Orange Lion And Saffron Tiger - Brainstorm in a Boardroom

India-Netherlands 2015

Much of the literature on Dutch-Indian relations largely rests upon the early contacts between the two countries

What springs to mind when one mentions ‘The Netherlands’ and ‘India’ in the same sentence is, without a doubt, an extensive list of contrasting characteristics. The sheer size, population, geography, culture, weather, history, languages; and the scale of the economy, society and the political systems are on the opposing ends of the spectrum. On a human level too, interaction and behaviour are distinctive. The Dutch are known for their ‘directness’ in diction and their economical use of words; Indians by contrast are more verbose and maintain a high regard for linguistic formality. However, such differences are by no means problematic—in fact they should be celebrated; diversity enriches interaction and has helped to steer business to take on a truly global form.

On closer examination however, there is one crucial trait that both countries possess, for which they are lauded worldwide: innovation (or jugaad). The Dutch are widely known to work within structures and resolve complex problems with innovative solutions that make use of cutting-edge technology; Indians meanwhile think outside of set working parameters and timeframes to produce creative answers to abstract questions and demands. In essence, the answer ‘no’ does not exist in the Indian business dictionary. ‘Innovation’ is thus a unique export that has brought both countries to the forefront of the global marketplace where each has the answers to questions that have yet to be asked.

Missions to India

With this in mind, it should come as no surprise that we are soon to see a new phase in bilateral economic relations. Between March and June 2015 two major trade delegations toured India from the Netherlands, the former of which was led by the Mayor of Amsterdam Eberhard van der Laan, while Dutch Prime Minister Mark Rutte directed the latter. Though separate in their individual agendas and purposes, the two missions are inextricably linked. The van der Laan mission visited New Delhi, Bangalore and Mumbai where it hosted a series of seminars with those Indian corporations that are already operational in the Amsterdam region. This sought to further cement the already strong relationship, which a range of Indian corporations have established with the Amsterdam City Council. Moreover, it would secure business activity for Amsterdam, and guarantee a basis from which Indian companies could launch their European commercial operations. The Rutte mission took over 90 Dutch companies to India and partnered each of them with Indian enterprises in collaboration with the Dutch Embassy in New Delhi. With ties already strengthened by the van der Laan mission, the Rutte mission could, by bringing corporations from both countries together, expand the business opportunities and investment flows to and from the Netherlands and India respectively. As the Netherlands and India harness their respective stockpiles of innovation and meet the economic needs of one another, it will unleash new opportunities and scope for business activity. Arguably, in the longer term, this could set a precedent for a partnership of equals.

This article will thus examine the ways in which such a partnership could be achieved and how both countries could build a solid, ‘win-win’ strategy for the future. Such a strategy would facilitate growth in trade, enhance productivity and raise investment flows to-and-from India and the Netherlands. To do this, the article will outline such a strategy under the three broader sectors of the economy: agriculture, manufacturing and services.

Historical Underpinning

To understand how Dutch-Indian trade relations have developed today—and to where they can reach—it is necessary to first silhouette a brief history of these relations, and understand how the historical record has shaped the relationship that The Hague and New Delhi shares today. Much of the literature on Dutch-Indian relations largely rests upon the early contacts between the two countries, under the aegis of colonialism and spice trade in the early 17th century. The Dutch East India Company (VOC) brought Indian goods to Europe and consequently created a demand for Indian exports—from food, fabric and textiles, to handicrafts, arts and culture—that continue to pervade today. At the same time however, it carved necessary historical lessons on the dangers of exploitation and the detrimental impact unequal relations can have for an export-based economy. This legacy shaped India’s post-colonial discourse from 1947 onwards with Western partners. Protectionism, import substitution industrialisation (ISI), planning and caution had been the characteristics of India’s post-1947 economy. This, therefore, explains the modest trade relationship The Hague and New Delhi shared throughout the 1950s to the 1990s, which centred on low annual trade volumes, restrained contacts, and regulations and laws that prevented Dutch companies, among other Western ones, to penetrate the Indian market.

Following the launch of market liberalisation policies in the 1990s, trade contacts between the Netherlands and India started to grow rapidly and trade expanded on a higher platform into technology-based commodities, manufactured goods and services. By the 2003-2007 period trade grew by 112 percent in the import-export sector. Today, however, it is common practice that foreign companies enter India with a local partner or as part of a joint venture. While some see this as a criticism of an ‘out-dated protectionist economy’, when viewed within the wider historical record, one can understand from where such policies may have originated. Culturally however, such a partnership makes for a lasting relationship and a commitment on both sides that trade relations are not for the short-term. What builds is more than a business venture, but a relationship, or partnership of equals, founded upon trust, common aims and common expectations. As emphasised before, today we see a more equal partnership emerging. Both countries are increasing cooperating in a range of research-based and technological initiatives and are enhancing the scope of peer learning in a range of digital, agriculture and service-based industries. In quantitative terms, trade volumes between the two countries totalled 6 billion euros ($6.6 million), and the Netherlands is the fifth largest source of foreign direct investment (FDI) in India, and concurrently India is the Netherlands’ fifth largest source of FDI. This article will now explore how to continue this trend towards greater cooperation and collaboration and forge an ever-more robust Dutch-Indian economic partnership.

Centre of Excellence

Agriculture presents a promising platform for both countries to pursue a ‘win-win’ strategy. One of India’s strongest suits is its diversity in geography and sheer size; across all geographic conditions, one may find farmers toiling away, cultivating the produce permissible in those weather conditions. India has the capacity to cultivate and grow a range of foodstuffs and thus satisfy internal and external food demand. The Netherlands meanwhile, is a much smaller country with a relatively limited geographical range. It has however developed an efficient and technologically synchronised means to cultivate agricultural produce. Drip farming, water management, greenhouse technology and seed technology are but a few in a long list of techniques the Dutch have mastered. Given India’s untapped potential, Dutch agricultural companies can invest such technology and management strategies; and India can reach its optimum, becoming a produce ‘powerhouse’.

The first way to execute the agricultural ‘win-win’ strategy is to expand upon the current programme of creating Centres of Excellence (CoEs). In 2013, the Dutch government sanctioned the creation of ten CoEs throughout India with the aim to increase agricultural output and introduce modern faming technology and techniques. CoEs embody the new character of Dutch-Indian relations: they serve as the points of cooperation and knowledge-sharing between Indian and Dutch agro-food industries, and offer small and medium-sized enterprises (SMEs) opportunities in capital and technological production, licensing, and distribution. The focus of each CoE will vary on the agricultural output of each location: for example, CoEs in Gujarat or Punjab will focus on potato production, while those in Kerala or Karnataka will focus on horticulture. In the Northeast meanwhile, Dutch companies are exploring the scope for CoEs focussed on cattle and pork production. Other centres will likely focus on fruit ripening and dairy production. As India aims to double its food production, expanding the number of CoEs can facilitate the intensification of its agriculture to enhance output, and make the food supply chain more efficient. Moreover, as CoEs take on a public-private partnership form, it offers both sides considerable gains to be made in the longer-term, and moreover ensures a stable long-lasting relationship. The combination of Dutch knowledge and Indian resources can simultaneously expand business opportunities for Dutch agro-food corporations, and make India become an even more robust producer of, and market for agriculture.

Continuing with the idea of knowledge sharing, the scale of work CoEs pursue could be broadened. Whereas the former type focuses specifically on cultivating or raising particular agriculture produce, CoEs could furthermore emphasise particular agricultural management strategies. The Dutch are proudly regarded for their water management abilities, success in drip farming, and progressive fertilisers and seeds. As India is host to a range of geographic conditions and climates, this has an impact on food production. Drip farming techniques may empower Indian farmers to still achieve successful yields in drought periods, while water management may combat the excesses of flooding. Notably, drought and flooding are among the largest sources of food destruction and food shortage in India. Collaboration offers Dutch seed and fertiliser companies new research scope into cultivating (arable) land in an array of environmental conditions, from the mountainous terrain of Kashmir, to the barren deserts of Rajasthan to the tropical climes of Tamil Nadu. Researchers are offered opportunities to examine different soils and interact with farmers operating in new temperatures; moreover, it could provide new insights in pest control and what new forms of seed and fertiliser can be made available to safeguard food production for the 1.2 billion Indians. The combination of Dutch research and local Indian knowledge may open new markets for Dutch companies, as well as provide new tools for Indian farmers to master agricultural production across the array of geographic conditions. This can ensure sustainable food security for the country, and help meet food targets as outlined in the National Food Security Act (2013).

Make in (Digital) India

The manufacturing and infrastructure sectors offer a key window of opportunity to increase bilateral trade and investment prospects for New Delhi and The Hague. Indian Prime Minister Narenda Modi’s three campaigns, Make in India, Clean India, and Digital India are all programmes whereby Dutch Indian collaboration may help realise a ‘win-win’ strategy. Moreover, as Dutch Ambassador to India, Alphonsus Stoelinga noted, infrastructural development is a necessary area in which India needs to concentrate. Here too, knowledge sharing and cooperative strategies may help successfully realise Modi’s initiatives and enhance India’s infrastructure potential. With an emerging, and ever-expanding middle class and scale of SMEs in India, Dutch research and expertise may thus find India as a viable market for investment in manufacturing and infrastructure, and a point from which to access new markets in Asia more broadly. India may be able to harness Dutch technology, skill, and strategy to further entrench itself as a manufacturing base.

The Make in India—an initiative to encourage companies to manufacture their products in India—is a ready platform from which to achieve a successful ‘win-win’ strategy. Changes to governmental regulations and reforms of bureaucratic processes to permit more companies to manufacture their products in India would introduce new technologies and research units to the country. The creation of joint venture schemes and other such combined Dutch-Indian partnership agreements would facilitate Dutch-Indian knowledge sharing initiatives to take place. Dutch companies would work with local Indian business partners to pursue manufacturing in a range of industries, such as automotive equipment, defence technology and transportation, to name but a few. In turn, this would offer Dutch companies a base from which to procure stakes in the Indian and wider Asian markets, and further equip India with the know-how to manufacture products of a new calibre. Taking this argument further, while the Netherlands attains advanced levels of research, technology and tools for manufacturing, there is a dearth of engineers in the Netherlands—20,000 engineers, to be precise. In India however, there are ample, highly qualified engineers. Bringing manufacturing to India would therefore be a strategically sound move: Indian engineers benefit from know-how and job creation, while Dutch companies have new bases for their operations and enjoy increased output due to their skilled Indian engineering workforce.

Similarly, Modi’s Clean India—a national campaign to clean India’s streets, roads and infrastructure—and Digital India—an initiative that seeks to ensure that government services are made available to citizens electronically—are two other key ventures in which the Netherlands can be involved. In Rutte’s own words, the “[Modi] government is so much focusing on these particular programmes where [the Dutch] can easily add value from a fresh perspective by bringing [Dutch] expertise, knowledge and companies.” The Netherlands is a global leader in waste management, and Amsterdam was among the pioneers of the smart (digital) city project. The possibility for Dutch companies to team up with the Indian government under a public-private partnership would create a mutually beneficial situation. Three facets make this a lucrative investment for both parties. Firstly, given India’s size and scope, these are by no means short-term projects. It is thus necessary for clear, extensive plans to be laid out from which to pursue the initiatives. Such plans may secure a long-lasting partnership and return on investment. The Dutch may capitalise on new business opportunities to handle waste management and construct a digital platform for the Indian government’s smart cities project, while India may procure the know-how to sustain these two projects in the longer term. Secondly, there is a case to say that the Dutch too can learn from India. In the 2014 national elections, 800 million Indians were eligible to cast their votes through two million e-voting systems across over 900,000 polling stations. In the Netherlands meanwhile, votes are still cast by paper and pencil. India has already shifted in becoming Digital India; it may require some shared know-how to further this field, and in return, could offer the Dutch peer learning on launching The Hague’s own e-Democracy initiative. Thirdly, the 2014 elections exhibited that there is a clear will to move towards a Digital India and it is more the case that the Dutch may help nurture this organically growing phenomenon, as opposed to imposing technologies and strategies. Enhancing the infrastructure, eco-friendliness and level of digital connectivity would, in the longer term, attract more foreign investment due to the extent of development, as well as sophistication of logistical and technological connectivity throughout the country. For the Dutch meanwhile, it may set a precedent to pursue similar initiatives in other emerging markets.

Bilateral Investments in the Service Sector

The service sector is a robust area of trade contact between the Netherlands and India, and has much potential that is yet to be explored. A number of Dutch service-based companies are well established in India, and have maintained business operations since, or even before, the market began its liberalisation process in the 1990s. Numerous articles and reports have rightly outlined the extent to which India is a lucrative, dynamic and necessary market for western firms—this article thus need not preach to the choir; there are already over 180 Dutch companies operating in India in a range of industries. It will however outline some key, untapped areas where trade and investment expansion would be beneficial. With an ever-growing and ever-strengthening Indian middle class, financial, future-planning and welfare-centric services could initiate operations in India. Moreover, a number of Indian firms, such as Tata Consultancy Services, Infosys, Wipro, Mahindra Satyam to name but a few, have established their European operations in the Netherlands. In the second part of this section, the article will articulate why the Netherlands is an advantageous base for Indian companies, and recommend new strategies that could further facilitate greater expansion of Indian corporations to the Netherlands.

The middle class is a core component of India’s consumer culture and represents a significant market share that in no respect can or should be ignored. As this group of people expands both in size and net value, their monetary mentality is gravitating from a ‘saving’ to an ‘investing’ culture: the group concerned seeks to augment their net worth and maintain a keen eye for their future financial success through diversified portfolios. With this in mind, Dutch banks, pension funds and other such investment-based enterprises could enter the market and secure new market shares. There is a clear urge on the part of Dutch companies to pursue such investment; during his recent visit, Rutte further noted that the Netherlands has “pension funds with [investments worth] 1.5 trillion euros [$1.65 trillion], and they want to find business opportunities in India.” The legal and regulatory frameworks in place, combined with the advice, and technical support of the Netherlands Foreign Investment Agency (NFIA) and the Dutch Trade Board (DTB), offer a number of well laid pathways from which Dutch companies can further their Indian market shares, and meet the growing demands of this vast population. Already Memoranda of Understanding (MOUs) have been signed between Kotak Mahindra Bank and the ING group in the finance field; while in healthcare, Fortis Healthcare alongside Vital Health Software has signed with Indian healthcare industry body, NATHEALTH. Such service-sector partnerships will, as ING CEO Ralph Hamers rightly identified, offer Dutch corporations “access to the vast Indian market”, and simultaneously offer clients in India “opportunities of [Dutch companies’] international network.” Moreover, joint schemes can pave the way for further knowledge sharing and peer learning, which can ultimately lead to greater heights being achieved across India’s services sector.

With over 160 Indian companies operating in the Netherlands, it is clear that the Netherlands offers foreign corporations net benefits. To enhance the scale of service-sector trade with the Netherlands and to encourage greater movement of Indian firms to the Netherlands, the DTB and the NFIA could partner with their Indian equivalents and offer specific Netherlands-India related services to further assist Indian enterprises on moving to the Netherlands. Moreover, the number of visa centres could increase in size or branch locations to increase the bureaucratic process to send Indian employees or students to the Netherlands to work in those Indian firms, or study at those Dutch universities.

Set Up Companies in the Netherlands

This article will now identify four vital benefits Indian corporations will find by setting up shop in the Netherlands:

• Firstly, the tax regime in place for foreign corporations facilitates companies to establish their offices in the Netherlands in an efficient manner that does not deter from their commercial operations. Furthermore, expatriate employees enjoy certain tax laws, such as a percentage of their annual income remains untaxed for a period up to ten years.

• Secondly, the Netherlands has excellent international connectivity through both its seaports and airports, Rotterdam and Schiphol respectively. Logistically, the Netherlands’ geographical position makes it a strategic point from which to conduct international business.

• Thirdly, the Netherlands is the ‘Gateway to Europe’. As the country is enmeshed in the wider political, economic and legal EU framework, this ensures compliance, quality control and access to an even larger host of markets with which Indian companies may interact.

• Lastly, an equally important, though lesser-explored point, is the quality of life offered in the Netherlands for Indian expatriates. With a thriving local and expatriate Indian community in the Netherlands, alongside an open, welcoming Dutch society, Indian expatriates may find themselves at home in the Netherlands in no time.

In the past years, Dutch-Indian relations have moved toward a closer form of cooperation on the basis of equal partnership, knowledge sharing, peer learning and joint venture schemes. This article has sought to highlight the depth of enthusiasm, energy and above all innovation both parties demonstrate towards strengthening the ties between The Hague and New Delhi, and touch upon the key milestones that can enhance this relationship further. The Modi and Rutte governments respectively are keen to take this relationship to new heights and expand trade and investment in new areas of the economy.

As one moves from a surface-level to a more detailed comparison, one may find the differences between the Netherlands and India begin to wane, and the similarities become more apparent. United by their common drive to innovate, the Netherlands and India seem more likely trade partners than previously thought—truly, how different are ‘orange’ and ‘saffron’, or ‘lions’ and ‘tigers’?

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Diplomatist Magazine was launched in October of 1996 as the signature magazine of L.B. Associates (Pvt) Ltd, a contract publishing house based in Noida, a satellite town of New Delhi, India, the National Capital.