By Lars Björn Gutheil
German-Dutch Chamber of Commerce
(DNHK), The Hague
In recent years, rumors have been going around that crisis is emanating from the Netherlands. After tough negotiations regarding reforms, the situation has stabilized. The country has recorded slight growth in spite of the crisis in Ukraine, and it is preparing itself for the future.
Do it well and sell it: the technology and supplier industry
Dutch people are not exactly known for taking a back seat. “Do it well and sell it,” that is something that you do not need to teach most businessmen from the North Sea kingdom. The Dutchmen’s distinct trade mentality has traditionally made their country one of the largest global exporters. With exports totaling around €550 billion, the Netherlands ranks eighth on the World Bank list of top exporters worldwide. When thinking about Dutch products, tulips and cheese typically come to mind. The agricultural and floral sectors actually continue to be significant. Nevertheless, the country today stands mainly for technology and a distinguished supplier industry. The Dutch industrial association FME proudly reports that every fourth part that is manufactured for a German car comes from the Netherlands. Its relationship with its neighboring state Germany has turned out to be a gold mine for the Netherlands. Whether it is in the automotive, chemical or electrical engineering industry, Dutch companies make good money in the broad “back country,” which is mainly served by the Rotterdam harbor. More goods are transshipped to Germany from Rotterdam than in all German ports combined. The trade volume between Germany and the Netherlands totaled €169 billion in 2013, with a clear trade surplus for the Dutch. No other country has brought more goods to the largest European market.
The past: financial crisis and recession
The otherwise confident lowlanders have been exercising modesty for the past few years, though. The European financial crisis of 2009 took a toll on the country. The EU’s former labor-market and reform leader battled a tough recession between 2012 and 2013. Industrial production stagnated, and unemployment doubled to more than 8 percent. The cabinet under Prime Minister Mark Rutte found it difficult to undertake significant reforms. The coalition of liberals and social democrats decided finally to enact massive savings and make cuts to the social system in tough negotiations with the opposition and among themselves. Reforms, such as the right to terminate employment, do not go as far as many investors had hoped. International companies still complain that it is too difficult to separate oneself from an employee once they have been hired—a stumbling block to labor market revitalization. The real estate market in particular still poses a problem for the Netherlands. The country has been providing tax credits to property buyers for years. Purchasing a house was cheaper than renting one. At the same time, many buyers wanted to quickly resell their real estate at a profit, thereby setting off a cost spiral that has significantly driven down the value of a lot of houses. Adding to this, there was bad speculation with commercial property. This bubble burst at the peak of the European financial crisis and has now forced the government to capitulate. Deduction options for mortgage interest rates are being progressively reduced, and credit for house purchases is being capped. The risks in the housing market will keep the country occupied for a while. The same can be said for a tax reform aimed at simplifying the Dutch system. The reform, which has been discussed for years now, plans, among other things, to standardize the value-added tax, increasing the costs of many goods. However, there is also just as little unity in the coalition over these issues as there is over the cost of implementing the reform and how to finance the costs. The Dutch social democratic party, the Partij van de Arbeid (PvdA), mainly believes that no further cuts can be expected of citizens at the moment. Starting in 2015, only a small reduction should ensure additional purchasing power. That would be desirable since the means available to average households for consumption has continually sunk in recent years.
Outlook: a period of (slight) growth is ahead
The Netherlands is finally experiencing another period of slight growth of 0.75 percent in 2014. This is largely thanks to the revitalization of the country’s markets. The trend reversal after two years of frustration has noticeably brightened the nation’s mood. The retail market enjoyed an upturn, industry increased and architects’ offices have already received an almost 40 percent increase in assignments for new construction within the first six months of 2014 in comparison with the previous year. The Netherlands even made a subsequent upwards adjustment to second quarter growth. The increase of 0.7 percent was above the EU average. The rise in private consumption caused an improvement in exports. The country expects growth of 1.25 percent for 2015 despite the conflict in Ukraine; but because of its export fixation, the Netherlands is still very dependent on developments in the world market. Growth is a tender plant whose roots are not deeply anchored in the soil yetIn 2011, the Netherlands demonstrated new core areas of its economy as so-called top sectors. The country wishes to reach the top bracket internationally in the agriculture and food, chemicals, creative, energy, technology and materials, life sciences, logistics, horticulture and water industries. Three-fourths of all Dutch innovation expenditures occur within the top sectors. In 2012, this was around €10 billion, more than one-half of which was in the technology and materials sector alone. According to the Dutch statistical office Statistics Netherlands (CBS), the top sectors are currently experiencing twice the growth of the overall economy. Three areas in particular stand out: the Internet of Things, water technology and sustainable energy.
The Internet of Things has many names. Germany strongly focuses on the production sector under the term Industry 4.0. The name Smart Industry is prominent in the Netherlands. John Chambers, CEO of the U.S. technology giant Cisco, already talks about the Internet of Everything. In the end, it is about interconnecting all areas of life and work. Thanks to online recording of all work steps, products can be manufactured and processed in a quicker, more targeted and less expensive way. Teams can work on the same product around the world; location no longer plays a role. The Internet of Things also has a great influence on linking logistical chains, the health sector and new services. The Netherlands wishes to play a leading role in this area. In April 2014, 240 Dutch companies participated in the world’s biggest industry trade show in Hannover under the motto Smart Industry. Although the industry is still young, many Dutch providers are very innovative today. Greenpeak Technologies from Utrecht develops wireless RF chips that connect devices to the future Smart Home. The Dacom company from Emmen combines sensors with online technology so that gardeners can keep track of how well their seeds are sprouting. Using the name DySi, many partners from northern Assen work together on the Sensor City, in which data streams are gathered and organized. Business potential is huge since the Internet of Things promises worldwide opportunities to earn a profit. The Netherlands is also a leader in technology that makes private and office spaces more energy efficient. In the future, so-called smart grids will ensure, for instance, that the lights in your home will only turn on when a person is present and that the washing machine switches on automatically at night when power is cheapest. The Frisian company I.C.Y. can network entire housing areas with its thermostat technology and decrease their energy consumption. The DWA company from Bodegraven near Gouda specializes in season-dependent heat and cold storage, and its customers include producers such as Heineken as well as large hospitals. The Netherlands’ water sector is also very developed. For decades, the Dutch have put forth a lot of effort in dike construction and land reclamation. The Dutch today are responsible for landmarks such as Dubai’s palm islands, the Seabrook sluice in New Orleans and the world-famous Afsluitdijk in the Ijsselmeer. They have turned their centuries-old struggle against water into an economic strength. In mid-October, the Egyptian Suez Canal Authority commissioned a consortium of Boskalis and Van Oord to construct an additional Suez Canal. The €1.2 billion project is considered to be the building venture of the decade. The Dutch have eliminated numerous competitors from the field with their performance, among them cheaper service providers from China. The Dutch water sector generates sales of €14 billion every year and employs 57,000 people overall. The outlook is good: Rising sea levels and growing environmental threats increase the need for good coast protection worldwide. Future urban centers require clean drinking water and technology to dispose of large quantities of wastewater. Even the maritime manufacturing industry is growing since more goods are being shipped worldwide. These are three fields in which Dutch companies play a leading role worldwide. Today, 75 percent of Dutch delta and water technology is already being exported. Using targeted financing of international projects, the Dutch government aims to further increase this amount and open up additional markets mainly for medium-sized companies. The times of self-doubt are a thing of the past. The alleged North Sea dwarf is expanding its role as a commercial giant in future markets and permanently securing them.