Relationship between Globalization and the Dutch Shipping Industry: The Importance to Dutch Economy

Contents

List of abbreviations

Executive Summary

1. Introduction
1.1 History about Dutch Shipping Industry
1.2 Brief description of the Dutch economy
1.3 Shipping in the Netherlands

2. Globalization
2.1 Definition and theoretical background
2.2 Globalization effects on Dutch Shipping Industry

3. Importance of Shipping to Dutch Economy
3.1 Relationship between Shipping and Dutch Economy
3.2 The influence of shipping industry to the Dutch economy
3.2 Future of the Dutch Economy and Shipping Industry

4. Conclusion

Literature and Sources

Appendix

List of abbreviations

illustration not visible in this excerpt

Executive Summary

The following report gives a review about the relationship between globalization and the Dutch economy. Furthermore the authors explain the importance to the Dutch economy. The first part of the available report contains a brief introduction about the Dutch Shipping industry and the general economic situation in the Netherlands.

In the second part the authors define the item globalization, give an overview about the theoretical background and show the effects on Dutch economy.

The importance of the shipping industry is the main topic at the third part of this report and shows the relationship between shipping and Dutch economy.

With the fourth part we give a summary and conclusion about our project topic and answer the research question.

1. Introduction

A Dutch business man might drive to work in a car designed in Germany that was assembled in Mexico by Daimler-Chrysler from components made in Japan that were fabricated in Korea from Malaysian rubber. The Dutch Business man may have filled the car with gasoline pumped by an oil rig in a well off the coast of Africa by a French oil company that transported it to Holland in a ship owned by a Greek shipping line. Before work the businessman stops for a quick breakfast, coffee and a chocolate muffin. The coffee beans were grown in Brazil and the chocolate in Peru. A large majority of the products mentioned in the above passage were transported by way of sea. Each of the products shares similar qualities, bulky, less high tech, large capacity moving long distances.

One of The Netherlands most prominent industries is shipping, within the industry there are many aspects, the authors of this report choose to concentrate on its freight transportation capabilities. The nature of the business incorporates all aspects of globalizations. The purpose of this report is to illustrate the direct correlations between shipping transport, globalization and its importance to the Netherlands and more importantly the world. Finally we want to find a answer for our research question if the Dutch shipping industry is really the key for the Dutch economy to follow the globalization process?

1.1 History about Dutch Shipping Industry

The year was 1595 and Jan Huygen van Linschoten set out on his maiden voyage Asia bound. The impact of his actions would be immense to the Dutch shipping industry. It was especially remarkable because at the time Dutch merchants were forbidden by the Portuguese to engage in lucrative trading with the East Indies. In 1595, Dutch merchants decided to break the Portuguese monopoly and set sail Eastbound. Within five years 65 ships were making the voyage. Increased competition among the Dutch resulted in the forming of a union: United East India Company (VOC). It was granted exclusive licenses to trade thus becoming a monopoly, the years to follow were prosperous with large economic and cultural growth. By the 17th and 18th century the VOC was the largest and richest company in the world. It was the first company to gain multinational status, paying out dividends of 40 percent. Throughout the companies life almost 4800 voyages were made. 200 years after its inauguration collapse of the commercial enterprise came from corruption, increased competition and numerous wars with England. This experience and depth of the Shipping industry has transcended through time and evolved into what is present day Holland a shipping giant among nations. The largest Company currently operating out of the Netherlands is P&O Nedlloyd as the fourth largest provider of container shipping services in the world.¹

1.2 Brief description of the Dutch economy

The Dutch economy has a strong international focus, the Netherlands being one of the European Union's most dynamic centres of trade and industry and depends heavily on foreign trade. Due to its favourable location by the North Sea, the Netherlands plays an important role as a main port and distribution centre for companies operating worldwide. Dutch are known as skilled in languages and posses good in negotiating trade agreements and implementing projects against the odds. The Dutch economy is also considered to have stable industrial relations, moderate unemployment and inflation, a sizable current account surplus, and an important role as a European transportation hub. The Netherlands is susceptible to international developments, especially in recent years the global recession. Main industrial activities in the Netherlands are mainly in food processing, chemicals, petroleum refining, and electrical machinery. A highly mechanized agricultural sector employs no more than 4% of the labour force but provides large surpluses for the food-processing industry and for exports.

The Netherlands, along with 11 of its EU partners, started using the Euro currency on 1st January 2002. The Netherlands also continues to be one of the leading European nations for attracting foreign direct investment. Netherlands is also very export orientated country and it was the world’s eighth largest exporter of goods and services in 2003. Dutch manufacturers export goods worldwide, maintain subsidiaries in many countries and often join forces with foreign partners. The main manufacturing industries are chemicals, food processing, metalworking and the refining of gas and oil.

Netherlands’ workforce numbered 7.5 million, in year 2003, three-quarters of whom worked in the service sector. Per capita gross domestic product (GDP) was €27,900 also in 2003. The unemployment rate was 5.3% and growth was strongest in the public sector, education and health care. The seaport of Rotterdam is the largest in Europe, transshipping tens of millions of tones of goods per year. It used to be largest but now the fast growth in the port sizes has challenged its position. The Amsterdam Schiphol Airport is the fourth largest airport in Europe and very important for both – passenger and goods traffic. Dutch transport companies are clustered around the two main import and export centers: Amsterdam Schiphol Airport and the seaport of Rotterdam.²

1.3 Shipping in the Netherlands

As we explained already in point 1.2 the Netherlands has a centuries-old tradition as a trading nation and the shipping industry is a very old and important part of the Dutch economy. Actually the Netherlands are one of the most important gateways for Europe and ideal for penetrating markets within the European Union as well as throughout Europe, Middle East and Africa. Most of the companies that have considered establishing a European Distribution Centre looked at the Netherlands as a potential location. A natural gateway with flat countryside and good river connections has been built into a dense infrastructure of ultramodern and well maintained roads, railways, inland waterways, airports and seaports. The central geographical position of the Netherlands in Europe (see map at appendix – Figure 1), good accessibility, excellent infrastructure and expertise of the logistics transportation and industry are only some of the reasons for establishing a European headquarters in the Netherlands. Furthermore the Dutch transport sector is highly developed and consists of approximately 11,000 companies with varying capacities, able to meet all demands in a minimum of time. One of the biggest shipping companies is P&O Nedlloyd's with 156 ships. The quality of Dutch logistics services is an important differentiating feature of the Netherlands. Due to the fact that so many multinationals have decided to outsource their European distribution activities the Dutch logistics service industry is a highly developed and growing industry. Many logistics service providers adapted their service package to new requirements. New services developed include: assembling, testing, quality control, repairing, labelling and packaging.

The Port of Rotterdam has grown to the biggest one in Europe by offering different kind of logistic services. In a worldwide view the Rotterdam harbour stands at the 7th position as you can also see at Figure 2 at the appendix. Today the worldwide biggest ports are located in Asia due to the strongly increasing economies there. Although Rotterdam as important trade centre is not the biggest port in the world the importance for the Netherlands is still very high. Several years ago the Dutch merchant fleet had dramatically been decreased but in 1995 there was a turning point and the Dutch government launched a new shipping policy to stop the decreasing trend.³

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¹ Note http://www.sscnet.ucla.edu/southasia/history/british/eaco.htm http://www.ponl.com

² Note http://www.hollandtrade.com - last access 21.04.2005

³ Note http://www.cia.gov/cia/publications/factbook/geos/nl.html#Econ - last access 26.05.2005 http://www.shipcon.nl/shipping.htm - last access 26.05.2005