Multinational corporations have warned that new migration regulations and fiscal reforms could force them to relocate their operations to other countries. The Netherlands has been a popular base for such companies, but many are now considering leaving. The technology firm ASML, which is valued at €360 billion and is the most highly-valued technology company in Europe, made a strong statement in early March, warning politicians in The Hague that it may need to look elsewhere for the space, engineering talent, and political support required for expansion.
The Dutch government, led by outgoing Prime Minister Mark Rutte, has responded to calls for support of the tech-heavy region where ASML and its spin-offs are located by announcing a €2.5 billion support scheme last month. However, some experts believe that this may not be enough. According to Rem Korteweg, a senior researcher at Dutch think tank Clingendael, although a right-wing government is likely to be formed in the future, it may not be one that is supportive of businesses.
The country is currently experiencing a political storm, and in the midst of it, there have been a number of partial relocations and threats of relocation. Following its victory in last November’s general election, Geert Wilders’ far-right Party of Freedom (PVV) is expected to bring about a shift to the right in The Hague. Despite being one of the most open economies in Europe, and even the world, the Netherlands is facing limits to its growth, according to Korteweg.
A potential government led by Wilders could bring about significant changes in areas such as taxation and immigration, which are crucial for companies to plan, invest, hire and grow in the long term. ASML CEO Peter Wennink cautioned in early March that countries like France and Germany are doing a better job of taking care of these “side conditions.” If ASML decides to take action, it could mark the end of four centuries of open trade and commerce, which have brought unparalleled prosperity.
The Dutch East India Company was the world’s first joint-stock company, which allowed it to dominate trade with Asia and become the first multinational corporation during the 17th and 18th centuries. This early success paved the way for many other companies to establish themselves in the open economy of the Netherlands, which was strategically located as Europe’s primary port of entry. The growth of this business-friendly environment even led to the creation of the term “de B.V. Nederland” or “Netherlands, Inc.”
Aggressive Persuasion
Big Corp. didn’t start small.
Unilever, which owns popular consumer brands such as Dove, Hellmann’s and Knorr, came into existence during the 1930s as a result of the merger between a Dutch margarine company and a British soap maker. Similarly, Shell, an oil company, was formed when Dutch and U.K. rivals joined forces in 1907.
These dual Anglo-Dutch structures have been advantageous for the Netherlands as the companies have their head offices, stock listings and tax registries in the country.
Politicians were under pressure from businesses to keep them on their side, as their bosses had the power to reorganize their corporate structure and move their headquarters overseas. In November 2020, Unilever moved its operations to a single parent company registered in the U.K, while Shell also shifted its headquarters from the Netherlands to the U.K. in 2021. Despite years of negotiations to appease these companies, they ultimately chose to leave.
ASML has a different set of grievances compared to Unilever or Shell, as their complaints do not revolve around the location of the companies on paper. What ASML is concerned about is something more significant from an economic standpoint: real investment plans.
According to the consulting firm McKinsey, the worldwide chips industry is expected to increase in size by nearly 100% by the year 2030, surpassing $1 trillion in revenue. Since ASML is a unique supplier to this industry, it is indisputable that the company will also expand.
ASML, the Dutch semiconductor company, is considering relocating its tech hub from Eindhoven, the country’s fifth-largest city. The region surrounding Eindhoven is known as “brainport,” and is where ASML is currently based, close to Philips and a top-tier technical university. However, after meetings in The Hague in early March, ASML’s CEO, Wennink, questioned whether Eindhoven is still the best location. He criticized politicians for having a different perception of what companies need to grow than the reality of what they actually need.
ASML, was angered by a change made last October by Pieter Omtzigt, a prominent lawmaker, which aimed to reduce a 30% tax break for expatriates. Omtzigt is an important figure in the ongoing negotiations for a new Dutch national government, and his political party, the New Social Contract, could have a significant impact on the formation of the next coalition. This makes it unlikely that ASML will be able to regain the tax break. The fact that these measures are rushed through, with insufficient consideration, is just as frustrating for ASML as the impact it will have on its workforce in the Netherlands, which is made up of around 40% non-Dutch employees.
Rash Decision-Making
The Netherlands’ political climate has been turbulent lately, which is not conducive to creating a stable environment for companies. This is a point of concern for Dutch employers federation VNO-NCW, which has been vocal about the issue. Ingrid Thijssen, the federation’s chairwoman, recently stated that many publicly-traded companies are considering moving their headquarters abroad. According to her, the number is so high that you need both hands to count them. In a statement shared with POLITICO, the federation’s spokesperson, Edwin van Scherrenburg, criticized the government’s policies, particularly the move to curb expat advantages and limit share buyback options. He described these policies as “unpredictable and thoughtless.”
Critics have expressed their disapproval of the unpredictability of The Hague. Robert-Jan Smits, the president of the executive board of TU/Eindhoven and a member of the Brainport Foundation supporting Eindhoven’s progress, believes that a stable government is essential to foster business growth. Smits stated in an interview that businesses are not interested in dealing with persistent uncertainty, which is currently prevalent in the Netherlands due to various impromptu measures related to fiscal policies.
Dutch politician Laurens Dassen, who belongs to the pro-Europe party Volt, has criticized policymakers for diverting funds from a €20 billion reserve called the “National Growth Fund” for projects aimed at promoting long-term growth. According to Dassen, this move is short-sighted and amounts to sacrificing future earning capacity and long-term investments for short-term gratification of the taxpayer.
Changing the Rules
It should be noted that the departure of Prime Minister Mark Rutte is a cause for concern. Rutte, who used to work as a manager at Unilever in the early 2000s, has been acknowledged for being receptive to some of the issues raised by large corporations, such as the elimination of the dividend tax.
Following the collapse of Rutte’s last government, an election was triggered, in which immigration was a major issue and the anti-immigrant party PVV, led by Wilders, emerged victorious. In its election platform, the PVV pledged to “limit international students on master’s programs” as a means of restricting study migration.
Fears have been raised among multinational corporations on how to attract global talent and provide accommodation for their foreign workforce. Despite no significant progress in coalition talks, companies, such as ASML, remain vigilant. In January, ASML CEO Wennink stated that 65% of international students at the Eindhoven Technical University settle in the surrounding area, which serves as a fundamental source of talent for the company.
