trade balance between Slovakia and the Netherlands has been strongly in favour of Slovakia for several years. Daoud explained to The Slovak Spectator that the reason for this surplus is the export of assembled products from Slovakia to the Netherlands when Dutch companies have outsourced their production to Slovakia, mainly in the mechanical engineering and food industries. The Netherlands reported a negative trade balance with Slovakia last year of €259.231 million.
“The trade volumes on both sides of this balance are continuously growing and so is the volume of investment from the Netherlands to Slovakia,” said Daoud. “For Slovaks, the Netherlands is the 9th most important export territory, despite the crisis.”
Regarding the most traded commodities, Roest said Slovakia exports mainly televisions and cars to the Netherlands which is logical because of the production facilities in Slovakia. Other commodities include chemicals, machines and agricultural products. Slovakia imports pharmaceuticals, equipment related to energy production, metal processing machines, animals and agricultural products from Holland.
“The results of bilateral trade in 2009 fell compared to 2008,” said Roest. “The first months in 2010 show a very positive result in bilateral trade; in some case we can see a 100-percent increase compared to the same months in 2009.”
