The Dutchmen add value at the Ural products

04.08.2009 — Analysis

Holland aspire to involve the Ural region in their trades ‘ sphere. How told to "Rusbiznews" Director of the Netherlands Business Support Office in Ekaterinburg Jan Van Laar, his country is interested mainly at unique components and semi-manufactured articles or finish goods which have high price, in the world markets.

- Mr Van Laar, the Netherlands take the lead in the list of the foreign trade partners of the Sverdlovsk Oblast. However, shipments of metals from the Urals to your country make up the principal share in the structure of the trade turnover. How can this disbalance in the trade be eliminated?

- This is true, my country predominantly imports raw materials. The Dutch are traders, it is in their blood. This is why we buy raw materials with the view to resell it or to process and then sell it.

Some centuries ago there existed the Hanseatic Union which included Dutch cities too. What they did was buying and selling commodities. Trade with Russia has a very long-standing tradition - first via Novgorod, then via Saint Petersburg. Now Holland, first and foremost, does trade.

As far as the Urals are concerned, the situation is that there is not much demand for Dutch goods here. This is why the trade is disbalanced. However, I do hope that the work of our office in Ekaterinburg will help the growth of exports from the Netherlands to the Urals and not only that. The Netherlands Business Support Office in Ekaterinburg covers all area of the Urals economic region that includes the Sverdlovsk, Chelyabinsk, Kurgan, Orenburg Oblasts, the Perm Krai, and republics of Bashkortostan and Udmurtia.

- What subjects of the federation and which industries of the economy are most attractive for Dutch companies?

- Mainly these are the three most developed regions - the Perm Krai, the Sverdlovsk and Chelyabinsk Oblasts. They already do have a history of trade relations with the Netherlands and also good prospects to further the development of collaboration. Moreover, agriculture - cattle breeding and dairy farming - is very well developed in the Kurgan Oblast. I am sure that good connections between the Kurgan and Dutch companies will develop in the future.

As far as Bashkortostan, Udmurtia, and the Orenburg Oblast are concerned, I am not too familiar with these regions yet, but I certainly have plans to visit them.

- The most developed sectors of the Urals economy are machine building and metallurgy. How can Dutch companies partake in the modernization of our large production facilities?

- Undoubtedly Dutch companies do have large experience and capacities in the automation and mechanisation of industrial enterprises. In order to do this, however, they must have sufficient information about the region. Then the contract signing process in all business spheres will speed up considerably.

For instance, I worked in Nizhniy Novgorod on various projects ten years ago. A Russian company approached me once and made a suggestion that sounded crazy at first - to export bicycles to Holland. I was very surprised. Bicycles are very popular in Holland and our industry producing this kind of transport is rather well developed. But since then between Nizhniy Novgorod and Holland there is a strong direct link in bicycle manufacturing. Nizhniy Novgorod manufacturers supply wonderful titanium bicycle frames to our country. It is something we can not make ourselves.

The Dutch even now know very little about the Urals as the region was off limits for foreigners during the soviet times. The Dutch economic and trade mission, however, will come to Ekaterinburg and Chelyabinsk in September 2009. The mission will include more than 50 representatives of business from the Netherlands of such industries as consumer goods manufacturing (a well known company Unilever), cattle breeding, dairy farming, food processing, and the protection of the environment. I am sure all these companies do have opportunities for work in the Urals.

I do go to food shops in Ekaterinburg and see that many food products and consumer goods sold there are not made in Russia. Russian companies will get used to the idea that these products must be made in your own country. However, this requires investment. Unfortunately, Russian companies still have a weakness - they are not very good in preparing investment projects for getting bank loans.

- Can you name particular projects in the sphere of agriculture being implemented or planned in the Urals with the participation of the Dutch companies?

- There are strong connections between companies from the Urals and from the Netherlands in the sphere of growing potatoes, dairy production, and growing flowers. A large greenhouse had been built 17 years ago in Zavodoukovsk (the Tyumen Oblast). The crops grown there (Herbs, salad and tomatoes) are still successfully sold in the Urals shops. Seeds for these flowers are supplied from Holland.

- You have visited Perm recently. What are the results of the trip?

- In Perm, for instance, we discussed the issue of the cooperation in the production of boats (casco's) as this city has access to the sea via the river Kama. One Dutch company got interested in the opportunity of supplying the plastic bodies for the boats made in the Urals for instance Perm. Everything else will be made in Holland, this will be an expensive product with a very high added value. It has to be said that world's best yachts of the highest class are made in Holland. If an Arab sheikh want a yacht, he would buy it in our country.

Moreover, Stork Aviation, a Dutch company specialized in service and maintenance of Fokker planes is looking for partners in the Urals. There are several turbine manufacturers in Perm which might satisfy the high quality demands of this company.

The Russians have the technology for the production of turbines and parts of turbines that are most difficult to make. If we speak of gas turbines, in the centre of it high pressure very hot gas hits turbine's metal parts. Usually metal deforms under such temperature and pressure conditions. Russians, however, have learned how to use composite materials, which is used for this part of the turbine. This technology is employed for instance in the Mig-29 fighter jet.

I had visited Perm before and went to see the Perm Motors company. Regardless of the fact that it was or still is a closed enterprise, we were shown some of the production. The precision to which complex engines and turbines for aircraft are made is unbelievable!

- Do Dutch credit and finance organisation consider opening branches in the Urals?

- The issue of opening some Dutch banks' branches in the Urals was considered in the beginning of the nineties. Then foreign banks were allowed one main branch and one additional office. We expect a representative of the ING consortium, which is a bank and an insurance company to be in the September mission. The situation in the financial market is very complex now, banks are more shut off now than before. The insurance company of the ING consortium is studying the markets and will be offering the insurance services. I do doubt, however, that we are going to see the promotion of the Dutch financial institutes in the Urals in a near future.

- Will Dutch retail chains come to the Urals?

- I do not know of such plans as yet. Once a Dutch retail chain Albert Heijn tried entering the Russian market but left rather quickly. At that time the markets were quite confusing and due diligence investigations of companies were hard to be made. I am for that reason happy that the big accountancy companies have settled in Ekaterinburg. Your country was at that time not yet a place where retail chains can make profits big enough to match competitive investmentplans elsewhere of those companies.

However, the Perekrestok retail chain is owned by X5 Retail Group which is registered in Holland. This does not mean that it is a Dutch company. When I worked in Bulgaria at the embassy of the Kingdom of the Netherlands LUKOIL representatives approached me and asked me to protect their interests before the Bulgarian Minister for Finance. - What did it have to do with me? You are a Russian company. - No, we are registered in Holland.

The Netherlands are not an offshore territory but the taxation system is very attractive for legal entities. The profit tax is about 20% which is amongst the lowest in Europe. Moreover, the services for companies - finance, accountings, and legal - are very well developed in Holland.

- Do you have any data on Urals companies registered in Holland?

- I know several such companies. The most important thing is that the company registration system in Holland is very different from the Russian system. Everything is much simpler in our Country. All you have to do is to come to the Chamber of Trade and Industry and to register the company. Nobody will be interested where your parent company is or dig any of your past at all.

For me it is always strange to watch why Russian State authorities want to know such a lot of information about companies working here. I consider it very wrong indeed. For instance a bank in Ekaterinburg demanded an annual budget plan from me with a detailed expense itemisation. But excuse me, this is none of their business! I want to plan and control my own budget myself. It is the ministry of Economic Affairs of the Netherlands to which I am really accountable for my budget and its spending. Of course this all has to be within the framework of Russian laws.

The Dutch do not like any external control at all. This is what all Dutch economy stands on. I cannot answer your question exactly because our Government does not control citizens of where they register companies. We strongly believe, and I admit sometimes to much, in a liberal principle which in French is: laissez faire, laissez passer et la monde va de lui meme.

The interview has been prepared by Pavel Kober