Prof Van Ark: 'Departure of multinationals to China no more than logical'

‘More Made in China’ was the headline in the Financieel Dagblad a little more than a week ago. This was occasioned by the sale of several Limburg DSM factories, as a result of the relocation of production work to China. But why should this be big news, asks Bart van Ark, professor of Economic Growth at the University of Groningen. ‘It is no more than logical that an increasing number of multinationals are relocating their production to countries in Asia. It actually surprises me that it’s not happening on a much larger scale!’

Van Ark believes that the Netherlands is too focused on the preservation of its so-called ‘crown jewels’. ‘Because we are a relatively small country, internationalization has played a vital role in the Netherlands down through the years. We have quite a few multinationals which are responsible for an important part of the gross national product. But that does not mean that we ought to cling on to that tradition at all costs.’

A bundle of emotion

Van Ark: ‘You see a similar reaction with the impending division of the ABN AMRO bank. There has been a bit of a fuss about it, but is the potential disappearance of a Dutch bank really such a disaster? Isn’t it simply more important that there are reputable banks, whether they be Dutch or otherwise? It’s not all that crucial to the Dutch economy. Of course it evokes a lot of emotion. But the ABN AMRO probably had just too few resources to evolve into a major force on the global level playing field.’

Don’t think in terms of borders

In Van Ark’s opinion, this last aspect is the key issue. ‘Large multinationals don’t think in terms of European borders and certainly not in terms of Dutch borders. They settle where the costs per unit of production are the lowest. And that is in Asia.’ Nevertheless, many companies are wary. A research and development section, for example, is often retained in the Netherlands, while the production process is moved to China.

Enormous market

Van Ark ascribes this conservatism to the security that companies want to build into their structure. After all, technology in China and India has not advanced to the same extent as it has done here. Van Ark: ‘But I predict that we won’t be able to maintain that advantage for long. There is no reason whatsoever to think that multinationals will remain in the Netherlands in the future. The population in China is growing and prosperity is growing too. Consumers there have more money to spend. That being the case, not only is production cheaper, there is also an enormous market.’

No doom scenario

The only reason for a multinational to stay here is a political one, according to Van Ark. ‘Traditional Dutch companies have the feeling that leaving the Netherlands is just not done. But whether that amounts to a legitimate reason, I’m not quite sure...’
He believes that the departure of multinationals is no reason to write a doom scenario. ‘There are enough multinationals that are completely at home in the Netherlands. We ought to orient ourselves to those companies. Perhaps the large Dutch multinationals will disappear, but we still have a lot to offer. A flourishing small and medium-sized commercial sector remains essential. Let the Netherlands excel in that field.’

Curriculum Vitae

Bart van Ark is Professor of Economic Development, Technological Change and Growth at the University of Groningen. He studied Economics at the same university and gained his PhD in 1993 with an international comparative study of the output and productivity of ten countries in the period 1950-1990. Van Ark is head of the Groningen Growth and Development Centre (GGDC), which provides annual advice on economic growth to the European Commission. Since 1997, Van Ark has been associated with The Conference Board, an international think-tank, and is presently seconded to The Conference Board as the Executive Director of Economic Research.

Contact: Prof. H.H. van Ark, tel. +31 (0)50-363 3674, e-mail: h.h.van.ark@rug.nl