Competitiveness of the Netherlands in the world economy

The Netherlands is a prosperous and highly industrialized high income West

European country bordering Germany to the east, Belgium to the south, and the North
Sea to the northwest. It has always been a major and active player on a global market,
historically specializing in maritime commerce. It still remains one of the prominent
modern trade and logistics centers, having the busiest seaports in Europe, located in
Amsterdam, Rotterdam, Terneuzen and Moerdijk, as well as several international
airports. Sometimes Rotterdam is even referred to as «the gateway to Europe», since
numerous non-community goods are exported to other countries via its port on a daily
basis. The total economic impact of the mainport of Rotterdam on the Dutch
economy was 45.6 billion euro in 2017. Of this amount, 14.8 billion euro is value
added through the aforementioned re-exports. For a small, open economy, the
Netherlands consistently scores well in international league tables such as the Global
Competitiveness Index (World Economic Forum) and the Global Innovation Index
(Cornell University, INSEAD & WIPO).
Furthermore, despite all the clouds on the horizon, like the rising protectionism
in China and the United States, Brexit and contracting world trade as a result of
COVID-19 pandemic, the Dutch economy remains surprisingly bright, especially in
comparison with others leading world economies. In 2018, the Netherlands was the
sixth-largest merchandise exporter in the world and, in terms of GDP, ranked third in
2015 (just behind Ireland and Switzerland). Dutch exports of goods reached a record
high of EUR 129888.80 million in June, 2021, while the exports of services reached a
record high of EUR 44362.70 million in September, 2019. In addition, the
Netherlands is also an active importer of goods as well, while the country’s exports of
services significantly exceeds the imports.
For any nation to be competitive, it is important that international companies
remain here and that more companies, entrepreneurs and international knowledge
workers are attracted to the country. The best ways to achieve this are the
governmental efforts to create a good quality of life: high quality transport networks,
space to work and live in, good provision of education, culture, green spaces and
recreational facilities. And the Dutch government is consistent and persistent in such
efforts. Pursuant to its latest statement, it has chosen to focus on strengthening the
spatial and economic infrastructure, which means enhancing the strengths of the
urban regions with a concentration of key economic sectors, international connections
and hubs; providing good public transport in urban regions and multimodal networks
for the logistics sector providing space for the main energy supply network and the
transition to a sustainable, renewable energy supply; providing space for main
pipelines carrying dangerous substances; ensuring the efficient use of the subsurface.
The key statistical data regarding the country's competitiveness are the best proof of
its success in the aforementioned directions.
In 2021, for the second year in a row, the country ranks 4th out of 64 states in
the IMD World Competitiveness Ranking, overtopped only by Switzerland, Sweden
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and Denmark. Its economy is characterized by varying degrees of investment in

innovation, diversified economic activities, and supportive public policy, according to
the experts at the World Competitiveness Center. The country also has exemplary
indexes in most of the pillars observed by the World Economic Forum, surpassing
average indicators of other states from the high-income group (See Figure 1).

Figure 1. Performance Overview of the Netherlands, 2019

It is also regarded as a digitally advanced economy that over the past two years
has quite seamlessly transitioned to “work-from-home” and, therefore, even under
COVID-19 conditions has thrived compared to its peers. In fact, pursuant to the
World Economic Forum's Executive Opinion Survey, the Netherlands ranks globally
first in terms of flexible work arrangements, fifth from the point of view of digital
skills of its population and tenth from the perspective of its digital legal framework.
Due to this, the Netherlands, along with Denmark, Estonia, and Finland, is among
those countries that are currently better prepared for an economic transformation
through their infrastructure. Such transformation includes being able to adopt legal
frameworks to channel break-through innovations for the social good as well as
upgrading infrastructure to accelerate the energy transition and broadening access to
electricity and ICT.
In terms of country's economic performance indexes, it excels most of other
states in international trade, international investment and employment rates, ranking
3rd, 4th and 4th in the world respectively. The Netherlands also has a highly
developed institutional and societal frameworks, business legislation, labour market
and technological infrastructure, which make it one of the global leaders regarding its
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level of competitiveness. Among the factors which detract the country's

competitiveness are primarily unfavorable prices and tax policy (See Figure 2).

Figure 2. Competitiveness landscape of the Netherlands

According to the Executive Opinion Survey conducted by IMD World
Competitiveness Center, the key attractiveness factors of the Netherlands include
skilled workforce, reliable infrastructure, high educational level, policy stability and
predictability, open and positive attitudes, dynamism of the economy and business-
friendly environment. What is also important is that, in conformity with trust in
government and corruption perception index provided by the World Economic
Forum, the Netherlands is one of the least corrupt countries in the world with quite a
high percentage of citizens who trust their government — 64%. These figures are
likewise a serious indicator of the high competitiveness of the state.
The country occupies 42nd place out of 190 in Doing Business Ranking 2020
and has an overall score of 76.1 out 100. It ranks especially high from the perspective
of starting a business — 94.3 score and the 24th place, getting electricity — 82.5
score and the 58th place, registering property — 80.1 score and the 30th place,
paying taxes — 87.4 score and 22nd place, resolving insolvency — 84.4 score and
7th place, and trading across borders — 100 score and the 1st place in the ranking.
However, the Netherlands has pretty poor scores with regard to dealing with
construction permits, getting credit, protecting minority investors, and enforcing
contracts (See Figure 3).

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 Figure 3. The Netherlands’ rankings on Doing Business topics

When it comes to the topic of starting a business in the Netherlands, the state,
with its score of 94.3, outranks many developed nations, namely Finland, France,
Denmark, and Belgium, and the overall regional average, which scores 91.3. This
success is explained by relatively easy enterprise registration procedures, combined
with promptness and low cost of all processes connected to them, as well as zero
tolerance to bribery, which resonates with already mentioned low corruption rates in
the country. In terms of registering property in the Netherlands, the procedures to
legally transfer title on immovable property are complex enough and are rather costly
due to the high notary fees, taxes and other charges. Nevertheless, this process doesn't
require much time, and the quality of the land administration is exemplary owing to
high reliability of infrastructure and transparency of information. As a result, in this
aspect, the Netherlands significantly outperforms France and Belgium and exceeds
the regional average score, which is 77.
As for tax payment in the Netherlands, the total number of taxes and
contributions withheld from a medium-size manufacturing company per year,
including consumption taxes, amounts to 9, which is slightly less than in other OECD
high income countries (10.3), and the whole process of complying with tax regulation
takes comparatively little time. However, the total tax and contribution rate stands at
41.2% of the annual profit, most of which is accounted for corporate income tax and
labour tax and health insurance contribution. In addition, the Netherlands, together
with Belgium, Denmark, and France ranks 1st and scores 100/100 in terms of trading
across borders on account of almost no time consuming documentary and border
compliance processes, such as clearance, inspections, and port or border handling, for
both export and import, on top of zero costs of these procedures.

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 According to the World Economic Forum, the country continues its climb
toward the top of the Index ranking 4th win the last 2 years as a result of small
improvements across all three subindexes (namely Basic requirements, Efficiency
enhancers and Innovation and sophistication factors), with a solid and even
performance across the pillars including top 10 ranks for infrastructure, health and
primary education, higher education and training, goods market efficiency,
technological readiness, business sophistication, and innovation. Speaking about the
level of education in the state, the Netherlands belongs to the group of countries
which are rather better prepared to keep schools’ curricula relevant and up-to-date
and expand investment in the skills needed for the jobs and “markets of tomorrow”.
What is also important is that the Netherlands ranks number one on Education First’s
ranking of countries by English skills, a worldwide benchmark for measuring and
tracking adult English proficiency. Almost 95% of the Dutch population
speaks English and over 75% speaks German. Thus, the country is an especially
attractive place for foreign entrepreneurs to incorporate their businesses here, given
that the majority of the population are at least bilingual.
The Netherlands scores especially high on the quality of its scientific research
institutions (4th) and closeness of links between universities and the private sector
(5th). Success stories of social innovation are particularly frequent in the Netherlands.
One weakness is its 37th rank in financial market development, as both the perceived
efficiency of and confidence and trust in the financial sector are low. Pursuant to the
World Economic Forum's Executive Opinion Survey, the most problematic factors for
doing business in the Netherlands are restrictive labour regulations, tax rates,
insufficient capacity to innovate, inefficient government bureaucracy and issues with
access to financing. However, over the past few years, large positive moves for labor
market efficiency indicators, including the ease of hiring and firing, were registered.
One of the reasons for this is the entry into effect of the Work and Security Act in
mid-2015 which attempts to improve the position of flexible workers and simplifies
dismissal procedures.
Companies in the Netherlands’ key innovative economic sectors that lead the
field at the European and global levels are found throughout the Netherlands.
However, they are concentrated mainly in the urban regions around the hubs like Port
of Rotterdam and Schiphol airport, Brainport (southeastern Netherlands), greenports
(Venlo, Westland-Oostland, Aalsmeer, northern North Holland, Boskoop and the bulb
region) and valleys. The Dutch government regards these urban regions as nationally
important and aims to further strengthen them. The central government prioritises
solving mobility problems in the hubs, Brainport and greenports, while regional
authorities aim to reduce congestion through the better use of infrastructure.
The above-mentioned Brainport Eindhoven and Brabant region is a principal
area where, citing its slogan, «technologies that change lives and innovations that
make our futures better, safer and cleaner» are developed. The region has a
population of around 750,000 and a workforce of 400,000. In 2011 it was awarded
the prestigious title ‘Intelligent Community of the Year’. The economic success of
Brainport can be attributed to cooperation, both regional and international. Braiport is
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one of the three main cornerstones of the Dutch economy, along with Amsterdam
(airport) and Rotterdam (seaport). It has been a key innovative manufacturing centre
of the country for over a hundred years. Presently, it concentrates more and more
technology and research institutes, educational centers and laboratories. The list
includes innovative companies and highly reputable knowledge and R&D institutes,
such as Philips, DAF, ASML, VDL, FEI Company, TomTom, Eindhoven University
of Technology, TNO, Design Academy Eindhoven, High Tech Campus Eindhoven,
High Tech Automotive Campus and Holst Centre.
This region can even be described as the European response to Silicon Valley. It
excels at inventing, developing and integrating world’s most complex high tech
machines, systems, parts and products, such as lithography machines that produce
chips for 80% of all smartphones on this globe, smart health innovations developed
with doctors and patients, electron microscopes that lead to revolutionary
breakthroughs in cancer research and truck platooning initiatives that will soon define
the future of mobility. Nowadays, Brainport is the high-tech growth accelerator of the
Dutch economy. The region’s high-tech profile, a highly skilled labour force and its
favourable geographical location (considering that it is located in Europe and has the
second largest Dutch airport — Eindhoven Airport), make it a very attractive region
to settle in for international companies and international knowledge workers. 
In Brainport and Brabant people from all over the world work together to
achieve continuous progress and create a brighter future. Numerous innovative start-
ups function here, which are always on the lookout for outstanding tech and IT talents
from all over the world. They currently offer more than 3,000 jobs in this sphere at all
levels. With a combination of open innovation, material knowledge at subnano level,
design expertise, knowledge of systems and system integration, people technology
interaction and data science they transform innovative ideas into advanced products
and breakthrough technologies. Companies in all sorts and sizes, knowledge- and
educational institutes and governmental organizations cooperate with each other here
in order to realize ambitions through technological innovation. The region also offers
various English high-quality study programs in the fields of technology, engineering,
and computer sciences.
Brainport has the highest number of patents in Europe and is ranked 5th on the
Global Innovation Index 2019 with regards to innovation linkages, existing industry-
academic collaborations, industry collaborations, and cluster development.
Furthermore, Brainport contributes to the realization of Sustainable Development
Goals, which today are one of the primary priorities of the European Union, by
working on the provision of green transport solutions, namely developing new battery
technologies for electric vehicle applications. Therefore, the region plays a key role in
the electrification of the transport sector. Various companies operating in Brainport
produce new generation batteries, such as solid-state batteries, and recycle old
lithium-ion batteries.
Moreover, Brainport wants to be in the world’s top 20 start-up ecosystems and,
to this end, actively attracts investments in local growing enterprises and encourages
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 foreigners to incorporate their companies and settle their production here. Technology
and networks here are clustered on campuses in order to create economic value and
facilitate business development. Each of these campuses, namely Automotive
Campus, High Tech Campus Eindhoven, TU/e Campus, Brainport Industries Campus,
houses an ideal mix of companies, talents and knowledge institutes with a specific
expertise. This facilitates the conduct of business here.
Today, the Dutch government also strives to initiate a transition to a sustainable,
renewable energy supply by, among other things, rebuilding and decentralizing the
national electricity infrastructure and constructing more onshore wind farms.
According to Confederation of Netherlands Industry and Employers, the top 5
challenges for the country in 2021 are as follows. First and foremost, the government
should maximize COVID-vaccine rollout so as to safely reopen the economy as soon
as possible. Secondly, the Confederation advises to create recovery plan focussed on
reducing company debt and stimulate investments, without raising taxes for coming
years. Thirdly, expedite government and private focus on investing in key enabling
technologies is required. Furthermore, national consensus on measures to meet Paris
climate goals is also should be built. Finally, the Confederation expects from the state
authorities a stimulation of construction of vital infrastructure and housing by solving
legal obstacles.
Summing up, the Netherlands is a highly competitive country and one of the
most developed economies even in the high-income group of states. However,
considering such major contemporary global challenges as economic crisis brought
about by COVID-19 pandemic and the related restrictions, as well as incessant and
ever-increasing environmental issues, a significant part of the government's efforts
should be directed at overcoming the adverse economic corollaries of the pandemic
as well as combating climate change and ensuring sustainable development of the
country.

List of sources:
1. World Integrated Trade Statistics. — Netherlands trade statistics. URL: https://wits.worldbank.org/CountryProfile/
en/NLD
2. Trading Economics. — Netherlands. EUROSTAT Indicators. URL: https://tradingeconomics.com/netherlands/
indicators-eurostat-data.html?g=gdp+and+main+components
3. Government of the Netherlands. Enhancing The Netherlands’ competitiveness. URL: https://www.government.nl/
topics/infrastructure/enhancing-the-netherlands-competitiveness
4. W E F. T h e G l o b a l C o m p e t i t i v e n e s s R e p o r t 2 0 1 9 . U R L : h t t p s : / / w w w 3 . w e f o r u m . o rg / d o c s /
WEF_TheGlobalCompetitivenessReport2019.pdf
5. IMD. World Competitiveness Ranking 2021. URL: https://www.imd.org/centers/world-competitiveness-center/
rankings/world-competitiveness/
6. WEF. Global Competitiveness Report Special Edition 2020: How Countries are Performing on the Road to
Recovery. URL: https://www.weforum.org/reports/the-global-competitiveness-report-2020/in-full/section-5-
assessing-countries-transformation-readiness
7. Brainport Eindhoven. Brainport For You. WorkTech. Xperience. — About the region. URL: https://
brainporteindhoven.com/int/for-you/work/tech-xperience/about-the-region
8. The World Bank. Database. — Netherlands. URL: https://data.worldbank.org/country/netherlands?
name_desc=false

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