NEW DUTCH FINANCE STATE SECRETARY - A FRIEND TO

UNCLAS SECTION 01 OF 02 THE HAGUE 000937 SIPDIS SENSITIVE SIPDIS STATE FOR EUR/UBI, EUR/ERA E.O. 12958: N/A TAGS: EFIN ECON EINV ELAB PGOV PINR NL SUBJECT: NEW DUTCH FINANCE STATE SECRETARY - A FRIEND TO BUSINESS REF: A. THE HAGUE 325 ¶B. THE HAGUE 642 THIS MESSAGE IS SENSITIVE BUT UNCLASSIFIED. PLEASE HANDLE ACCORDINGLY. ¶1. (SBU) SUMMARY. In a meeting with Ambassador Arnall, new Finance State Secretary de Jager credited recent reductions in corporate tax and withholding rates for strengthening the Dutch investment and business climate. He said the new coalition government was considering measures to address rigidities in existing labor regulations and suggested the Netherlands might benefit from U.S. experiences in increasing access to financial capital markets for small- and medium-sized enterprises. De Jager's 1992 experience in starting up his own company should make him a friend to business and may influence his approach to formulating Dutch customs and fiscal policy. END SUMMARY. INVESTMENT AND BUSINESS CLIMATE IMPROVING . . . -------------- -- ¶2. (SBU) On May 10, Ambassador Arnall paid an introductory call on Jan Kees de Jager, who took up his position in February as State Secretary for Finance in the center-left Balkenende IV cabinet (ref A). De Jager, who has the lead on customs and fiscal policy at the Ministry of Finance (MOF), said the Dutch investment and business climate was steadily improving. In January, the GONL reduced corporate taxes from 29.6 to 25.5 percent and dividend withholding rates from 25 to 15 percent. Such changes were already starting to have a positive effect, de Jager noted, and the Netherlands was now even more competitive in attracting foreign investment and companies. While many viewed the Dutch regulatory environment as inflexible and burdensome in comparison with the rest of the world, de Jager suggested that it fared well when compared with other EU countries. DESPITE RIGID LABOR MARKET . . . -------------- ¶3. (SBU) On the labor front, De Jager said a primary complaint from foreign companies operating in the Netherlands, including some American Chamber of Commerce members, were the costs and difficulties related to laying off or firing employees. To annul an employment contract, he explained, third party consent (a court decision) was often needed. Judges in such cases usually ruled in favor of the employee and required that the company compensate the terminated employee with a cash award. De Jager said the new coalition government was looking into ways to remove this third party consent requirement and to simplify overall hiring and firing regulations, especially for small- and medium-sized enterprises. He expected a decision on the matter in the coming weeks. AND CAPITAL SHORTAGES -------------- ¶4. (SBU) The Netherlands was witnessing an increase in the number of small business start-ups, de Jager noted, but financial capital shortages remained a challenge. While sufficient capital for start-ups and financing for large companies existed, he said there was a lack of capital for companies with revenues between 200,000 and 2 million euros ($270,880 and $2.7 million). He suggested that the Netherlands might benefit from U.S. experiences in increasing access to capital markets for such companies. COMMENT/BIO INFORMATION: "A FRIEND TO BUSINESS" -------------- --- ¶5. (SBU) Former Treasurer for the Christian Democrats (CDA) and former Chair of the party's youth wing, de Jager (38) is known as a brilliant mathematician with a strong business background. He previously served with Prime Minister Balkenende on the national "Innovation Platform" and helped draft the financial policy section of the CDA's election platform last fall. His experience in starting up his own company (Spectra Vision BV in 1992) should make him a friend to business and is likely to influence his approach to formulating customs and fiscal policy, for which he will have the lead at the MOF. Meanwhile, it remains unclear how the THE HAGUE 00000937 002 OF 002 more conservative, business-oriented de Jager will work with new Finance Minister and former PvdA (Labor party) leader Wouter Bos (ref B),who is expected to support more social-oriented spending interests. ARNALL