Dutch seek to export miracle

Date: 09/01/1997

By Tim Jones

ADMIRATION for certain economies seems to ebb and flow as often as skirt hemlines go up or down.

Six months ago, Ireland was basking under the 'Celtic tiger' sobriquet, boasting double-digit growth rates and falling public debt. Now, it appears, we have a Nederlands mirakel.

Fourteen years of Dutch budgetary austerity have nevertheless coincided with a reduction in unemployment to 7&percent; of the workforce and avoided social unrest.

The Netherlands, until now ignored except for admiring or admonishing glances at its liberal attitude to soft drugs, prostitution and homosexuality, is now the economic flavour of the month.

The miracle has made the front page of the Wall Street Journal, won the respect of Bank of France President Jean-Claude Trichet and in contrast provoked heart-searching analysis in left-wing French economic monthly Alternatives Economiques.

Although they will deny it, politicians in the Netherlands are enjoying the kudos and are keen to export the best parts of the 'Dutch model' during their presidency of the EU in the first half of this year.

They know that this can most effectively be done in the liberalisation of utility markets.

In this, they are in a happy position not only are they true believers in the need to open Europe's airline, post, rail and gas markets to competition, but they also stand to benefit from it.

In all these areas, the Netherlands boasts the best prepared public-service companies in the Union.

The French government knows this. Why else did French President Jacques Chirac, of all people, demand that the question of postal services liberalisation be resolved by the end of last year?

If agreement had not been reached under the Irish presidency, the European Commission had made it clear that it would start applying clear and transparent competition rules to the sector.

But Paris was even more scared of the Dutch. “I think the French were a lot less afraid of the Commission notice than they were of the prospect of the presidency that was going to follow us,” said one Irish official.

In the end, the French got a great deal. A directive which was originally intended to remove post offices' monopolies on the collection, sorting and delivery of letters weighing up to 350 grams, and then their unique right to deal with incoming cross-border mail and direct mail until 2001 was made much more flexible at a ministerial meeting late last year.

Direct and cross-border mail will not now open until 2003 at the earliest.

The Dutch peril seems to have concentrated minds wonderfully. The visit paid by Communications Minister Annemarie Jorritsma-Lebbink to her French counterpart François Fillon in the week before the Dublin summit was meant to reassure him. It did - two weeks later, a postal deal had been done.

In Koniklijke PTT Nederland NV (KPN), the Dutch boast the most commercially minded post office in Europe. Privatised in the early Nineties, the integrated post-cum-telecoms operator is unusually profitable, reaping profits of nearly 200 million ecu last year from sales revenue of only 1.4 billion ecu. With its recent purchase of Australian delivery firm TNT, KPN has joined the ranks of the world's top communications companies.

With KLM Royal Dutch Airlines, the Netherlands is also home to Europe's second most profitable carrier behind British Airways.

As the Commission prepares to come forward with its proposals to reform the EU-wide system for allocating airport take-off and landing 'slots', KLM president Pieter Bouw will be breathing down the neck of the presidency.

Bouw is very unhappy with the Commission's wish to give as much preference as possible to start-up airlines in the allocation of available slots.

“I would prefer the European Union to stay out of that debate and leave it to the market parties to get it solved,” he said recently. “If they say that they will give priority to new entrants serving intra-European routes, that will totally neglect the importance of intercontinental carriers serving airports at times that fit within their hub-and-spoke systems where they have invested huge amounts of money for decades.”

The Hague can be expected to support Transport Commissioner Neil Kinnock in his campaign to legitimise the previously under-the-counter practice of buying and selling slots. Karel van Miert, Kinnock's colleague responsible for competition policy, is sceptical about such a move and fears it could strengthen the hand of already powerful carriers.

Kinnock can also expect strong support from the Dutch government in a more highly charged area of transport railways.

The Commissioner's White Paper on the future of Europe's railways, which was published in July last year, has already provoked a storm of protest which culminated in a pan-EU day of industrial action four months later.

Kinnock fears that unless radical measures are taken soon, firms will cease to transport freight by rail within the next decade. He wants to create trans-European rail 'freeways' to link major cities for the movement of freight, and intends to come forward with new legislation to ensure that railway companies put their infrastructure and operations arms into separate divisions with distinct managements, and to tighten up the rules on the payment of subsidies.

The Hague has, so far, been highly circumspect in championing this cause. Its already tense political relations with French President Jacques Chirac over its drugs policy could be strained further by Dutch campaigning for rail liberalisation.

Nevertheless, the Dutch rail operator Nederlandse Spoorwegen (NS) is going through the same process as KPN before it and the attitude of the government is strongly 'liberal'.

NS has already adopted a commercial corporate structure and a cost-cutting programme. By 1998, it is due to be fully privatised and all state subsidies to the company will be eliminated by the turn of the century.

Under her presidency, Jorritsma-Lebbink (who doubles as transport minister) will work hard to build a coalition of liberal states to identify the rail freeways as a first step towards EU liberalisation.

Ironically, the one area where the Dutch presidency could conclude a liberalisation deal is in the sector where its chairmanship could actually undermine it gas.

Like the British, the Dutch have the interests of a major market player at stake. Gasunie surpasses British Gas as the EU's largest supplier of natural gas and wants to build a pipeline linking the 'interconnector' from the UK to Zeebrugge with the Netherlands, Germany and ultimately Russia.

But some UK government and industry officials, who are hoping for the most liberal deal on gas possible, fear that The Hague's need to be above the fray during its presidency will deprive the liberal camp of a tough proponent at a critical time.

However, Stan Dessens, the director-general for energy at the Dutch ministry of economic affairs who will be largely responsible for getting a gas deal through the Council of Ministers, plays down British fears.

“I have the impression even from the British that they are glad the Netherlands has taken over at such a delicate moment in the gas negotiations,” he says. “With the Netherlands in the presidency and being on the liberal side, the chances for having proposals in a liberal direction are better.”

In all the talk about the Dutch and their miracle, the special nature of the Netherlands is often overlooked.

While unemployment is relatively low and falling, many of the jobless are classed as 'invalids' and do not count in the official figures as they would elsewhere.

The country's commercially minded utility companies are also in a charmed position.

Gasunie and the government have taken a long time to come around to gas liberalisation and, while it is certainly true that KPN is a largely private-sector company, it also has a monopoly in most postal services and dominates the telecoms market.

And when NS comes to the market, it will also be sold off as a vertically integrated company able to compete strongly with foreign rivals if they are allowed on to the rails it will also own and manage.