One in five large companies relocating activities

04/12/2007 15:00

Since 2001 more than 600 large Dutch companies in manufacturing and services have relocated business processes to countries outside the Netherlands. Another 200 companies expect to do this within the next two years.

International relocation of business processes by sector of industry

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High-tech manufacturing in particular relocated

Significantly more manufacturing than services companies have relocated processes to other countries. In the high-tech industry in particular nearly half of companies have offshored business processes since 2001 or plan to do so. The fact that three-quarters of companies in this sector are already quite internationally oriented as they are mart of multi-national corporations has certainly contributed to this development.

Core activities to eastern Europe and Asia

Forty percent of all activities offshored in the period 2001-2006 consisted of core activities (production of goods and services for the market). These processes have been relocated to countries in eastern Europe and Asia, such as Poland, the Czech Republic, China and India.

Most relocations (60 percent) have concerned support processes such as distribution and logistics, IT services and administrative positions. Many of these activities are concentrated in western Europe especially Germany and Belgium.

International relocation of business processes by destination, 2001-2006

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Cost effectiveness main motive

The main reason companies decide to move activities out of the Netherlands is to save money, particularly wage costs. Companies also cite improvement of their competitiveness as reasons to offshore processes: following customers or competitors, better logistics and access to new markets.

Fewer regulations in other countries and labour shortage at home are apparently not significant reasons to transfer business activities.

New jobs as a result of offshoring

It is difficult to give an exact estimate of the consequences of relocation for employment in the Netherlands. For about half of companies, offshoring activities costs no more than 10 jobs, but for 15 percent of companies more than 50 jobs are lost at home.

On the other had, nearly half of relocations create new jobs in the Netherlands, for example to manage offshore processes. Relocating activities may also leave room for other activities at the company in the Netherlands.

Gusta van Gessel and Fintan van Berkel