The future earning capacity of Dutch industry

Thijmen van Bree: The business climate for companies in the Netherlands and our future earning capacity are in the focus of attention. Issues include concerns about achieving climate goals within the deadlines, international competitiveness, labour market shortages, the need for more control on security of supply in global supply chains, a lack of investments in R&D and innovation in the Netherlands compared to neighbouring countries, and a slowdown in labour productivity growth compared to other countries.

ASML and Boskalis, for example, have expressed concerns about them being able to achieve their growth ambitions in the Netherlands, and the Dutch government has launched the 'Beethoven' project. This was one of the drivers behind the decision of the Dutch national government and regional authorities to jointly invest 2.51 billion euros in the Eindhoven region (FD, 28 March 2023).

New activities and players required to solve societal challenges

However, a good business climate does not automatically go hand-in-hand with a good innovation climate, according to Marthe Hesselmans and her co-authors of the Scientific Council for Government Policy (WRR) 2023 report titled ‘Goede Zaken. Naar een grotere maatschappelijke bijdrage van ondernemingen (Good business. Unlocking business potential to benefit society) recently on the economists' discussion platform MeJudice. It is exactly this renewal and innovation that the Netherlands needs in order to get on a new, future-proof path to growth.

Hesselmans and her colleagues therefore argue that the Netherlands would benefit more from attracting and facilitating innovative companies that are in a position to help solve the major challenges of our time, such as the climate crisis, nitrogen, quality of nature, the housing market, shortages on the labour market, limited labour productivity growth, changing needs for skills and abilities, the use of space, and raw materials. Outdated methods of doing things do nothing to solve these issues, and may even exacerbate them.

Investing in R&D and innovation is crucial

To stimulate innovation and capitalise on new economic opportunities in the Netherlands, investments in R&D and innovation are essential. The new technologies, products, services, working methods, and business models (including collaborative models) that result from these investments can help steer the economy and Dutch society in a new direction.

In this context, it is extremely worrying that the fourth round of the National Growth Fund has been put on hold. In addition to generic innovation instruments (such as the Dutch R&D tax credit scheme (WBSO) and Innovation Box), the Growth Fund is an important driver of additional private R&D through public investments.

The need for a strong, systematic commitment to renewal and innovation becomes even more apparent given that the Netherlands wants to achieve the Lisbon target of 3% R&D expenditure compared to GDP, and restore labour productivity growth. In terms of R&D investments, the Netherlands is clearly lagging behind countries such as Belgium, Germany, and Denmark. This has been revealed by a current comparative country study into R&D expenditure and related policy, which we are conducting together with the Innovation and Knowledge directorate of the Ministry of Economic Affairs and Climate Policy.

One positive sign is that Beethoven has led to investments in strengthening the business climate and ecosystem in the Eindhoven region. However, the innovation climate in the Netherlands really does have to be reinforced by systematic investments in robust local, regional, and national research and innovation ecosystems. The presence and interactions between enterprises, knowledge institutions, research facilities, infrastructure, missions and visions on collaboration, and long-term innovation projects are extremely important for R&D investments in the Netherlands. They create a receptive ground for new activity.

Isolated national policies are ineffective

European coordination is important in this regard, as ecosystems do not respect national borders. Isolated national policies will be ineffective in helping the Netherlands on to a new path of growth. The working group could, therefore, seek inspiration in Beethoven's ninth symphony; the European anthem, as an expression of shared values and the task of adapting the Dutch economy and society to meet changing circumstances in a resilient Europe. Let us base our actions on the fact that these changing circumstances create new opportunities for the Netherlands.

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