The Netherlands has long been a centre for global trade and finance. Peter Van Ginneken, Country Head of Global Liquidity and Cash Management, Netherlands, HSBC, explores why the country is an ideal location for corporate treasuries.
T: +31 6 2329 66 35
Over the years, the Netherlands has capitalised on its position as a key player in Europe by developing a world-class technology and logistics infrastructure. By promoting financial and logistical expertise alongside an open economy (the Netherlands has, for example, well-established multi-currency liquidity markets), the country has formed itself into an attractive home for treasury centres and liquidity structures, according to Peter Van Ginneken, Country Head of Global Liquidity and Cash Management, Netherlands, HSBC.
For a small country sitting on the northern shores of Europe, the Netherlands has long been keen to demonstrate its openness to the world. Playing a part in shaping global and regional development, it was a founding member of both NATO and the European Union. As the key northern gateway to Europe throughout the country’s history, trading stands proud.
The country’s geographic position and access to the vast European distribution network of road, rail, canal and rivers is ideal. Additionally, long-term commitment to the strategic development of Rotterdam, Europe’s largest port, has seen the World Economic Forum’s ‘Global Competitiveness Report’ bestow upon it the accolade of best port infrastructure in the world several years in a row.
Over many years its status as a productive nation has seen the Netherland’s trade surplus remain consistently high, industrial relations remain stable, and the unemployment rate stay relatively low. The country is now the sixth largest economy in the EU and as such can be fairly described as a major hub for international trade, transportation and banking. It is the world’s second largest agricultural exporter and has major interests in technology, food processing, chemicals, petroleum refining and electrical machinery.
As an integrated EU country, its key trading partners are regional. Figures from 2016 shown in order of size (see charts below).
Domestically the Netherlands has maintained the kind of astute financial management that others would do well to observe.
When the global financial crisis hit back in 2008, much of Europe and the world suffered. The Dutch budget deficit crept up to 5.3% of GDP. Recession followed and unemployment doubled to 7.4%. However, growth returned in 2014 following the government’s austerity measures, with internal controls serving to rapidly rebuild strength and confidence.
Starting in 2010, the measures taken aimed to improve public finances and evolve broad structural reforms in key policy areas such as the labour market, housing, energy and pensions. By 2016, the government budget returned to a surplus of 0.3% of GDP, with economic growth of 2.1%.
The government’s macro-economic policy unit, CPB1, in August 2017 revised its growth forecasts for the Dutch economy upwards to 3.3% for the year and 2.5% in 2018. Currently the Netherlands has a sovereign rating from Fitch of AAA (the highest credit quality) with a stable outlook. Moody’s have granted it Aaa (prime) status and the same stable outlook.
According to Eurostat2 data, current nominal GDP of the Netherlands is €697.2bn. It outperforms the EU aggregate in terms of real GDP growth, attaining an average annual differential of 0.1% between 2006 and 2016. The country can also claim above-average levels of wealth in terms of per-capita GDP, at purchasing power parity. Measured across the decade from 2005 to 2015, this surpasses the EU average by 36.8%.
The lifestyle element has a strong appeal here, says Van Ginneken. He feels the size of Amsterdam and other key cities allow the kind of ‘connection’ that often eludes its bigger, busier counterparts. This, he feels, leads to a work/life balance in the Netherlands that is “optimal”.
Naturally, the country’s transportation infrastructure is a major asset when residents seek to expand horizons. “From here you can explore Europe and the rest of the world easily,” he says. With flight times from Amsterdam to London or Paris, for example, at less than one hour, the Netherlands is well-connected with other European financial hubs.
“Not only have the Dutch achieved high levels of education, they also rank among the most skilled.” This is not promotional puff but a statement from the OECD3. On average, 32% of Dutch 25 to 64-year-olds hold a university degree, which is significantly above the OECD average of 24%.
The combination of these elements serves to make the Netherlands an increasingly powerful proposition for treasuries.
The investment by a top tier global technology firm in a new data centre shows that the Netherlands “has a lot to offer to international and IT companies”, said Dutch Minister of Economic Affairs, Henk Kamp. The nature of investment by global technology giants demonstrates that, in tandem with all that is mentioned above, the country’s strategy to become one of the top international hubs for a multitude of sectors – not just finance and treasury – is working. It also shows that the scalability of the country’s technical infrastructure is solid.
The Netherlands’ relative financial strength is tied to its long tradition of banking and finance. This is linked to its history as a global trading nation stemming back hundreds of years.
The country’s place today as a major trading centre is without question. For companies to sustain their operations in a globalised market, it requires a level of banking support that matches their global reach whilst fully meeting the needs of their local operations. For this to happen, expertise ‘on the ground’ is essential. This should be met with a depth of solutions, services and customer support that can actively connect all of these local, regional and global needs.
To be truly effective, foreign investors into the Netherlands need nuanced regulatory and cultural perspectives from their bank. But international or global businesses also need a global partner bank that understands each region and country in which it operates, in the same detailed manner, so that the trade and investment corridors between them may be optimised.
In recent years, there has been a jump in the number of participants on the flow trading side in the Netherlands. This has been facilitated by the country’s willingness to build a sympathetic infrastructure. This, notes Van Ginneken, is giving investment banks and high-tech trading companies a huge market for the trade of stocks, bonds, currencies, commodities, derivatives and other financial instruments.
Indeed, the strength of the Netherlands’ technology infrastructure (including the ultra-fast fibre connectivity sought by some flow traders) is both established and reflected by the presence of data centres from global players.
This works alongside a national commitment to support fintech development. Amsterdam was cited last year by the European Commission as the European capital of innovation. “Our advantage resides in the knowledge, the infrastructure and the stability of the country,” Van Ginneken explains.
Treasurers will need guidance from their bank when considering the impact of geopolitical trends and events on their business to ensure that their organisations are prepared for various scenarios.
With regards to Brexit, ccompanies in all industries including banks are preparing for different scenarios. For example, treasurers will continue to require regional cash management solutions once Brexit negotiations conclude.
Currently reaching 33 markets in Europe, HSBC has always been a fully international and European bank. As a result, HSBC Netherlands is already well-equipped to support clients as they navigate geopolitical uncertainty.
It is not only trends originating within Europe that have the potential to change the European landscape. For example, the impact of the Belt and Road Initiative (BRI) and economic stimulus programme, first announced by the Chinese government in 2013, should not be underestimated. China is connected to Europe by the Silk Road Economic Belt routes, and the 21st Century Maritime Silk Road creates a network of waterways across Asia, Africa and Europe.
BRI is already having an impact in Europe in a variety of ways. Investment from China into Europe rose by 25% during 2016 (source: EY Attractiveness Europe 2017).
With the transport of goods becoming easier and cheaper, it gets easier for Chinese businesses to invest in Europe, in countries such as the Netherlands. To help support these businesses, HSBC is bringing experts from China to Europe who understand the specific needs of Chinese businesses operating overseas, and can provide this support in Mandarin.
The digital economy and the rise of electronic banking tools for consumers and corporates in the Netherlands has provided a strong incentive for faster payments, in particular mobile ones, with an expectation that decision-making should be able to be done on-the-go. The exponential growth of the mobile phone and notably the smartphone has further nurtured this expectation.
There is a drive towards innovation and alternative payments that will open the way to new ecosystems that respond to customer and corporate requirements to pay within seconds and be informed about transactions at the same time. Such solutions are not only coming from the banking sector, but also from new third-party providers.
HSBC is strongly embedded in the Netherlands and able to offer truly global liquidity structures, with multi-currency pooling, links to the RMB market and a global network.
When looking to establish a European or global hub, or indeed when simply starting a business, the Netherlands consistently scores very highly as the place of choice. The banking, tax, and legal frameworks make it an ideal location to set up a cash pool, payment factory or a company’s entire treasury centre. “It truly is very close to a perfect environment for regional and international corporates,” suggests Van Ginneken. “Infrastructure, location, stability, tax, legal and financial infrastructure are all important factors but so are the more human factors such as, kids’ schooling, language, cost of living and overall quality of life.”
Van Ginneken states that “we are proud to be able to assist many of the largest global companies with their local, regional and global treasury needs from the Netherlands.”
HSBC is strongly embedded in the Netherlands and able to offer truly global liquidity structures, with multi-currency pooling, links to the RMB market and a global network. Through HSBC’s online banking platform, HSBCNet, and non-bank platforms such as SWIFT for corporates, our flexible liquidity solutions work seamlessly with customers’ existing processes to ensure they are making the best use of available balances.
The ongoing pursuit of global trade and investment, which is both exemplified and accelerated by current events, will continue to strengthen the connection between countries and the regional and international reach of organisations. This in turn will increase the complexity of their cash, trade and treasury management needs and the demands on their banking partners.