Opening academisch jaar Nyenrode

Toespraak | 06-09-2010

Ladies and gentlemen, professors and governors, students and alumni,

John Hay, a former US Secretary of State, said over a century ago: ‘The Mediterranean Sea is the sea of the past, the Atlantic Ocean the sea of today, and the Pacific Ocean the sea of the future.’ That sounds about right. Except that he overlooked one sea. The little sea that never surrendered, that always played a significant role in world trade, and still does so today: our own North Sea! The sea that through the centuries provided the inspiration and the means to get the Dutch people out of their huts and hides, into ships and shops, profits and pinstripes. The sea that provided the inspiration and the means to make trade our trade, and business our business. That enterprise made the North Sea a sea not to be overlooked and the Netherlands an economic power not to be underestimated.

But the times they are a-changing. Always.

Lehman Brothers and Northern Rock, bank run and bonus culture, subprime mortgages and credit default swaps, rescue plan and governance, credit crunch and recession. Those were – and are – the words that changed our times and our world.

At the moment the global economy is recovering from the most severe recession since the Great Depression of the 1930s. As a result of the financial crisis, global output fell in 2009, leading to a sharp rise in unemployment and a deterioration in public finances. This has led to increased public debt levels; the IMF expects that in 2014 the average public debt in advanced economies will be 40 percentage points higher than the pre-crisis levels. These debts have to be addressed. In the United States, in the European Union, and in this country. In two weeks I will be presenting my budget. The budget of the current caretaker government. With this initial budget we will save 3.2 billion euros on a yearly basis. More than we have to under EU rules, and a significant and very necessary first step.

We all know that, overall, macroeconomic developments during the first half of 2010 confirmed expectations of a modest but steady economic recovery. But we also know that the recovery remains fragile. Downside risks have risen amid the turbulence in the financial markets, reflecting worries about fiscal sustainability, policy responses and future growth prospects. These significant downside risks make the economic outlook very uncertain. There are people who think we might even be heading towards a ‘double dip’. The assessments and recommendations of economic commentators are often diametrically opposed. Some argue that the only way to avoid a double dip recession is to print more money. Others argue with equal conviction that the only way to avoid a new crisis is by implementing radical austerity measures. In other words, budget cuts. Who is right? Only time will tell. But it is not in my nature – nor in our best interest – to sit back and wait for things to happen. We must make things happen ourselves. I believe that to a large extent our economic future and economic growth lie in our own hands.

As you all know, governments and central banks have taken unprecedented measures to prevent a financial meltdown and stimulate economic demand. These crisis measures have worked well, and they will continue to support the recovery for a while, but they are not structural drivers of economic growth. In the end – in fact, sooner rather than later – the economy will have to grow by its own means again, without the stimulus measures of governments and central banks. This is real economic growth, which is driven by technological progress and innovation. And, above all, by enterprise.

So the way out of this crisis is not to wait for better times, but to encourage enterprise. Here at Nyenrode you – and as a former student I can - call it the head-heart-hands approach or the spirit of enterprise.

Here at Nyenrode you have learned – as I did – that entrepreneurship is about seizing opportunities, about combining knowledge with nerves. That is how the Dutch East India Company came into being, as well as the first shares and the first stock exchange, the Port of Rotterdam and Schiphol Airport. That is how the Netherlands became a transport hub, a logistic hub, a financial centre, and everything else that makes this small country on the North Sea an economic power to be reckoned with. But to hold on to that position we have to adapt to a changing economic reality. Because it is now more obvious than ever that John Hay was right: the Pacific Ocean is the sea of the future.

It is clear that today the drivers of global growth are not the traditional advanced economies, but emerging economies like China, India and Brazil. IMF projections for 2010 clearly show that advanced and emerging economies are in different gears. The IMF expects the world economy to grow by 4.6% this year. Advanced economies are projected to grow at a modest 2.6%, while growth in emerging economies is expected to be almost 7%. The IMF estimates that economic growth will be an overwhelming 9.8% for China. And this trend will continue. So emerging economies have plenty of opportunity to catch up with our levels of prosperity. By increasing capital investment and making use of readily available technologies they can already grow very fast. In 20 or 30 years, the emerging economies will account for a larger share of the world economy than the traditional advanced economies. It is not unthinkable that our roles will be reversed.

In China, for example, the middle class is developing rapidly. Right now, it is about the size of the entire population of the United States, and they are just getting started. A McKinsey study estimates that it will take two decades before these ‘nouveaux riches’ reach their full spending potential. This increase in consumer demand is likely to be an engine of economic growth.

But the seemingly infinite opportunities of these countries are not the whole story. The emerging markets also have a number of disadvantages they still have to overcome. The World Bank’s 2010 Doing Business report illustrates this. The report evaluates 183 countries to see how business-friendly they are. The Netherlands ranks number 30, while China ranks numer 89, Brazil number 129, and India 133. This is one of the main advantages of the Netherlands: our good business climate. Studies by Ernst & Young show that foreign investors choose the Netherlands because of our favourable location, our world-class seaport and airport, our first-class links to the rest of Europe and our excellent reputation for storage, distribution, transport and logistics. A highly skilled, multilingual workforce and a modern ICT infrastructure are other important reasons for foreign companies to locate here. These assets also enable us to benefit from business opportunities in countries like China and India. The Netherlands is a hub in many ways – of knowledge, logistics and business cultures. And it is well placed as a springboard between the euro countries and other financial centres. And then I haven’t even mentioned the landscape and quality of life here, or the high standard of our theatres, concert halls and events.

But an appealing business climate must also include transparent legislation and taxes, flexibility and reliability. Companies want to know exactly where they stand, and the government and oversight agencies need to respond adequately. That’s where the government comes in. And this government has worked hard to strengthen Dutch competitiveness. We have reduced the administrative burden, abolished capital duty, lowered dividend tax, introduced tax-exempt investment institutions, and lowered corporate tax to between 20 and 25.5% – to name just a few of our measures.

The opportunities offered by emerging markets are not only to be found in our own backyard. We can – as we have done throughout history – undertake our own business adventures. We have always had the guts to go for glory; we have always nurtured the spirit of enterprise. Not only here at Nyenrode, but also in the cabinet. Not that I believe that the government has a leading role in business. It doesn’t. As an entrepreneur myself, I believe that government should neither try to be an entrepreneur nor stand in the way of enterprise. International enterprise is first and foremost the expertise and responsibility of the entrepreneur. Dutch entrepreneurs have been highly successful in emerging markets, and they still are. Many Dutch firms are active in those countries.

Rather, the government’s role is to support and facilitate international enterprise. For instance by lowering or eliminating barriers to international trade and investment. A good example of the government’s role is the export credit insurance facility for companies exporting to risky emerging markets. For instance, one of the largest dredging companies in the world, Van Oord, recently obtained insurance from the Dutch government for their activities in Abu Dhabi. In another case, the export credit insurance facility enabled a South African company to buy a large dredging ship built by the Dutch company Merwede.

Over the past two years, the export credit insurance facility has proved to be a very flexible instrument for offering insurance, even in difficult times.

Another way government can support international business is by concluding tax treaties. To prevent double taxation for the many Dutch companies that are active internationally, the Netherlands has signed over 80 tax treaties.

For an open economy like the Netherlands, these treaties are very important, and the government makes a big effort to sign new treaties and modernise old ones. The Dutch government actively seeks input from the business community before setting its priorities in the negotiations. For example, when Dutch companies are expanding their activities in a country with which there is not yet a treaty, drawing up such a treaty becomes a priority.

In March, during a trade mission to China, organised in close cooperation with the Holland Financial Centre, I had the (h)onour of signing a tax treaty with Hong Kong. This treaty will enhance investments between the Netherlands, Hong Kong and China and provide certainty and tax benefits for Dutch companies based in Hong Kong – and vice versa, of course.

But, as I said, the spirit of enterprise belongs mainly in the heads, hearts and hands of the entrepreneurs themselves. So where do they find their inspiration? Where do they get their guts, their appetite for glory? At our schools, colleges and universities. I was very much inspired during my time here at Nyenrode. You seem to have created a unique marriage of learning and experience, knowing and doing. And you’re always one step ahead. That’s why you not only have an Institute for International Business, but also a Europe China Institute and a Europe India Institute. Institutes for applied business research, institutes that help students and entrepreneurs to understand the do’s and don’ts of sustainable globalisation, global sourcing and emerging markets. Institutes that will help our country to return to strong and sustainable economic growth.

You are also one step ahead in another field: public accountancy. A few months ago you opened an interesting knowledge centre: the Centre for Public Auditing & Accounting, a partnership between the Government Audit Service and Nyenrode. I couldn’t attend the opening ceremony so I’d like to take this opportunity to say how important this Centre can and will be for the future of government auditing and accounting. Because if the world changes, the government has to change too. This also means that we need a different attitude and approach from our government auditors and accountants. We need auditors and accountants who are able to look further than one process, one department, one budget; who are also able to advise on non-financial matters; who understand the new challenges of the public sector: sustainability and cost-effectiveness, transparency and reliability. This new Centre can help government auditors and accountants to do all this and more, to help and inspire them to do their work in a changing environment. What can also help is a bigger, broader Government Audit Service, not least in terms of efficiency.

Ladies and gentlemen,

Nyenrode alumni are encouraged to go out into the world, to spread their wings in business, management, accountancy and – sometimes even politics. And they always come back: to tell new students about their experiences, to inspire the new generations. I am proud to be one of them, to be part of the Nyenrode family. Why? Because I am convinced that after 64 years this splendid institution has only become more splendid and more important. Do you remember the Beatles song in which Paul McCartney asks: ‘Will you still need me, will you still feed me, when I’m 64?’ The answer is clear: Yes, we will!

Thank you.