USHS Blog
The Netherlands for sale? Hostile takeovers and national security
Last year, the McKinsey’s connectedness-index ranked the Netherlands among most ‘open’ economies in the world, second only to Singapore. The flip side to the benefits of open- and connectedness is an increased vulnerability for international political developments, such as geopolitical scheming or rising protectionism. Economic openness can then become a threat in itself. The public panic on foreign acquisitions that the Dutch media recently reported on is an exemplary case in point. Foreign investments in prime national enterprises are currently no longer seen as business opportunities, but rather as threats to Dutch strategic economic interests. The lingering and still unanswered question, however, is whether this notion of threats would actually justify the ongoing implementation of extraordinary governmental measures.
Hostility towards foreign acquisitions
Late last year, the Dutch parliament came together to discuss a narrowly averted foreign takeover of the national mail company by Belgian investors – and the atmosphere was charged. ‘I am very fond of free trade, but that doesn’t mean that we have to surrender everything to those capitalist dogs,’ ranted Social Democrat Mei Li Vos. The same sort of bestial imagery resurfaced three months later, after the American company Kraft Heinz made a hostile bid on Unilever. Finance Minister Jeroen Dijsselbloem had some advice for the Dutch multinational: ‘dare to protect yourself from the vultures, the hyenas that are ready to destroy your company.’
Over the past few months, all spectrums of the Dutch media have continued to report with an air of suspicion and anxiety on impending foreign take-overs, firing alarmist headlines in all directions: ‘Dutch companies sold abroad on a massive scale,’ ‘Stop selling off our companies!‘, ‘Hostile take-overs are the dark side of capitalism,’ ‘Just how naive does the Netherlands want to be?‘ The timing of these take-overs is no coincidence. It is now highly advantageous to acquire businesses in the Netherlands because the Euro-Dollar exchange rate is favourable, the interest rates are low and Dutch companies have plenty of money in their reserves. In fact, a Thomson Reuters’ database shows that Dutch companies are indeed increasingly sold to foreign investors. However, that same database also shows that Dutch companies still buy even more businesses abroad. The average acquisition sum actually exceeds foreign investments in the Netherlands by almost five times. Admittedly, the foreign acquisition of a company like Unilever would be unprecedented in size, but the current sloganeering of ‘a selling-off of the Netherlands’ is backed by sentiments rather than numbers.
Acquisitions of and by Dutch companies, 2010-2017, source: daskapital.nl
Vital sectors and national security
The fear for hostile acquisitions by malignant investors is not only reverberated in the media, but also in official institutions. In 2014, the Dutch counter-terrorism unit published the report ‘Between naivety and paranoia‘, which argued that foreign take-overs might jeopardize national security. The report referred to an increasingly complex and risky geopolitical context and its authors recommended the protection of three main security interests, namely: the continuity of vital sectors (energy, telecommunication, water etc.); the security of confidential information; and the functionality of the democratic legal system. In vague but ominous terms, the report especially warned for investments from ‘state-controlled planned capitalist economic systems of some emerging economies’, which clearly refers to China and probably Russia as well.
The direct incentive for the official commissioning of the report was a hostile bid on KPN by a Mexican investor in 2013. Foreign ownership of this telecommunications company was deemed to be in conflict with national interests. Acquisition could have brought control over extensive parts of the public telecom infrastructure into foreign hands. The state, the military and the intelligence services, moreover, depend on KPN services. The telecom provider eventually managed to block the Mexican take-over thanks a legal construction. Yet the legacy of this episode endures. Ever since, the Dutch government has been preparing legislation that will allow the authorities to stop foreign acquisitions in vital sectors like the telecom market.
Merging national security and national interest
Even if the Dutch government is preparing a comprehensive law on foreign investment, this effort actually overlooks threats that are related to social welfare rather than strategic calculations. In the above mentioned media articles the populace signals societal threats relating to large-scale job losses, waning labour conditions, the loss of innovative advantages, and the slackening of sustainability projects. It remains questionable whether foreign acquisitions would necessarily lead to such deprivations. The underlying assumption is that foreign companies are loyal only to their shareholders, while national businesses would feel a sort of responsibility to Dutch society. This suspicion of foreign investment fits a newly ascendant patriotism, in which it is always easier to identify an enemy as alien. If take-overs of Dutch companies would really lead to social misery, then it would probably be the neo-liberal market itself rather than the national origins of the investor, which poses the threat.
Worldwide protectionist measures, source: Globaltradealert.org
A new era of protectionism
In this atmosphere of suspicion among public, press and parliament, it is highly probable that governmental interference for the sake of supposed national interests will only intensify. The international tide, moreover, seems to head in a similar direction. Countries like the United States, Germany, France and Great Britain have all set up regulations against unwanted (foreign) investors. These regulations were originally introduced to safeguard national security. However, as ‘new’, often highly state-led economies have risen to global prominence, the laws in question are increasingly employed to protect ‘national champions’ and economic strategic interests.
In the face of such measures, it appears timely to note the dawn of a new protectionist era. Last February, following Chinese take-overs in the German tech-industry, the EU was called upon by three of its largest members to allow for regulations against foreign takeovers. The need for such measures, however, was framed not in terms of national security, but of strategic economic interests. The Dutch calls for governmental interference against ‘the dark side of capitalism’ fit this development. Protection is not only geared at menacing emerging economies, it is also directed against fellow liberal economies that have turned protectionist themselves. The Dutch authorities will probably heed the call, not so much because hostile takeovers are a matter of national security or public interest, but because the current protectionist tide will certainly not leave the second most open economy in the world untouched.