International -- European Cover Story
Unsung Heroes (int'l edition)
Europe's immigrant entrepreneurs are creating thriving businesses--and thousands of jobs
Chin Thach is far more than a survivor. The ethnic Chinese Cambodian arrived penniless in 1976 in France, having fled the murderous Khmer Rouge regime at home. Yet he set right to work, studying French at night and working on the Citroen auto assembly line. By 1986, he had enough money saved to open his own computer assembly company with two immigrant friends. Today, Abacus Equipement Electronique boasts annual sales of $275 million and employs 400 in a shiny new factory in the suburbs of Paris. "My family owned a factory producing soy sauce in Cambodia and I always wanted my own business," says Thach, who hopes to take his company public this year.
Immigrants such as Thach are injecting new dynamism into the Continent's economies, and creating thousands of new jobs. Yet every single European Union government is trying to close its door to almost all new immigrants--except for political asylum seekers and those making petitions to reunify families. Policies vary in harshness (table, page 22), but most ominous are those espoused by Jorg Haider's extreme right Freedom Party, which recently gained a place in Austria's government for the first time. He calls for kicking out illegal immigrants and making it tougher for others to get into Austria. And he vows to slow the EU's planned expansion to the East."MORE DYNAMIC." Haider's attacks against foreigners draw on deep fears. In a recent European Commission poll, 66% of EU citizens admitted to being "a little racist," while 33% said they were either "very racist" or "quite racist." It is these Europeans who blame the Continent's 16 million legal immigrants and countless more illegals for stealing jobs, jacking up crime rates, and straining welfare budgets. Unemployment among legal residents who hold non-EU passports does in fact run an average twice that of native Europeans, while crimes committed by immigrants run up to three times higher. Unstable, immigrant-packed ghettos are growing in European cities such as Amsterdam, Paris, Berlin, and Brussels. On the Costa del Sol in southern Spain recently, bands of Spanish men chased Moroccan immigrants, burning down businesses and mosques. The violence came after a Moroccan worker was charged with robbing and murdering a Spanish woman.
Yet, there is another side to the story--as Chin Thach's thriving company shows. For every unemployed foreign resident from Kosovo or Morocco, eight more legal immigrants are working, providing jobs for other Europeans. Foreigners in the EU earn at least $461 billion a year and pay $153 billion in taxes, estimates Hans Dietrich von Loeffelholz at the RWI Economic Institute in Essen. That's far more than the estimated $92 billion immigrants receive in welfare. The number of foreign self-employed rose from 550,000 seven years ago in 10 Western European countries to more than 650,000 today, an increase of 18%. In contrast, native-born self-employed increased by only about 7%, according to new data compiled by the OECD. "Immigrants take huge risks to leave their home country," notes OECD migration expert Jean-Pierre Garson. "As a group, they are more dynamic than the norm."PERMANENT GUESTS. Such research is giving a new twist to the debate over immigration in Europe. Of course, Europeans know that immigrants have long done the jobs no one else wants. But policymakers have only just started to measure their contribution to Europe's economy. They are also studying the positive impact of immigration on U.S. growth and debating how to unlock similar benefits for the EU by encouraging the immigration of more skilled workers. "In the future, everybody is going to be fighting for the best brains, and Europe has got to do a lot more to compete against Australia, Canada, and the U.S.," says John Salt, professor of demographics at University College, London. Long-range planners say immigrants will have to play a vital role in fueling economic growth as Europe's population ages.
This kind of hard-core economic argument may provide one of the Continent's best weapons against the anti-immigrant rhetoric of politicians such as Haider. It's one reason Germany recently introduced a new citizenship law, awarding citizenship to foreigners' children at birth. Belgium recently naturalized some 35,000 illegal immigrants under a program to allow long-term asylum seekers to work. And the Netherlands has dropped restrictive diplomas required to open a barber or butcher shop, typical enterprises for legal immigrants just starting out.
But legal immigrants in many countries are still fighting against the odds to set up their own companies, especially in high-tech industries such as software and the Internet. "When I go to Silicon Valley, I see Indians and Chinese in senior positions," says Michiel Frackers, the 31-year-old chief executive of Dutch Internet startup BitMagic and himself the son of Indonesian immigrants. "Europe must allow the same thing to happen."
Historically, Europe has recruited foreigners with few skills. When the Continent boomed in the 1950s and 1960s, Germany, France, and other countries brought in millions of often illiterate workers from Turkey, North Africa, and the Indian subcontinent to run factories and fill service jobs. But when their economies soured after the oil shock in the 1970s, Europe's governments began offering the so-called guest workers money and other incentives to return home.
It didn't happen. Most of the "guests" stayed on, eventually gaining permanent residency. And even though Europe has retained its closed-door policies, the influx of immigrants has continued. Family reunification and asylum applications increased the EU foreign population by about 500,000 per year through the 1990s and by 717,000 in 1999, largely because of the Kosovo crisis. In Germany, the Netherlands, France, Belgium, and Britain from 7% to 10% of the population was born outside the EU--compared with 9% in the U.S. "Fortress Europe is a myth," says Godfried Engbersen, a migration specialist at Rotterdam's Erasmus University.
Europe needs those immigrants to maintain the size of its labor force in the 21st century. Low birthrates on the Continent translate into declining, older populations. A new U.N. study says the EU will require 40 million immigrants by 2025 in order to avoid a decline in the workforce. "Europe would prefer to ignore this cold truth," says Joseph Chamie, the report's author and director of the U.N. Population Organization.
How Europe shapes its immigration policy is crucial: An immigrant's legal status directly affects his or her ability to create wealth. "If you feel secure and are putting down roots, you are more likely to build a business," says Michel Vanderkam, a researcher at Belgium's Center for Equal Opportunity. Britain's nonwhite immigrants came from the Commonwealth and, as descendants of the empire, became automatic citizens. Not surprisingly, they have created the most companies proportionately of any immigrant group in Europe. More immigrants work for themselves than for others in Britain.LONG HOURS. As Europe's largest economy, Germany also boasts the largest absolute numbers of foreign entrepreneurs. But Germany and Austria both also have restrictive nationality laws and place numerous obstacles in front of immigrants. Polish refugee Marek Siuda, 40, had to get his German-born wife to register his Stuttgart moving company because German law requires four-year residency before foreigners can start their own businesses. "We had a lot of difficulties with the government office for foreigners," says Katrin Siuda, Marek's wife and business partner. Germany and Austria still require hard-to-earn diplomas for many service professions.
Most immigrant entrepreneurs, with little capital and minimum education, overcome these obstacles by opening up small shops. "French people don't want to work these hours anymore," says Ali Boumargu, a 30-year-old Moroccan owner of Proxi-Service food market in northern Paris. He keeps his shop open evenings until 10 and all day on Sunday, when most other stores in France are closed. In Stuttgart, 27-year-old Safak Akdogan puts in 70-hour weeks behind the hot grill at his Turkish snack bar. "I was born into the entrepreneurial way of life," Akdogan says.
These low-skill businesses can turn into successful companies. Moroccan Rahma el Mouden arrived in the Netherlands in 1975 at the age of 15. Her parents had arranged for her to marry a Moroccan guest worker already settled in the country. In 1997, after working several years as a cleaning woman, she started her own company, MAS, short for Multicultural Amsterdam Cleaners. With 75 workers, mostly immigrants, it generated $1 million in sales in 1999.
Other immigrant entrepreneurs take advantage of low-cost manufacturing in their home countries to build up competitive businesses. After Kemal Sahin finished his engineering studies at Aachen University in 1982, Sahin feared the German government would deport him. He had no work papers, but was told he would be allowed to stay if he could open a shop. So Sahin began importing T-shirts from Turkey and selling them in Aachen.
That was the start of what eventually became a textile empire. Sahin went on to acquire 18 textile factories in Turkey, where he makes clothing for sale across Europe and even in the U.S. He also owns 311 Adessa retail outlets, which are found in most German cities. His Santex Gruppe now employs 9,600--1,800 in Europe, the rest in Turkey. Sales reached $900 million last year. "My business mentality is German, and my cultural mentality Turkish," Sahin says.HIGH-TECH ENTREPRENEURS. Pioneers such as Sahin encourage other Turkish entrepreneurs to strike out on their own. Around his headquarters in Aachen, a half-dozen other Turkish clothing enterprises have opened up. Veli Demirdizen worked as a salesman for more than a decade for Sahin before opening his own children's clothing company, D.M.D. Mode Vertriebs, in 1998. It will notch up $1.8 million in sales in 1999. "I learned all I could at Santex and was ready to do better out on my own," says Demirdizen.
Turkish entrepreneurs in particular are becoming a powerful force in Germany, where there are 50,000 Turkish-owned businesses. That's expected to more than double by 2010, producing some $101 billion in sales, according to a study by accounting firm KPMG. "The money saved up by the parents, who lived modestly, is being invested by the children, turning guest workers into entrepreneurs," says Helga Herrmann of the Cologne-based Institute of the German Economy.
Increasingly, as foreigners gain experience and obtain access to better education, they are moving into more sophisticated industries. Sri Lankan Suran Goonatilake, 32, earned a PhD in artificial intelligence at London's University College before co-founding Searchspace in 1993 to develop financial software. Searchspace now employs 50 people and clients include the London Stock Exchange. Venture capitalists are preparing an initial public offering valuing the company at $30 million. "When you have cutting-edge technology," Goonatilake says, "people don't care about your color."
With the debate about immigration still under way in Europe, that may be wishful thinking. Candidates echoing Haider's views have made electoral progress in Denmark and Switzerland. The implosion of the moderate right in Germany, France, and Italy may open the way for more extremism. But there's also the possibility that the Freedom Party's rise to power will cause Europeans to call for more tolerance. The other 14 governments all condemn the extreme right's entry in Vienna. "Haider has frightened everybody into realizing the dangers of an anti-immigrant policy," says Ronald Lesthaeghe, a professor of demographics at the Free University of Brussels.
But Europe's leaders must do more than disapprove of xenophobia. They must remove both legal and psychological barriers to immigrants, and welcome the children of foreign residents into Europe's social and corporate structures. "When my father came to Amsterdam, he could have achieved much more if Holland had been more of a meritocracy," says 31-year-old Frackers. He co-founded one of the Netherlands' biggest Internet service providers, Planet Internet, with Dutch phone company Royal KPN and now has started his own Net company. "I've been much more successful in mixing into the traditional Dutch Establishment." How Europe's Establishment welcomes immigrants in the future could play a big part in promoting economic growth--and stifling the hatreds and fears that have bedeviled immigrants for years.By William Echikson in AMsterdam, with Katharine A. Schmidt in Stuttgart, Heidi Dawley in London, and Anna Bawden in ParisReturn to top