2006 INVESTMENT CLIMATE STATEMENT - THE NETHERLANDS

UNCLAS SECTION 01 OF 09 THE HAGUE 000126

SIPDIS

STATE FOR EB/IFD/OIA (JNHATCHER)

STATE ALSO FOR EUR/UBI, EUR/ERA

TREASURY FOR OASIA/IMI/VATUKORALA

USDOC FOR 4212/USFCS/MAC/OWE/DCALVERT

PARIS FOR USOECD

E.O. 12958: N/A
TAGS: EINV EFIN ETRD ELAB KTDB NL OPIC USTR
SUBJECT: 2006 INVESTMENT CLIMATE STATEMENT - THE NETHERLANDS

REF: STATE 202943


1. The following transmits the draft 2006 Investment Climate
Statement (ICS) for the Netherlands. This update corresponds with
Chapter VI in the FY 2006 Country Commercial Guide. The full text
of the ICS has been forwarded by e-mail to EUR/IFD/OIA to the
attention of J. Nathaniel Hatcher and Paul A. Brown. Any
questions regarding the Netherlands ICS should be directed to
Jasper Jorritsma in Embassy The Hague's Economic Section, at 011-
31-70-310-2276, or by e-mail at jorritsmaj@state.gov

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A.1. Openness to Foreign Investment
--------------


2. The Netherlands' trade and investment policy is among the most
open in the world. With combined merchandise exports and imports
virtually equal to GDP, the Dutch economy is one of the most
internationally oriented in the world. The Netherlands remains
among the world's five largest suppliers of investment capital in
terms of outward FDI stock. The Netherlands also ranks fifth
among global recipients of FDI (in terms of inward stock). The
government of the Netherlands maintains liberal policies toward
foreign direct investment and adheres to OECD investment codes.


3. The only Dutch exception to the principle of national
treatment is in air transport. As in the U.S., nationality and
ownership requirements apply for licenses to operate an airline,
and the right to cabotage is reserved to national carriers. With
the exception of a few public and private monopolies from which
foreign and domestic private investment is banned, foreign firms
are able to invest in any sector and are entitled under the law to
equal treatment with domestic firms. These monopolies include the
Netherlands Central Bank, the Netherlands railways, and public
broadcasting. While the national airport Amsterdam Schiphol is
currently included in this list, the Dutch state intends to
privatize a minority share of the airport in the course of 2006


4. The Dutch comply with European Union reciprocity provisions in
banking and investment services and in a few other areas.
Provisions related to government incentives, national rules of
incorporation, and access to the capital market are administered
on a non-discriminatory basis. Business laws and regulations
conform to international legal practices and standards and apply
equally to foreign and Dutch companies. Companies established in
the Netherlands are advised to follow the accounting guidelines
published by the Dutch Accounting Standards Board (DASB)
(www.rjnet.nl). Companies listed in the Netherlands are required
to follow the International Financial Reporting Standards (IFRS)
issued by the International Accounting Standards Board
(www.iasb.org). Companies currently are not authorized to use
U.S. accounting rules (US GAAP) in the Netherlands. Companies
looking to invest in the Netherlands are advised to contact the
tax service's APA/ATR ruling department (www.belastingdienst.nl)
to get an advance ruling on the application of pertaining tax
laws.


5. Structural and regulatory reforms have long been an integral
part of a major reorientation of Dutch economic policy. Product
market competition is strengthened through programs aimed at
stimulating market forces, liberalization, deregulation and
legislative quality combined with a tightening of competition
policy. The government has reduced its role in the economy by
introducing market forces in formerly public utility sectors.
While the gas and electricity production sectors are gradually
being opened up to foreign competition, government-controlled
entities retain dominant positions in gas and electricity
distribution, rail transport and the water sector. The government
is reducing its share in the country's leading telecommunications
provider and sold its controlling ('golden') share on December
16th, 2005.


6. Despite relatively high Dutch labor costs and labor market
imperfections (complex labor laws resulting in restrictive hiring
and firing practices for employers),foreign investors have found
the Netherlands a favorable location for their European investment
projects. The Dutch actively solicit foreign investment through
the Netherlands Foreign Investment Agency (NFIA) (www.nfia.com)
and related regional economic development companies. Foreign
direct investment is concentrated in growth areas including
information and communication technology, biotechnology, medical
technology and food processing. Investment projects are
predominantly in contract manufacturing (high-tech assembly),
distribution, and value-added logistics. International annual
benchmark studies identify the Netherlands as one of the most
popular locations for foreign Information and Communication
Technology (ICT) in Europe, while also ranking the Dutch
biotechnology sector among Europe's elite.


7. The Netherlands ranks among the countries with the largest
number of broadband connections and the highest Internet
penetration in the European Union. According to the Economic
Intelligence Unit (EIU) e-commerce readiness survey (www.eiu.com),
the Netherlands ranks eighth in the world thanks to continued
rollout of broadband services, internet-related legislation and
government broadband programs. In 2004, the government embarked
on a broadband action program aimed at creating a regulatory
framework that will stimulate and facilitate broadband
development.


8. The Netherlands is particularly attractive for the
establishment of European headquarters, European distribution
centers, call centers and shared services centers. The port of
Rotterdam serves as a link between international shipping lines
and the European hinterland. Investment surveys indicate that
U.S. investors favor the Netherlands as a location for European
Distribution Centers (EDCs). An estimated 60 percent of U.S.
companies with a distribution center in Europe have located it in
the Netherlands. Examples include Cisco, Honeywell, IBM, ABM,
Seagate, Western Digital, 3M, Amgen, Cannondale, Polaroid, Rank
Xerox, and Medtronic. Following the introduction in the late
1990s of a more friendly tax regime, the number of European
headquarters established in the Netherlands increased sharply to
nearly ninety.


9. Foreign investors find the Netherlands attractive because of
its stable political and macroeconomic climate, highly developed
financial sector, the presence of a well-educated and productive
labor force, and the high quality of the physical and
communications infrastructure.


10. Various international surveys rank the Netherlands among the
countries in the industrialized world with the most competitive
economies and most favorable business and investment climate. The
World Economic Forum (WEF) Growth Competitiveness Index puts the
Netherlands eleventh among the world's most competitive economies.
The Netherlands continues to rank ninth on the WEF Business
Competitiveness Index. The Economist Intelligence Unit (EIU)
ranks the Netherlands sixth on its 2005 global business
environment ranking for the period up to 2009. The World Bank
ranks the Netherlands twenty-fourth in terms of the ease of doing
business in its Doing Business report, noting it as one of the top
dozen reformers in the world.


11. The Netherlands is known for its favorable fiscal climate.
Precise tax guidance given to foreign investors provides
transparency with regard to long-term tax obligations. To this
end, Advanced Tax Rulings (ATR),in combination with Advanced
Pricing Agreements (APA),are guarantees given by local tax
inspectors with regard to long-term tax commitments for a
particular acquisition or green field operation.


12. Despite predominantly favorable business and investment
conditions, other international organizations, including the World
Economic Forum, flag an erosion of its competitive position as a
major challenge confronting the Netherlands. More specifically,
relatively high wage costs, relatively heavy administrative
burden, structural imperfections in the road infrastructure, and a
less than flexible labor market are cited as potential bottlenecks
in attracting foreign direct investment to the Netherlands.


13. Sharper tax competition among EU Member States and measures
by the European Commission aimed against national tax incentives
with a subsidy element are also likely to affect the Dutch
competitive environment. To this end, the Corporate Financing
Arrangement (CFA) will be abolished in 2007 as a government
subsidy harmful to EU tax competition.


14. There are no formal foreign investment screening mechanisms,
and 100 percent foreign ownership is permitted in those sectors
open to foreign investment. The rules on acquisition, mergers,
takeovers, and reinvestment are nondiscriminatory. All firms must
conform to certain rules of conduct on mergers and takeovers. The
Social Economic Council (SER),an official advisory body composed
of representatives of government, business and labor, administers
Dutch merger and takeover rules. SER rules are intended, first
and foremost, to protect the interests of stakeholders and
employees. They include requirements for the timely announcement
of merger and takeover plans and for discussions with trade
unions. Surveys among European companies rank the Netherlands
second after the United Kingdom for the transparency of its
corporate governance practices. Despite the supposedly open
policy, elaborate corporate protective measures against hostile
takeovers may de facto block acquisitions or takeovers by Dutch
and foreign investors. The Dutch are working to further reduce
these barriers within the framework of the EU's Financial Services
Action Plan (FSAP) within the next few years. A corporate
governance code of conduct that seeks to improve transparency in
shareholder/management relations, as well as the structure and
accountability of management, took effect in 2004. The code of
conduct provides for a marginal reduction of takeover defenses.


15. The Netherlands maintains no preferential or discriminatory
export or import policies with the exception of those that result
from its membership in the European Union. The Dutch also abide
by all internationally agreed strategic trade controls, (e.g. the
Wassenaar Agreement). In summary, Dutch domestic restrictions on
foreign investment remain minimal and no new ones are being
planned. The Dutch investment climate should continue as it is,
but will increasingly be influenced by EU policies.

A.2. Conversion and Transfer Policies
--------------


16. There are no restrictions on the conversion or repatriation
of capital and earnings (including branch profits, dividends,
interest, royalties),or management and technical service fees,
with the exception of the nominal exchange license requirement for
non-resident firms.

A.3. Expropriation and Compensation
--------------


17. The Netherlands maintains strong protection on all types of
property, including private property, and the right of citizens to
own and use property. Expropriation would only take place in the
public interest and with adequate compensation. We have no reason
to believe that it would be undertaken in a discriminatory manner
or in violation of established principles of international law.
Post is unaware of any recent expropriation claims involving the
Dutch government and U.S. or other foreign-owned property.

A4. Dispute Settlement
--------------


18. Post is not aware of any investment dispute involving the
Dutch government and U.S. or other foreign companies. The
Netherlands is a signatory to the International Convention on
Investment Disputes and a member of the International Center for
the Settlement of Investment Disputes (ICSID). Although the
central government has no rules regarding withdrawals of
investment, occasionally trade unions go to court over company
closures. This has occurred in the case of both domestic and
foreign-owned firms.

A.5. Performance Requirements and Incentives
--------------


19. There are no trade-related investment performance
requirements in the Netherlands. General requirements to qualify
for investment subsidy schemes apply equally to domestic and
foreign investors. There are no requirements for employment of
local capital or managerial personnel. In practice, however,
almost all chief executives of major U.S. subsidiaries in the
Netherlands are Dutch or other EU nationals, because skilled
managers are available at a cost less than that of posting an
American abroad. In the case of staff personnel, however, Dutch
(or other EU nationals) must be employed unless firms can
demonstrate that a Dutch national cannot perform the job in
question. This burden is eased by an existing provision that
prior employment with the firm of at least two and a half years
amounts to a presumption of unique qualifications for the job.


20. Limited, targeted investment incentives have long been a well-
publicized tool of Dutch economic policy to facilitate economic
restructuring and to promote energy conservation, regional
development, environmental protection, R&D, and other national
socio-economic goals. Subsidies and incentives are available to
foreign and domestic firms alike and are spelled out in detailed
regulations. Subsidies are in the form of tax credits that are
usually disbursed through corporate tax rebates or direct cash
payments in the event of no tax liability.


21. Reflecting the European Union's limits on direct government
support, the Regional Investment Projects Subsidies Scheme (IPR)
currently is the only major regional investment incentive still
available to investors. The IPR aims to encourage corporate
investment in parts of the country with a weaker economic
structure (predominantly in the North, the East and the far South
of the country) by giving an investment grant for new investments
(industrial buildings and fixed assets) or the acquisition of
land. Investment costs qualifying for IPR grants include costs
incurred for the acquisition of land, necessary buildings and
durable equipment. IPR cash grants of up to twenty percent of
actual investment costs for new manufacturing operations, and
fifteen percent on expanding operations, are available up to a
maximum of approximately $15 million per project for new projects
and $19 million for expanding operations. Because different
criteria for regional economic development apply in an expanded EU-
25, Dutch investment subsidies under the IPR will be phased out in
2006 (for more information on regional investment grants consult
www.bakernet.com, www.nom.nl, www.oostnv.nl or www.liof.nl).


22. Local investment subsidies are sometimes also available from
regional development companies. Regional non-tax incentives are
available in the form of cash grants, low-interest loans, and
local government participation and export guarantees for selected
areas. The growing number of tax incentives offered to investors
in other EU countries has prompted the government to look into the
possibilities of expanding existing tax instruments to improve
aggressively the Dutch fiscal climate vis-a-vis that in competitor
countries like Belgium, Germany and Ireland.

A.6. Right to Private Ownership and Establishment
-------------- --------------


23. There are full rights of private ownership and establishment
of business enterprises in the Netherlands, except in the monopoly
sectors noted in the introduction. Despite the fact that service
providers must often meet stringent licensing requirements,
numerous enterprises in the Netherlands are 100 percent owned by
foreign firms, including many from the United States. Licenses
are granted on the basis of competitive equality.

A.7. Protection of Property Rights
--------------


24. The Netherlands has a generally good set of legislation and
regulations that protect intellectual property rights (IPR).
However, the enforcement of anti-piracy laws remains a concern to
producers of software and digital media (see below). The
Netherlands belongs to the World Intellectual Property
Organization (WIPO),is a signatory of the Paris Convention for
the Protection of Industrial Property, and conforms to accepted
international practice for the protection of technology and
trademarks. The Dutch have been slow in implementing EU
directives bringing domestic legislation in line with the WIPO
1996 Copyright Treaty (WCT),the WIPO Performance and Phonogram
Treaty (WPPT),and the EU 98/44/EC directive. There is consensus
among policy makers on the need for measures aimed at raising
awareness of IPR rules and regulations and to strengthen
enforcement.


25. Patents for foreign investors are granted retroactively to
the date of the original filing in the home country, provided the
application is made through a Dutch patent lawyer within one year
of the original filing date. Patents are valid for 20 years.
Legal procedures exist for compulsory licensing if the patent is
inadequately used after a period of three years, but these
procedures have rarely been invoked. Since the Netherlands and
the United States are both parties to the Patent Cooperation
Treaty (PCT) of 1970, patent rights in the Netherlands may be
obtained if a PCT application is used. The Netherlands is a
signatory of the European Patent Convention, which provides for a
centralized Europe-wide patent protection system. This convention
has simplified the process for obtaining patent protection in EU
Member States. Infringement proceedings remain within the
jurisdiction of the national courts, which could result in
divergent interpretations detrimental to U.S. investors and
exporters.


26. The enforcement of anti-piracy laws remains a concern to
producers of software, audio and videotapes and textbooks from the
United States. Organized optical disc software piracy and
ecommerce piracy are also of major concern to the Dutch. Annual
losses to the U.S. motion picture industry due to audiovisual
piracy in the Netherlands have been estimated at tens of millions
of dollars annually. The Dutch government has recognized the need
to protect intellectual property rights and law enforcement
personnel have worked with industry associations to find and seize
pirated software. Dutch IPR legislation currently in place
explicitly includes computer software as intellectual property
under the copyright statutes.

A.8. Transparency of Regulatory System
--------------


27. Laws and regulations that affect direct investment, such as
environmental rules, health and safety regulations, etc., are non-
discriminatory and apply equally to foreign and domestic firms.
Dutch tax law facilitates attracting non-Dutch personnel to live
and work in the Netherlands. Currently, expatriate staff
transferred to the Netherlands on a temporary contract can make
use of the 30 percent ruling. The ruling provides that 30 percent
of his/her gross employment income in the Netherlands is not
taxable under Dutch personal income tax laws. This treatment is
granted for a maximum of ten years. Furthermore, the expatriate
is considered a non-resident, meaning that only income from Dutch
sources is taxed in the Netherlands.


28. Dutch corporations and branches of foreign corporations
currently are subject to a corporate tax rate of 29.6 percent
(profits of up to 22,689 euros (roughly $27,500) are taxed at a
rate of 25.5 percent) on taxable profits, which puts the
Netherlands in the top half of the corporate tax bracket in the
EU. Dutch corporate taxation generally allows for the exemption
of dividends and capital gains derived from a foreign subsidiary
(participation exemption). Surveys into the corporate tax
structure of EU Member States observe that both the corporate tax
rate and the effective corporate tax rate in the Netherlands are
higher than the European average. Nevertheless, the Dutch
corporate tax structure ranks among the most competitive in Europe
given other beneficial tax measures. The corporate tax rate will
be reduced further to 29.1 percent (25 percent respectively) by

2007. No local Dutch income taxes are levied on corporations.
Furthermore, the Netherlands maintains an extensive network of tax
treaties with a large number of countries. A protocol amending
the U.S.-Netherlands 1992 tax treaty took effect on December 28,

2004. The protocol modernizes anti-abuse rules to prevent
exploitation of the treaty by third-country nationals. The
protocol also eliminates source-country withholding taxes on
certain inter-company dividends, thereby removing a remaining
barrier to cross-border investment in both directions.

A.9. Efficient Capital Markets and Portfolio Investment
-------------- --------------


29. Dutch financial markets are fully developed and operate at
market rates, facilitating the free flow of financial resources.
The Netherlands is an international financial center for the
foreign exchange market and for eurobonds and bullion trade. The
flexibility that foreign companies enjoy in conducting business in
the Netherlands extends into the area of currency and foreign
exchange. There are no restrictions on foreign investors' access
to sources of local finance.

A.10. Political Violence
--------------


30. The Netherlands is noted for its stable political
environment. Although political violence rarely occurs in the
highly consensus-oriented Dutch society, a number of politically
and religiously inspired acts of violence have recently led Dutch
politicians to review integration policies. The Dutch economy
derives much of its strength from a stable industrial climate
fostered by partnership between unions, employers' organizations
and the government. Strikes are rarely regarded as the primary
means to settle labor disputes, and labor strikes in recent
decades have been very rare.

A.11. Corruption
--------------


31. New anti-bribery legislation, implementing the 1997 OECD anti-
bribery convention, became effective in 2001. The new anti-
bribery law reconciles the language of the OECD anti-bribery
convention with the EU fraud directive and the Council of Europe
convention on fraud. It makes corruption by Dutch businessmen in
landing foreign contracts a penal offense, and bribes are no
longer deductible for corporate tax purposes. At a national
level, Dutch Justice and Interior Ministries have taken steps to
sharpen regulations to combat bribery in public procurement and in
the issuance of permits and subsidies. Corruption scandals in the
building sector have led NGO Transparency International to lower
Dutch ranking on its Corruption Perception Index in 2005 from
tenth to eleventh place.

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B. Bilateral Investment Agreements
--------------


32. The Netherlands has signed bilateral investment agreements
with a large number of countries including: Albania, Argentina,
Armenia, Bangladesh, Belarus, Belize, Benin, Bolivia, Bosnia
Herzegovina, Brazil, Bulgaria, Burkina Faso, Cambodia, Cameroon,
Cape Verde, Chili, China, Costa Rica, Croatia, Cuba, Ecuador,
Egypt, El Salvador, Eritrea, Ethiopia, the Gambia, Georgia, Ghana,
Guatemala, Honduras, Hong Kong, India, Indonesia, Ivory Coast,
Jamaica, Jordan, Kazakhstan, Kenya, Kuwait, Laos, Lebanon,
Macedonia (FYROM),Malawi, Malaysia, Mali, Mexico, Moldova,
Mongolia, Morocco, Mozambique, Namibia, Nicaragua, Nigeria, Oman,
Pakistan, Panama, Paraguay, Peru, the Philippines, Rumania,
Russia, Senegal, Serbia and Montenegro, Singapore, South Africa,
South Korea, Sudan, Sri Lanka, Surinam, Tajikistan, Tanzania,
Thailand, Tunisia, Turkey, Uganda, Ukraine, Uruguay, Uzbekistan,
Venezuela, Vietnam, Yemen, Zambia, and Zimbabwe.


33. The Netherlands adheres to OECD codes on capital movements
and invisible transactions, with the exceptions mentioned earlier.
It maintains a treaty of Friendship, Commerce and Navigation with
the United States that generally provides for national treatment
and free entry for foreign investors, with certain exceptions.
The Netherlands is also a member of the EU single market.

-------------- --

C. OPIC and Other Investment Insurance Programs
-------------- --


34. Dutch companies investing in developing countries through the
establishment of subsidiaries or joint ventures can insure their
investment against non-commercial risks with the privately-owned
credit insurance company Atradius (formerly Gerling NCM) under the
1969 Investment Reinsurance Act (WHI). Atradius reinsures its
political risks with the Ministry of Finance. Dutch investors
have not heavily utilized this insurance program, however, and
efforts are underway to find ways of making the program more
effective.


35. According to Article 7b of the WHI, reinsurance of investment
in LDC's (Less Developed Countries) can be provided only if a
satisfactory agreement has been reached with the recipient country
regarding regulations that will apply to Dutch investment in that
country. The act covers procedures that will be followed in the
case of a dispute between the investor and the host country on
recovery of indemnity resulting from the insurance of the
investment. Investment in countries with which the Netherlands
has concluded a bilateral investment treaty is eligible for
coverage under the Investment Reinsurance Arrangement (IRA). The
Netherlands is a member of the Multilateral Investment Guarantee
Agency (MIGA).

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D. Labor
--------------


36. The Dutch workforce is well educated and multilingual. As a
result of the current economic downturn, employment growth has
been decelerating, resulting in an increase in the level of
unemployment. With an unemployment rate of 6.0 percent in the
fourth quarter of 2005 (down from 6.3 percent during the same
quarter in 2004),the official unemployment rate remains well
below the EU average.


37. The Netherlands currently has the highest part-time work rate
in the OECD, which has contributed to greater labor market
flexibility. A substantial increase in the participation of women
in the workforce led the share of part-time workers in the total
working population to increase to more than 40 percent. Labor
market participation, especially by elderly workers, is slowly but
gradually growing from a low of 60 percent in the early 1990s to
more than 70 percent of the potential labor pool in 2005.
Increased labor market participation is regarded as critical to
ensuring continued economic growth and to coping with the impact
of a rapidly aging population.


38. The Dutch government's job creation policy is focused on the
following elements: reducing the general burden of taxes and
social security contributions, moderating growth in wage levels,
improving productivity, strengthening the economic structure,
reducing the regulatory burden on business, and promoting
innovation. In addition, the Dutch government has taken measures
to improve labor market flexibility. This combination of greater
(but not full) labor market flexibility, consensual wage
restraint, and a lowering of the tax burden and social security
contributions is seen as the key to economic recovery.


39. Workers may be found through government-operated labor
exchanges, a rapidly growing number of private employment firms,
or directly through, for example, newspaper advertisements. The
official average workweek has long been 38 hours, but work-
shortening programs (ADV) have effectively reduced the average
workweek in some sectors of the economy (notably in banking and
insurance) to 36 hours. The trend towards shorter working hours
(and early retirement) with the objective of creating jobs or
avoiding layoffs was reversed in 2004. Faced with sharply rising
costs related to the rapidly aging Dutch population, government
labor market polices are increasingly geared toward higher
contributions by the productive labor force by expanding working
hours. In 2004, Parliament thus reached agreement to amend
current labor laws, allowing the maximum workweek to increase from
an average of 50 hours to 60 hours. In a related move, workers'
rights for working breaks are likely to be curtailed. New
legislation has also been adopted which will increase the
flexibility in the operating hours of companies and shops.


40. The average contract wage increased in 2005 by 1.3 percent,
the same as in 2004. Average per unit wage costs in 2005 grew by
0.4 percent after an average 2.25 percent wage cost decline in
2004 and are expected to decrease by 0.9 percent in 2006. The
average wage cost rise in the Netherlands is among the lowest in
the European Union after Germany and Austria. Surveys of average
annual labor costs (base pay plus employers' social security
costs, mandatory benefits and voluntary benefits) across the EU
rank the Netherlands ninth after countries such as the UK,
Germany, France, Sweden and Denmark.


41. Benchmark reports by the European Industry Federation (UNICE)
observe that, despite relatively high wage costs, the Netherlands
has one of the highest levels of labor productivity in
manufacturing. In order to reduce growth in unit labor costs, the
Dutch government has significantly reduced employers' costs for
workers who earn the $1,531 per month minimum wage or slightly
above by providing tax breaks. It has also called on
organizations of employers and workers to create jobs at the
lowest end of the wage scale.


42. Labor/management relations in both the public and private
sectors are generally good in a system that emphasizes the concept
of social partnership. Although wage bargaining in the
Netherlands is increasingly decentralized, there still exists a
central bargaining apparatus where labor contract guidelines are
established. About 75 percent of all Dutch workers are currently
covered by union contracts that are negotiated on a sector basis
with employers associations and, if accepted by the government,
are extended by law to the entire sector. Some sector labor
contracts (e.g., road transport and haulage) are relatively
inexpensive, while others (e.g., metal) are more costly. To avoid
surprises, potential investors are advised to consult with local
trade unions to determine which, if any, labor contracts apply to
workers in their business sector prior to making an investment
decision. Collective bargaining agreements negotiated in the past
few years have, by and large, been accepted by the rank and file
without much protest, despite only moderate wage rises. Days lost
to strikes are relatively low.


43. The Dutch economy derives its strength from free trade and a
stable industrial climate fostered by partnership among unions,
employers' organizations and the government. There is substantial
labor involvement in corporate decision-making on matters
affecting workers. Each company in the Netherlands with at least
50 workers is required by law to institute a Works-Council, with
which management must consult on a range of issues including
investment decisions. Legislation implementing the EU Work
Council Directive came into effect in 1998. The Dutch government
also agreed to introduce legislation governing employee
participation of European companies (companies operating in at
least two EU member states). Under this legislation, company
founders and its workers must conclude an agreement on employee
participation. Trade unions and management are generally
receptive to foreign investment, especially where this leads to
improved employment possibilities and related benefits. U.S.
companies generally perceive works councils as contributing to
better management-worker relations and a benefit to the company.

--------------

E. Foreign-Trade Zones/Free Ports
--------------


44. The Netherlands has no free trade zones or free ports in the
sense of territorial enclaves where commodities can be processed
or reprocessed tax-free. There are, however, a large number of
customs warehouses (EU category A through E, but no category A and
F or "free zones") and free warehouses at designated places and
international airports where goods in transit may be temporarily
stored under customs supervision. Goods may be repacked, sorted
or relabeled.

--------------

F. Foreign Direct Investment Statistics
--------------


45. Cumulative U.S. direct investment in the Netherlands totaled
$202 billion in 2004, according to the U.S. Bureau of Economic
Analysis, the third highest such total worldwide (industry
breakdown in paragraph 50 below). The U.S. data, which include
reinvested earnings, show an FDI inflow from the U.S. to the
Netherlands of $13 billion in 2004.


46. Official Dutch government statistics on the level of FDI in
the Netherlands (by country of origin and industry sector),and
comparable data covering the stock of Dutch FDI abroad, are
compiled by the Netherlands Central Bank (NB) on an ad hoc basis
(http://dsbb.statistics.nl). The NB's FDI inflows are based on
sources of capital transactions rather than on actual "by country"
investment outlays; the NB's FDI data differ substantially from
those published by the U.S. Bureau of Economic Analysis.


47. The NB's FDI statistics reveal that the total stock of FDI in
the Netherlands amounted to 368 billion euros (roughly $440
billion),about 75 percent of GDP, at the end of 2004. The FDI to
GDP ratio in the Netherlands continues to be among the highest in
the EU. According to NB data, total net FDI inflows into the
Netherlands continue to drop sharply, down from 13 percent of GDP
in 2001, 6 percent in 2002, 4 percent in 2003, and almost 0
percent in 2004. This last figure is due to a significant
decrease in investment from other European countries and a
negative flow from the US of almost 8 billion euros.


48. Foreign companies established in the Netherlands account for
roughly one-third of industrial production and employment in
industry. At the end of 2004, an estimated 31.5 percent of
foreign establishments in the Netherlands came from the U.S., 19.5
percent from Germany, 14 percent from the UK, 7 percent from
Scandinavia, 17 percent from the rest of Europe, 9 percent from
Asia and the remaining 2 percent from other non-OECD and non-EU
countries.


49. The top fifteen U.S. investors in the Netherlands, ranked by
sales (investment outlays are protected) include: Cisco Systems
International BV, Sara Lee/DE NV, Phillip Morris Holland BV,
Cargill BV, Esso Nederland BV (Exxon Mobil Corp.),Lucent
Technologies Nederland BV, Sun Microsystems Nederland BV, Merck
Sharp & Dohme BV, Dow Benelux NV, Alcoa Europe Holding BV, IBM
Nederland NV, Daimler Chrysler Nederland NV, Hewlett-Packard
Nederland BV, Du Pont de Nemours Nederland BV, Masterfoods Veghel
BV.


50. Other prominent U.S. investors in the Netherlands include 3M
Nederland BV, Amgen BV, Abbott Labs, Lyondell Chemical Nederland
BV, and Starbucks, General Electric Plastics Europe BV, Honeywell
BV, Eastman Chemical Europe BV (for testimonials, see
www.nfia.com)

51. Extent of U.S. Investment in Selected Industries - U.S.
Direct Investment Position in the Netherlands on a historical cost
basis - 2004 (Millions of U.S. Dollars)
Category (Amount)
All Industries (201,918)
Total Manufacturing (24,997)
Of which: Chemicals & Allied products (12,069)
Of which: Food & Kindred products (4,075)
Of which: Primary & Fabricated Metals (2,591)
Of which: Electric & Electronic Equipment (1,718)
Of which: Transportation Equipment (1,216)
Of which: Industrial Machinery & Equipment (851)
Finance incl. Depository Inst. (22,529)
Wholesale Trade (13,397)
Information (4,431)
Petroleum (3,850)
Services (1,573)
Utilities (102)
Other Industries (131,095)
Source: USDOC, BEA


52. Web Resources

http://www.bakernet.com
http://www.bea.gov
http://www.belastingdienst.nl
http://www.cbs.nl
http://www.cpb.nl
http://dsbb.statistics.nl
http://www.eiu.com
http://www.iasb.org
http://www.imf.org/external/country/nld/index .htm
http://www.nom.nl
http://www.liof.nl
http://www.nfia.com
http://www.oecd.org
http://www.oostnv.nl
http://www.rjnet.nl

BLAKEMAN