The 2011 Investors’ Agenda of Priority PointsDoing what works to stimulate innovation and flexibilityWednesday May 25, 2011
AmCham’s Investors’ Agenda of Priority Points • Coordinated by AmCham’s Policy Committee • Input encouraged from all our member companies • Expert input from AmCham’s Board and Standing Committees (esp: Tax, Legal, Human Resources) • Published annually since 1995
Six Largest Sources of Foreign Investment in NL – the US is still number 1 (there are about 1,700 US companies in NL) Stock of foreign investment in 2009; billions of euros Source: De Nederlandsche Bank
Top 7 Destinations for US Direct Investment in Europe – 2009 (historical-cost basis) Billions of Dollars Source: US Dept. of Commerce
Europe still most important destination for US Direct Investment Abroad – over 60% of total in 2009 US Direct Investment Abroad - Historical cost basis 2009 Billions of dollars Source: US Dept. of Commerce
US Investment in NL compared with other countries – more to NL than BRIC
Where has AmCham’s Priority Points contributed to success in the last decade? • Labor participation rate has increased – especially among women and older workers • Traffic congestion problems have been addressed with significant investment in infrastructure • Some effective labor flexibility measures have been introduced (Flexwet) • Significant decrease in corporate tax rate to a very competitive level • Introduction of the fiscal innovation box to stimulate R&D • Action is being taken to reduce the level of red tape
Moving forward – the context • The political reality: A minority government dependent on seeking support from any and all other parties to initiate legislation. • Public finances need to be consolidated without putting the economic recovery at risk. This involves two spear points:
Background – cont’d • Secure fiscal sustainability, i.e. debt can be serviced without an unrealistically large future correction to balance off income and expenditure. (In Peter Rabbit language this means: spend only what you can afford). • Raise potential growth prospects by insuring the conditions are in place for business – including foreign business - to invest and prosper
Why foreign business? Because foreign investors are catalysts for productivity and growth in the Dutch economy Foreign investors: ▪ Are more successful ▪ Create more employment ▪ Hire more skilled workers (foreign co’s are responsible for 24% of total employment as well as 30% of private R&D) ▪ Outsource more locally than their Dutch counterparts. Source: Min. of Economic Affairs - Buitenlandse Investeerders zijn Groeiversnellers voor de Nederlandse Economie (July 2007)
Policy Implications – The Priority PointsCreating the climate to attract more foreign business • Stimulate labor flexibility through increased employability in the Netherlands • Stimulate Innovation – Implement what works! • Taxation – Consistent, Predictable & Simple
Policy Implications – The Priority Points A. Stimulate labor flexibility through increased employability in the Netherlands While continuing to stress the need to relax termination laws, AmCham sees flexibility can be significantly improved by increased employability
Policy Implications – The Priority Points A. Stimulate labor flexibility through increased employability in the Netherlands How? • Prevent long-term unemployment by incentivizing job-seeking. • Tackle demographic ageing and the growing dependency ratio. • Stimulate skills for the future.
A. Stimulate labor flexibility through increased employability 1. Prevent long-term unemployment by incentivizing job-seeking How? • Provide more help with employability skills such as literacy, IT, customer service skills, etc. as unemployment spells lengthen. • Increase conditionality and liabilities for benefit sanctions among longer term unemployed to ensure they take the opportunities that present themselves. • Ensure appropriate incentive structures for those managing and delivering return-to-work programs.
A. Stimulate labor flexibility through increased employability 2. Tackle demographic ageing and the growing dependency ratio. How? • Legislation or other mechanisms are needed to encourage employers to train – and hire – older people. • Further and higher education funding may need to change and flexible part time provision increased, to allow and encourage older people to acquire new skills. • Pensions and taxation arrangements need to become more flexible to accommodate people drawing income from multiple sources.
A. Stimulate labor flexibility through increased employability 3. Stimulate skills for the future. Issues: • Growing technological complexity will drive up skills level requirements in production sectors. • Demographics and increased female participation in the labor market will increase demand for caring services for both younger (particularly pre-school) and older age groups. Therefore……
A. Stimulate labor flexibility through increased employability 3. Stimulate skills for the future. ……, potential employees at all ages and training providers alike need access to effective information, advice and guidance to ensure supply is available to met these and other emerging areas of demand for employment and skills.
A. Stimulate labor flexibility through increased employability 3. Stimulate skills for the future But the most important and cost effective is early child development. • A child’s early years are critically important. Pre-school and summer school participation needs to be encouraged – even made mandatory – for children lacking basic language and cognitive skills due to shortcomings in a home situation.
Policy Implications – The Priority Points B. Stimulating Innovation – Implement what works! How? • Invest more in education, talents and skills • Ensure that the conditions for businesses are conducive for innovation – i.e. less red tape and sufficient tax and other incentives for small innovative companies.
Stimulating Innovation – Implement what works! • Invest more in education, talents and skills How? • Aim for excellent universities with excellent research infrastructures • Support more incubator initiatives like YES!Delft • Reward a good teacher – it pays off!
Stimulating Innovation – Implement what works! • Ensure that conditions for businesses are conducive for innovation – i.e. less red tape and sufficient tax and other incentives for small innovative companies How? • Role of government is to create non-discriminatory generic policy that is supportive of anyone with an innovative idea and entrepreneurial talent. Don’t select key industries to focus on. We cannot know in which sectors the country will be earning its keep in 10-15 years.
C. Taxation – Consistent, Predictable & Simple • Maintain and enhance the Innovation Box. • Ensure stability, consistency and simplicity in tax legislation. • Simplify the existing interest deduction limitation rules to increase clarity among the business community. • Have tax losses carried forward indefinitely.
Implementing the Priority Points – Action Items • Copies of AmCham’s Priority Points will be forwarded to relevant political party representatives, national and municipal government officials, other foreign chambers, employers’ and labor organizations. • One-on-one meetings of AmCham representatives with selected policy makers including members of Parliament and ministerial staff. • Discussion with other stakeholders prepared to support and strengthen the AmCham position
Conclusion The attractiveness of NL for foreign investment has improved significantly in recent years: • Effective tax rates on companies have decreased • Extensive fiscal incentive measures have been introduced for companies active in R&D • Many political parties acknowledge the need for continued investment in education and see the need for increased labor flexibility
The outlook is positive • Fiscal stability and predictability is an essential characteristic for a country wishing to attract foreign investors. • Present economic circumstances are trying. But, it is clear that economic recovery and sustained growth will ultimately have to come from the country’s business community – including foreign investors. • The Netherlands’ openness to foreign investors and diverse cultures has served it well in the past and should be nurtured to remain a catalyst for increased business dynamism and innovation in the future.
Working for a Better Business Climateadvocacy ● information ● networking