Maintaining RI-Dutch business relations

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.