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Wednesday, 13 July 2016

Goodbye to the ‘mainports’ Schiphol Amsterdam Airport and the Port of Rotterdam. Welcome to the Dutch ‘Brainport’ locations and innovations centres that yield the real ‘high added value’ jobs.

Roughly one year ago, I wrote an article in which I ‘complained’ that the emphasis in The Netherlands was lying on ‘low added value’ distribution and commercial jobs, with regard to goods, services and internet hosting:

My point is that – in my humble opinion – The Netherlands increasingly turns into a country, which picks up the breadcrumbs that other countries, large companies and institutions leave for it. Very efficient and cost-effective in the execution of its job, but increasingly harmless as a competitor in heavyweight technological areas, in which the real money is earnt.

Instead of standing on its own two feet with its own products, innovations and a substantial number of globally leading companies, the country seems to become more and more satisfied with being the Olympic Champion of the Servants. To me, that is a worrisome development:
  • As the focus of The Netherlands increasingly lies on the low-cost distribution of imported goods and bulky materials – domestically as well as all over Europe – through cargo vessels and trucks, The Netherlands has seemingly turned into the official ‘mailman’ of China and the Far East: cautiously taking care that every consignment is delivered at the perfect place and perfectly on time, but with a relative importance that is becoming more and more futile;
  • With its massive web of tax rulings and its generally favourable fiscal legislation with many mischievous loopholes in it, The Netherlands is the spider in the web for multinationals, large popgroups (f.i. U2 or Rolling Stones) and wealthy persons to avoid (‘some say’ evade) their corporate and income taxes; 
  • This led to a host of ‘fake’ head-offices and letter-box firms in the country, that are simply there to easily avoid taxes; not for the entrepreneurial atmosphere in The Netherlands;
  • And last, but not least, another new spearhead in The Netherlands is data storage, hosting and data distribution for large internet companies and internet services providers. The consequence is that The Netherlands is currently establishing a massive data hosting infrastructure (i.e. internet backbones) and large number of data storage centers for companies as Microsoft, Google, Amazon and the likes of them.

While one could easily disqualify last year’s call of mine as ‘the usual stuff from a professional agitator with an obstinate opinion’, I received a few endorsements from unsuspicious sources during the last two weeks.

On July 1st, 2016, the daily newspaper Volkskrant printed a summary of a report from the official Dutch Council for the Environment and Infrastructure:

'Cabinet lays too much emphasis upon the importance of Schiphol and the Port of Rotterdam for The Netherlands.

Even though this claim is often made, Schiphol and the Port of Rotterdam are actually not the main driving forces of the Dutch economy. In order to improve the climate for the establishment of businesses in The Netherlands, the national government should not only make their ‘usual’ investments in those two ‘mainports’. Only aiming at volume growth of Schiphol and the Port of Rotterdam is not what ‘tomorrow’s economy’ demands from the Dutch government'.

This was stated by the Dutch Council for the Environment and Infrastructure (RLI), in an official advice that was offered to the Cabinet last Friday. Under the tell-tale title ‘Beyond the mainports’, the official advisory body added question marks to the permanent growth ambitions of Schiphol and the Port of Rotterdam. The addition of these mainports to the Dutch economic growth is less significant than Cabinets tend to think, is concluded by the Council.

The indirect added value of Schiphol to the Dutch economy in 2015 was roughly €9 billion. That is 1.4% of the Dutch Gross Domestic Product (GDP), which stands for the production of all goods and services within The Netherlands, including those by foreign companies. The Port of Rotterdam adds another 3.1% to that GDP, but the port is in a declining trend nowadays.

Only governing towards expansion of goods and human traffic flows via those two ports is senseless, according to the advisory body. ‘The climate for business establishment in The Netherlands is decided by many more factors than Schiphol and Rotterdam alone'.

For instance the ‘Brainport Region Eindhoven’ is getting increasingly important as economic core area for The Netherlands and it can show better growth rates than the two aforementioned mainports.

And, as a genuine bombshell in favour of my argument from last year, there was an interview with the retired Professor Albert Pols of the Delft’ Institute of Technology, printed in Het Financieele Dagblad on Saturday, 9 July. Here are the pertinent snippets:

“Either I was twenty years too early or the Council was twenty years too late”. 

Nevertheless, Albert Pols, retired Professor Design and Planning at the Delft’ Institute of Technology (TU Delft), feels himself endorsed in his opinion that the Dutch mainport policy is a waste of money.

In 1997, Albert Pols – in a report on behalf of the Scientific Council on Government Policy (i.e. WRR) – heavily criticized the Dutch mainport policy. Already then, he judged that everything was wrong about the official strategy to position The Netherlands as a distribution stronghold.

Pols was an adamant adversary of the large infrastructural projects of the Nineties, in order to reinforce those two mainports: 
  • the establishment of the  ‘Betuwelijn’ (i.e. a special railway to Germany for the transport of bulky goods, coming from Rotterdam) or
  • the establishment of the Tweede Maasvlakte (i.e. new land, created through drainage, that was developed for industrial establishment and container shipping for the Port of Rotterdam). 
Those huge investments  north of €25 billion  would have had more effect, when the money had been invested in education and the development of new technologies (hence: nano technology).

“Rotterdam took its chance to (ab)use the mainport concept as an advertizing slogan. It was in fact advertizing malpractice, as Rotterdam never became a mainport in the first place and will actually never become one.

A mainport is a sea junction where cargo is concentrated and subsequently redistributed to other ports all over the globe. Singapore is an example of a mainport. 

However, in spite of their mainport policy, Rotterdam always remained a common transit port. Rotterdam became large as a transit port for coal and iron ore to the German ‘hinterland’. As a matter of fact, Rotterdam is 'the largest port of Germany'. For German stateowned companies, it was much easier to store their stockpiles of coal and iron ore in Rotterdam, than on their own ‘backyard’.

It is an utter illusion that "we" (i.e. the Dutch) are so good in logistics... 

When the government came up with the mainport policy, the electronics company Philips was clutching at straws and Fokker (i.e. a former Dutch avionics company) was already in deep, deep trouble. Unemployment was high. 

Infrastructure had to become the main driving force for the 21st Century. Education and research both suffered from fierce austerity measures set by the Dutch government and a shedload of money was invested in infrastructure instead, as ‘we were so successful in doing that’. Well, we have seen that. All our national, logistical players WITH added value have now vanished from the face of the earth: Nedlloyd, NS Cargo. And container terminal ECT is now owned by the Chinese.

Besides that, the margin in transport is minimal. The added value lies at the sender and the recipient of those goods; not in the hands of the distributor.

The Netherlands would have been better off, when we would have invested that money (i.e. the €25 billion invested in the mainports - EL) differently, or for instance would have reduced the corporate taxes with it. 

Which are today’s winners?! The answer has nothing to do with mainport development. The competition for added value is decided at the development of new products and services, with as a driving force the potential for innovation and the ample availability of venture capital”.

Professor Albert Pols is of course totally right with his observations regarding the mainports Rotterdam and Schiphol, that he made in the Nineties, as well as in the interview. The storage and distribution jobs that the Port of Rotterdam enables are of course decent jobs for the people that have them. Nevertheless, by sheer nature there is very little added value stored in these jobs. As the professor stated: ”The added value lies at the sender and the recipient of those goods; not in the hands of the distributor”.

Although professor Albert Pols did not state that explicitely, he probably also recognizes the fact that The Netherlands being ‘China’s mailman in Europe’, is neither very 'honourable' nor valuable for the country. Neither is The Netherlands being 'Germany’s warehouse manager'.

Through Rotterdam (as well as through other European ports), China is flooding Europe with its vast steel surplusses, sold at dumping prices nowadays. And also with shedloads of plastic and sheet metal household appliances, electr(on)ic toys, inexpensive consumer goods and cheap home electronics of often very poor quality.

Most of these goods are sold via toy stores and inexpensive department stores, as well as via the numerous discounters and outlet stores that are conquering Europe like wasps during a sunny garden party.

Especially those cheap, poor quality goods and plastic toys have a very negative effect on the amount of waste produced within the European Union, as they are often tossed away only hours or days after being purchased or presented: already broken and unrepairable and (therefore) utterly useless, plastic waste.

Therefore I fully endorse the professor’s message that the Port of Rotterdam is perhaps not the indispensable economic stronghold that The Netherlands needs more than anything else in the country.

The same goes for Schiphol. It is now a quite successful airport, which gains a lot of (in)direct, low and higher level service and distribution jobs for The Netherlands. Therefore it undoubtedly is an economic stronghold in The Netherlands.

Nevertheless, Schiphol is involved in a cat fight with the national airports of Turkey and Dubai – for transit passengers and international cargo  that it probably cannot win eventually, as the latter two are heavily subsidized by their respective governments and attract more and more attention within the aviation industry. The result would be an inevitable reduction in the number of transit passengers and cargo and thus economic decline for Schiphol.

And there is more. In the remainder of the FD article (see the aforementioned link), which I did not print here, the professor rejected the current plans for a seventh runway for Schiphol.

He is right! With six runways Schiphol already has more runways than most other airports in the world. Airports like O’Hare (Chicago), Heathrow (London) and Narita (Tokyo) serve many more airplanes and passengers with (much) less runways.

Myself, I have a sneaky suspicion that this seventh runway – and the accompanying, new passenger terminal that will be developed much closer to the city centre of Amsterdam – are rather meant as catalysts for the development of new commercial real estate on Schiphol’s turf, than out of sheer necessity for a safe and quick passenger handling. Especially when Schiphol’s plans to move the charter flights to Lelystad Airport will be continued indeed. Please remember where you read it first.

So let’s hope that the government listens indeed to Albert Pols. And indeed invests the money in better education, as well as in research and innovation. 

There is enough potential for innovation and research present in The Netherlands. Not only in the Brainport Eindhoven, but also in other Dutch hotspots where universities, research centres and innovative companies join their forces. As particularly those efforts will yield the real, new jobs with real added value for the country.

Please let China’s mailman do his job, as he is very good at it... 

But don’t forget to invest the government funds where they really make a difference. And that difference is not made at Schiphol or the Port of Rotterdam. 

Scout’s honour!

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