Maintaining RI-Dutch business relations

Trade and investment relations between Indonesia and the Netherlands are exactly 400 years old this year. This long history explains the strong economic ties between the two countries. Bilateral trade now totals US$1.6 billion per year. Indonesian exports to the Netherlands are $1 billion, partially reflecting the important distribution function that the Netherlands has for the European market.

The Netherlands are the seventh largest foreign investor in Indonesia, with investments totaling over $11.5 billion. Netherlands companies in Indonesia are active in many industries, such as food, including Friesland Dairy Foods (better known as Susu Bendera), Nutricia, Unilever and Heineken; chemicals, AK20 Nobel and DSM; banking, ABN Amro, ING and Rabobank; food processing; textile printing machines; construction, Ballast Nedam, Decorient and Boskalis; as well as many other fields. And there is, of course, Philips, one of the largest foreign investors in Indonesia. Annual Dutch approved investments in Indonesia totaled $320 million in 1997.

For companies in the Netherlands that want to start a business in Asia, Indonesia is very often one of the first countries they look at. At least 5 percent of the Netherlands' population has family ties with Indonesia. Despite the current economic situation, the number of Netherlands' companies interested in entering the market is not yet significantly different from previous years. They are, however, looking more into local production than before.

Both the presence and the interests of Netherlands' businesses in Indonesia reflect the structure of the Dutch economy: a large agribusiness sector with deep specializations and supplying industries in a wide range of subsectors, a strong cluster of chemicals and energy-related industries and a strong construction sector, focused mainly on water infrastructure (the construction of ports and waterways), and some highly specialized environmental technology companies.

Trade and investment

The Dutch economy is booming. At a growth of 3.8 percent per year, the Netherlands is one of Europe's star performers. After many years of economic struggling, characterized by the vicious circle of excessive social security spending, rising government budget deficits and rising unemployment, an important turnaround as been realized. Two faces have created this turnaround: * Drastic cutting of social security benefits, especially the benefits for unemployment and sickness. Whereas the benefits used to amount to 90 percent of the income last earned, these benefits have been reduced to less than 70 percent. Furthermore, the conditions for access to these benefits have been tightened, and the time allowed to make use of these benefits has been reduced to three years, creating a strong incentive for people to reenter the labor market. Despite heavy protests, this reversal broke the vicious circle and led to less government spending, reduced taxation and more employment. * National agreement between employers and employee organizations to keep wage increases moderate. This has resulted in labor costs in the Netherlands now being 10 percent lower than in Belgium and even 32 percent lower than in Germany, which has contributed to employment. Over the last four years, 400,000 new jobs were created and unemployment was reduced from over 9 percent in the 1980s, to less than 6 percent now.

These developments have made the Netherlands meet the strict monetary and fiscal conditions for participating in the common European currency euro, which will be introduced on January 1, 1999.

Indonesian-Netherlands Association

The Indonesian-Netherlands Association (INA) Chamber of Commerce supports the development of economic ties between Indonesia and the Netherlands. First of all, it helps Indonesian exporters find their way into the Dutch market. Information on virtually every company and on many markets in the Netherlands is available at INA. The Netherlands is an attractive market in itself because of the rapidly rising wealth of its 15 million people and its dynamic and internationally very open business environment.

The Netherlands is also an important starting point and distribution center for Asian companies entering the European market. More than 200 million consumers in Europe can be reached within 24 hours after goods have arrived in the Port of Rotterdam, the world's busiest port with an annual turnover of about 300 million tonnes, or Amsterdam's Schiphol Airport, Europe's fourth largest airport.

The Port of Rotterdam handles all kinds of cargo, but is especially well equipped for containers, forest products, dry and liquid bulk (coal, ore and oil) and food. INA helps about 100 Indonesian companies each year to do business in the Netherlands. A lot of information is available at INA and it helps establish contacts in the Netherlands.

INA has a number of support facilities for Indonesian-Dutch cooperation. The two most import of these are: * Through Indonestec, a joint technological research of Indonesian and Dutch companies strongly subsidized. Last year, some successful cooperation projects were started between Indonesia and Dutch companies. Production facilities were modernized with the help of Indonestec. In another project, technology was developed to make vegetable crops more resistant to diseases. * The Netherlands' Management Cooperation Program (NMCP) makes experienced, retired, Dutch managers available at very low cost to Indonesian companies, to assist them in developing and implementing new production systems, or other kinds of management support. In 1997, almost 50 experts were placed with various companies throughout Indonesia to provide a very broad range of support. In 1998, the aim is to place 60 experts in Indonesia. They can be particularly helpful in engineering production processes to make them more competitive on the international market. The formula of sending retired managers to emerging countries has proven extremely successful worldwide, and with over 4,000 experts available in 200 different fields of expertise, this program is the largest of its kind in the world.

There are many other subsidized facilities available to support almost all aspects of Indonesian-Netherlands business, ranging from company matching and feasibility studies to equity capital.