TAMIL NADU NATIONAL

LAW SCHOOL

B.A.LL.B., (HONS.),

THIRD SEMESTER 2015-16

ECONOMICS PROJECT
ON
COUNTRY ECONOMIC ANALYSIS OF NETHERLANDS

PROJECT BY: -

SUBMITTED TO:-

SIDDHARTH PANDEY

PROF. S SATYAMOORTHY

BA0140061
SECTION-B

ACKNOWLEDGEMENT
At the outset, I thank the Almighty who gave me the strength to accomplish this project with
sheer hard work and honesty.
I take this opportunity to observe protocol to show my deep gratitude to our revered contracts
Course Teacher,PROF. S SATYAMOORTHY (FACULTY)
for his kind
gesture in allotting me such topic as research project, which is full of knowledge and is related to
our future study of the constitution. Her timely advice, direction and valuable assistance
tremendously boosted me during the making of this project.
Secondly, all this wouldnt have been possible without my parents and friends who gave their
valuable time for guidance, boosted my confidence and helped me a lot in completing this
project without any drawbacks. Hence I am forever indebted and grateful to them.
Thirdly, I am very much thankful to the staff and administration of TNNLS who provided
valuable sources of information in the form of library and database connections.
The successful creation of this project is due to the background work and co-operation of many
persons. So I once again take this opportunity and privilege to convey my deepest regards and
thanks to all those who was involved directly or indirectly in the making of this project.

Date:-6-10-15

SUPERVISORS CERTIFICATE
This is to certify that the Research Project cum Analysis of the country Netherlands submitted
to the TAMIL NADU NATIONAL LAW SCHOOL, TIRUCHIRAPPALLI in fulfillment of the
requirements for internal component for B.A; LL.B (HONS.), third Semester is an original and
bona-fide research work carried out by SIDDHARTH PANDEY under my supervision and
2

guidance. No part of this study has been submitted to any University for the award of any Degree
or Diploma whatsoever.

PROF. S SATYAMOORTHY (FACULTY)

INTRODUCTION
Netherlands is the sixth-largest economy in the euro-zone and is noted for its stable industrial
relations, moderate unemployment and inflation, sizable trade surplus, and important role as a
European transportation hub. Industrial activity is predominantly in food processing, chemicals,
petroleum refining, and electrical machinery. A highly mechanized agricultural sector employs
only 2% of the labor force but provides large surpluses for the food-processing industry and for
3

exports. Netherlands, along with 11 of its EU partners, began circulating the euro currency on 1
January 2002. The Dutch financial sector suffered as a result of the global financial crisis, due in
part to the high exposure of some Dutch banks to US mortgage-backed securities. In 2008, the
government nationalized two banks and injected billions of dollars of capital into other financial
institutions, to prevent further deterioration of a crucial sector. After 26 years of uninterrupted
economic growth, the Dutch economy - highly dependent on an international financial sector and
international trade - contracted by 3.5% in 2009. To recover, the government sought to boost the
domestic economy by accelerating infrastructure programs, offering corporate tax breaks for
employers to retain workers, and expanding export credit facilities. The stimulus programs and
bank bailouts, however, resulted in a government budget deficit of 5.3% of GDP in 2010 that
contrasted sharply with a surplus of 0.7% in 2008. The government of Prime Minister Mark
RUTTE began implementing austerity measures in early 2011, mainly reducting expenditures,
which resulted in an improved budget deficit in 2011. However, in 2012 tax revenues dropped,
GDP contracted, and the budget deficit deteriorated. In 2013, the government budget deficit
decreased to 3.3% of GDP due to increased government revenue from higher taxes. However,
spending on social benefits also increased, due to a rise in unemployment benefits and payments
for pensions. The high unemployment rate and tax increases have contributed to continued
decreases in household disposable income, causing the Dutch economy to contract.
The Netherlands has a market-based mixed economy, ranking 17th of 177 countries according to
the Index of Economic Freedom. It had the thirteenth-highest per capita income in the world in
2013 according to the International Monetary Fund. In 2013, the United Nations World
Happiness Report ranked the Netherlands as the fourth happiest country in the world, reflecting
its high quality of life1

ECONOMIC SNAPSHOT

1. Form of government:

1 http://www.oecd.org/eco/surveys/economic-survey-netherlands.htm

Official name is Kingdom of the Netherlands. It is Conistitutional monarch consisting a

Bicameral system of government. It has 75 members elected by provincial states and Second
Chamber consists of 150 members, directly elected for a four-year term. The First Chamber can
only approve or reject bills and may not initiate or amend them
Electoral system
It follows Universal direct suffrage over the age of 18. The whole country forms a single
constituency, and the Second Chamber is elected by the system of proportional representation.
The First Chamber is elected indirectly
Head of state
King Willem-Alexander, who acceded to the throne on April 30th 2013. The role of the monarch
goes beyond the purely ceremonial. The monarch co-signs new acts of parliament, contributes to
the formation of new governments and presides over the Council of State (an advisory body on
legislation and administrative court)
National government
It consists of Council of Ministers headed by the prime minister, responsible to the crown
government of the centre-right Peoples Party for Freedom and Democracy and centre-left
Labour Party was formed in November 5th 2012 and Mark Rutte (VVD) became the prime
minister.

2. GDP:
The GDP in Netherlands was worth 869.51 billion US dollars in 2014. The GDP value of
Netherlands represents 1.40 percent of the world economy. GDP in Netherlands averaged 322.57
USD Billion from 1960 until 2014, reaching an all time high of 931.29 USD Billion in 2008 and
a record low of 12.28 USD Billion in 1960. GDP in Netherlands is reported by the World Bank
Group.2

3. Population:
The Netherlands is the 64th most populated country in the world and as of July 26, 2015 it has a
population of 16,924,632. It the twenty-seventh most densely populated country in the world with an
area of 41,526 km and has a population density of 500 per km.

2 http://www.nationmaster.com/country-info/stats/Economy
5

4. Unemployment:
Unemployment Rate in Netherlands The was unchanged at 6.8 percent in
August, the same as in the previous month and the lowest since February of
2013. In August last year, the unemployment rate was recorded at 7.2
percent.3

5. Country rating:
The rankings granted to netherlands by different institutions are as follows;
International Monetary Fund: Income per capita in purchasing power parity ranked 9
out of 181 (2011)
United Nations Development Programme: Human Development Index ranked 3 out
of 169 (2011)
Gallup World Poll: happiness ranked 4 out of 155 (2009)
World Economic Forum: Global Competitiveness Report ranked 5 out of 144 (2012
2013).

Institute for Economics and Peace: Global Peace Index[2] ranked 25 out of 152 (2011)

The Economist: Democracy Index ranked 10 out of 167 (2011)4

3 http://www.tradingeconomics.com/netherlands /unemployment-rate
6

6. Netherlands Trade
The Netherlands is an export-oriented economy and derives more than two-thirds of its GDP
from the merchandise trade. Main exports are: machinery and transport equipment (28 percent of
total exports), mineral fuels (23 percent), food (11 percent), clothing and footwear (10 percent)
and pharmaceuticals (5 percent). Netherlands main imports are: fuel (29 percent of total
imports), machinery (26 percent) and food and live animals (8.6 percent). Main trading partners
are Germany (24 percent of total exports and 17 percent of imports) and Belgium (12 percent of
exports and 10 percent imports). Others include: China, France, United Kingdom and United
States. This page provides the latest reported value for - Netherlands Balance of Trade - plus
previous releases, historical high and low, short-term forecast and long-term prediction,
economic calendar, survey consensus and news. Content for - Netherlands Balance of Trade was last refreshed on Saturday, October 3, 2015. 5

4 en.wikipedia.org/wiki/International_rankings_of_the_Netherlands
5 http://www.tradingeconomics.com/netherlands/gdp-growth-annual
7

7. Gini Coefficient:
Gini index measures the extent to which the distribution of income (or, in some case,

consumption expenditure) among individuals or households within an economy deviates from a

perfectly equal distribution.6.
The Gini Coefficient of Mauritius in the index is 28.9.

ECONOMIC HISTORY OF NETHERLANDS

As World War II approached, the Netherlands attempted to retain their neutrality, as they had
done in World War I, which resulted in the nation coming out untarnished (Dutch Ministry of
Foreign Affairs). Queen Wilhelmina made arrangements with Hitler, prior to the war not to
invade her country (Spencer Tucker, Priscilla Mary Roberts, 2005). The Dutch remained
confident in this agreement, but in 1935 began arming their military for defensive purposes. The
Dutch also maintained their traditional defensive plans which were based on pre-modern
warfare; such as Fortress Holland which consisted of destroying dikes and dams to create
barriers, and did not account for modern weaponry (The Greb Foundation , 2008).
In May 1940 Hitler began his invasion of the country, and claimed victory within five
days (Woolf, 1999). At this time the government went into exile in England working to rally
Dutch support and maintain morale within their home country (Ganse, 2007). The Netherlands
remained occupied and civilly administered by the Nazis throughout the war without major
damage to their infrastructure. Hitler ordered occupying officials to work to link the German and
Dutch economies together, because the Dutch were considered part of the Arian race. Nazis
ordered the country to be put to full use to support the war effort; skilled workers and food
production capabilities were exploited throughout the occupation (Spencer Tucker, Priscilla
Mary Roberts, 2005). Nearing the wars end, as allied powers retook the country, the Nazis
retaliated against the Dutch reclamation by attempting to destroy much of the countrys
infrastructure. This resulted in mass starvation during the winter of 1944 to 1945 leading to it
being called Hunger Winter. Mass starvation occurred because of transportation breakdowns
from strikes ordered by the exiled Dutch government to assist allied powers advancements, as
well as the destruction of dams, dikes, and bridges to defend against the oncoming Allie troops
by the Germans. Although the Netherlands may have trekked through German occupation, by the
end of World War II, it was considered to be one of the most damaged European nations
(Anderson, 1995).
6 http://data.worldbank.org/indicator/SI.POV.GINI
8

The Dutch government returned to the Netherlands from its exile in London in 1945. The
government, while in London, had created plans which would speed the countrys challenging
industrial and economic reconstruction. Queen Wilhelmina and her government already had been
working on plans to make the government more democratic than it had previously
been (Enyclopedia Britannica, 2008). The government established rations of food and textiles
which helped equally distribute goods throughout the country, and created resources to be used
in reconstruction (Jonge, 1952).The government established social programs to aid the
recovering population, and encouraged rapid industrialization to rebuild the countrys
infrastructure using grants, tax breaks, and national business strategies. Much of the money used
to assist the country came from the United States Marshall Plan.
The post war period set the stage for what makes up the Netherlands today. World War II brought
about mass struggle and devastation to the Dutch people, causing the government to react upon
their return from exile to create programs assisting the people in starting their postwar lives. The
welfare and social programs the Dutch government created to aid post war victims today, on tax
payers money, instead of money gifted to the country by the Marshall Plan. These programs are
considered a model network of social programs by some, but are often a deterrent to
multinational corporations as a barrier to invest in the Netherlands economy, because of the
higher operating costs from taxes to support the governments expenditures.
The Netherlands economy is structured largely by what remained undestroyed of the post war
infrastructure. The Netherlands owes that it is the distributer of international goods to Germanys
investment into seaports during Nazi occupation, government economic reconstruction plans, as
well as the country being in a key location in Western Europe. The Dutch government after the
war invested itself into the private sector, which led to many state owned corporations, many of
which continue today. The governments low cost production plans, subsidies, and wage
regulations after the war allowed business income to be reinvested in the economy and guided
the country to become a major manufacturer of electronics and chemicals. The government
worked progressively to unify Europe for protection and economic success which further pushed
it away from its agricultural origins and into the newly evolving global economy.

Following the majority of reconstruction in the Netherlands, the country entered a period of
economic expansion that began in 1950 and continued until the early seventies ( Naastepad,
Kleinknecht, 2004). This period is known as the Golden Age of the Dutch economy; not to be
confused with the seventeenth century Dutch Golden Age of economic expansion (Dutch
Ministry of Foreign Affairs). It is marked by Western Europe, as well as the Netherlands,
completing reconstruction and focusing on constructing their long term economies. The Dutch
economy grew between four and five percent per year, the labor force doubled as well as capital
9

stock; largely within the manufacturing sector whose labor productivity increased by six
percent (N. F. R. Crafts, Gianni Toniolo, 1996).7.

GDP (Gross Domestic Product)

The gross domestic product (GDP) measures of national income and output for a given country's
economy. The gross domestic product (GDP) is equal to the total expenditures for all final goods
and services produced within the country in a stipulated period of time.
The GDP in Netherlands was worth 869.51 billion US dollars in 2014. The GDP value of
Netherlands represents 1.40 percent of the world economy. GDP in Netherlands averaged 322.57
USD Billion from 1960 until 2014, reaching an all time high of 931.29 USD Billion in 2008 and
a record low of 12.28 USD Billion in 1960. GDP in Netherlands is reported by the World Bank
Group.8

On the assumption that the purpose of an economic indicator is to give an impression of

overall economic developments in the future, GDP is in principle a more suitable reference
series than manufacturing output. After all, manufacturing output accounts for only 15% of
Dutch GDP, while the services sector accounts for 50% of GDP. Although it must be said that
the small share of manufacturing output need not as such be a reason for disqualification in this
regard. For if the industrial sector is broadly as dynamic as the services sector, then the small
7 http:// andersonmwa.wordpress.com
8 http://data.worldbank.org
10

share of manufacturing in the total economy is not a problem. Moreover, GDP has a practical
disadvantage in that the actual figures only become available on a quarterly basis, whereas
manufacturing output figures are published every month.

GDP- PPP
The GDP per capita PPP is obtained by dividing the countrys gross domestic product, adjusted
by purchasing power parity, by the total population. This page provides the latest reported value
for - Netherlands GDP per capita PPP - plus previous releases, historical high and low, short-term
forecast and long-term prediction, economic calendar, survey consensus and news.

The Gross Domestic Product per capita in Netherlands was last recorded at 45280.55 US dollars
in 2014, when adjusted by purchasing power parity (PPP). The GDP per Capita, in Netherlands,
when adjusted by Purchasing Power Parity is equivalent to 255 percent of the world's average.
GDP per capita PPP in Netherlands averaged 40815.34 USD from 1990 until 2014, reaching an
all time high of 47388.18 USD in 2008 and a record low of 32534.04 USD in 1990. GDP per
capita PPP in Netherlands is reported by the World Bank.

11

GDP Rank
The rankings granted to netherlands by different institutions are as follows;
International Monetary Fund: Income per capita in purchasing power parity ranked 9
out of 181 (2011)
United Nations Development Programme: Human Development Index ranked 3 out
of 169 (2011)
Gallup World Poll: happiness ranked 4 out of 155 (2009)
World Economic Forum: Global Competitiveness Report ranked 5 out of 144 (2012
2013).

Institute for Economics and Peace: Global Peace Index ranked 25 out of 152 (2011)

The Economist: Democracy Index ranked 10 out of 167 (2011)9

GDP Growth (trend for the last few decades)

The Gross Domestic Product (GDP) in Netherlands expanded 1.80 percent in
the second quarter of 2015 over the same quarter of the previous year. GDP
Annual Growth Rate in Netherlands averaged 2.09 percent from 1989 until
2015, reaching an all time high of 5.80 percent in the fourth quarter of 1999
and a record low of -4.40 percent in the second quarter of 2009. GDP Annual
Growth Rate in Netherlands is reported by the Statistics Netherlands.

9 en.wikipedia.org/wiki/International_rankings_of_the_Netherlands
12

GDP Composition by sector of origin

This entry gives the percentage contribution of agriculture, industry, and services to total
GDP. The distribution gives the percentage contribution of agriculture,industry, and services to
total GDP, and will total 100 percent of GDP if the data are complete. Agriculture includes
farming, fishing, and forestry. Industry includes mining, manufacturing, energy production, and
construction. Services cover government activities, communications, transportation, finance and
all other private economic activities that do not produce material goods.
Nethrelands spends on agriculture: 2.6%, industry: 25.4%, services: 72.1%, healthcare 7.0% of
GDP of its GDP as estimated in the year 2015.
(SOURCES: CIA World Factbooks 18 December 2003 to 28 March 2011 )

Agriculture
Agriculture GDP in Netherlands was last measured at 1.65 in 2013, according
to the World Bank. Agriculture corresponds to ISIC divisions 1-5 and includes
forestry, hunting, and fishing, as well as cultivation of crops and livestock
production. Value added is the net output of a sector after adding up all
outputs and subtracting intermediate inputs. It is calculated without making
deductions for depreciation of fabricated assets or depletion and degradation
of natural resources. The origin of value added is determined by the
International Standard Industrial Classification (ISIC), revision 3. Note: For
VAB countries, gross value added at factor cost is used as the
denominator.This page has the latest values, historical data, forecasts,
charts, statistics, an economic calendar and news for Agriculture - value
added (% of GDP) in Netherlands.10
Manufacturing
Gdp From Manufacturing in Netherlands increased to 17441 EUR Million in
the second quarter of 2015 from 17287 EUR Million in the first quarter of
2015. Gdp From Manufacturing in Netherlands averaged 16029.54 EUR
10 http://www.tradingeconomics.com/netherlands
13

Million from 1995 until 2015, reaching an all time high of 18817 EUR Million
in the first quarter of 2008 and a record low of 12626 EUR Million in the
second quarter of 1995. Gdp From Manufacturing in Netherlands is reported
by the Statistics Netherlands.11

Tourism
The contribution of the tourism sector to Dutch GDP rose from 3.2 percent in 2010 to 3.6 percent
in 2013 according to the latest figures released by Statistics Netherlands today. The tourism
sector is mainly growing because more foreign tourists visit the Netherlands and because there
are more foreign bookings with Dutch companies.

Netherlands focuses on the development of two sectors government (public administration,

defence and subsidised education) and health care (including pharmaceuticals) .
11 http://www.hollandtrade.com/business-information/holland-information
14

Both sectors are of great economic importance in the Netherlands. In terms of value added, they
constitute about one fifth of the Dutch economy. In terms of employment and final consumption
even about one quarter is involved. Furthermore, these sectors have in common that they are
mainly financed publicly (by social security contributions and taxes) and that productivity
growth is relatively slow. Baumols cost disease model suggests that this can lead to increasing
pressure on public finance and to negative effects for economic growth and inflation.
Government sector
The government sector refers to all activities of the government, such as defence (1% of GDP in
2001), education (4% of GDP) and public administration (6% of GDP). Public administration
comprises a wide variety of activities. Policy preparation and organising the democratic
decision-making process is only a minor part of the activities. The major activities are the
provision of specific services, like police, justice, construction and maintenance of roads, the
collection of taxes and social security contributions and the distribution of social benefits and
subsidies.
The final consumption expenditure on the services of the government (public administration,
defence and subsidised education) will grow in the public scenarios from 13.6% GDP in 2001
to about 15 or 16% GDP in 2040. In Regional Communities, the relative importance of public
administration will increase; this is partly compensated by lower expenditure on education, in
particular due to a decline in the number of pupils and students. In Strong Europe, the relative
size of public administration will grow less and at more selected areas. In this scenario,
expenditure on defence and education will increase; the latter is mainly due to demography.
The two market scenarios show an entirely different development for government services:
a decrease from 13.6% GDP in 2001 to 11% GDP in 2004. In Transatlantic Market and Global
Economy, the role of the services provided by the government is more limited, substantial
savings are attained on administrative costs and school fees are raised. In Global Economy, the
Health care
Health expenditure; public (% of government expenditure) in Netherlands was last measured at
20.67 in 2013, according to the World Bank. Public health expenditure consists of recurrent and
capital spending from government (central and local) budgets, external borrowings and grants
(including donations from international agencies and nongovernmental organizations), and social
(or compulsory) health insurance funds.This page has the latest values, historical data, forecasts,
charts, statistics, an economic calendar and news for Health expenditure - public (% of
government expenditure) in Netherlands.
In 2001, the value added of the sector Health care (Health and social work activities) in the
national accounts was 7.0% of GDP. Expenditure on health care (or final consumption)
amounted to 8.7% of GDP.
The sector Health care covers nearly all types of care financed by social-security
15

contributions (Medical Health Fund Act (ZFW) and the Exceptional Medical Health Act), taxes
(e.g. municipal preventive health care and welfare work), private health-care insurance and paid
directly by households. However, excluded are pharmaceuticals (1.3% of GDP) and the
administrative costs of running private and public health-care insurance (0,3% GDP). Including
also these types of expenditure would imply a figure of 10,3% of GDP3. Most of these
expenditures on health care are financed via social security contributions. In all four scenarios,
expenditure on health care as a percentage of GDP will increase, from 10.3% in 2001 to between
16.8% (Strong Europe) and 18.7% (Global Economy) in 2040.12
Ageing and progress in medical technology are major driving factors behind this growth.Ageing
does not only increase expenditure on health-care services, but also substantially alters its
composition. Progress in medical technology is potentially even a more important driving factor
than ageing. However, the impact of medical technology on expenditure on health care depends
also on the economic growth and the role of public arrangements. More economic growth
increases the income available for consuming new technology. Citizens and patients will be
willing to spend a substantial part of their increase in material welfare on better healthcare.
Lower economic growth reduces the financial means for new medical technology, in particular
when public arrangements play a dominante role.

GDP Composition by sector of origin

a.

Main goods/products in each sector

Inflation and interest rate

Netherlands Inflation Rate
The inflation rate in Netherlands was recorded at 0.80 percent in August of
2015. Inflation Rate in Netherlands averaged 3.38 percent from 1971 until
2015, reaching an all time high of 11.19 percent in November of 1974 and a
record low of -1.30 percent in February of 1987. Inflation Rate in Netherlands
is reported by the Statistics Netherlands.13

12 http://ssrn.com/abstract=996550
13 http://www.tradingeconomics.com/netherlands
16

In Netherlands, the most important categories in the consumer price index are: housing, water,
electricity and gas (24.5 percent of the total weight); transport (11.6 percent) and food and nonalcoholic beverages (11.3 percent). The index also includes: recreation and culture (10.3
percent); furnishing and household equipment (6 percent); clothing and footwear (4.9 percent);
hotels and restaurants (4.2 percent); communication (3.3 percent) and alcoholic beverages and
tobacco (3.1 percent). Health, education and other goods and services account for the remaining
20.8 percent of total weight.14.
Netherlands Interest Rate
The benchmark interest rate in Netherlands was last recorded at 0.05
percent. Interest Rate in Netherlands averaged 2.31 percent from 1998 until
2015, reaching an all time high of 4.75 percent in October of 2000 and a
record low of 0.05 percent in September of 2014.15
Netherlands Money

Last

Previous

Highest

Lowest

Unit

Interest Rate

0.05

0.05

4.75

0.05

Percent

14 http://data.worldbank.org
15 http://data.worldbank.org
17

Netherlands Money

Last

Previous

Interbank Rate

-0.03 -0.02

Highest

Lowest

Unit

9.90

-0.03

Percent

UNEMPLOMENT
Netherlands Unemployed Persons
The number of unemployed persons in Netherlands increased to 604
Thousand in August of 2015 from 603 Thousand in July of 2015. Unemployed
Persons in Netherlands averaged 468.06 Thousand from 2003 until 2015,
reaching an all time high of 699 Thousand in February of 2014 and a record
low of 310 Thousand in August of 2008. Unemployed Persons in Netherlands
is reported by the Statistics Netherlands.
Netherlands Unemployment Rate
The seasonally adjusted jobless rate in Netherlands was unchanged at 6.8
percent in August, the same as in the previous month and the lowest since
February of 2013. Unemployment Rate in Netherlands averaged 5.43 percent
from 2003 until 2015, reaching an all time high of 7.90 percent in February of
2014 and a record low of 3.60 percent in February of 2008. Unemployment
Rate in Netherlands is reported by the Statistics Netherlands.16

16 http://data.worldbank.org
18

19

FISCAL HEALTH, ANNUAL GROWTH,

EXCHANGES RESERVES

AND FOREIGN

Annual Growth
The Gross Domestic Product (GDP) in Netherlands expanded 1.80 percent in the
second quarter of 2015 over the same quarter of the previous year. GDP Annual
Growth Rate in Netherlands averaged 2.09 percent from 1989 until 2015,
reaching an all time high of 5.80 percent in the fourth quarter of 1999 and a
record low of -4.40 percent in the second quarter of 2009. GDP Annual Growth
Rate in Netherlands is reported by the Statistics Netherlands. 17

Netherlands Foreign Exchange Reserves

Foreign Exchange Reserves in Netherlands increased to 35038 EUR Million in
August from 34670 EUR Million in July of 2015. Foreign Exchange Reserves in
Netherlands averaged 25045.57 EUR Million from 1999 until 2015, reaching
an all time high of 44319 EUR Million in September of 2012 and a record low
of 15694 EUR Million in March of 2005. Foreign Exchange Reserves in
Netherlands is reported by the De Nederlandsche Bank.

17 http://www.tradingeconomics.com/netherlands/gdp-growth-annual
20

CURRENCY
The Netherlands began using the euro currency on January 1st of 2002. The Netherlands is a
founding member of the EU (European Union), the OECD (Organization for Economic Cooperation and Development) and the WTO (World Trade Organization).
The Netherlands (EUR) has an open, capitalist economy with a flexible labor market.
Netherlands's Fundamental Currency Analysis (short term investment): The Netherlands is part
of the Euro economic zone, whose currency is moderately valued on a global scale per the
purchase price parity analysis. Netherlands's Value Investor Survey (short term investment): The
Netherlands economic environment is very favorable for long term economic growth due to high
scores on government transparency, economic diversity, and the SWOT analysis. Netherlands's
Currency Trading Strategy: An moderately valued currency, low investment flow potential, but
very favorable business environment leads to a neutral outlook for Dutch investments.
This service analyses and forecasts the credit risk posed by Netherlands and provides a regularly
reviewed country risk rating. In addition to the currency, sovereign debt and banking sector risks
posed by Netherlands, the service also looks at political, economic policy and economic structure
risks. You also receive short- and medium-term economic and political forecasts for the
country.18
18 https://store.eiu.com/
21

GNP (Gross National Product)

Gross National Product ( GNP) is an economic statistic that includes GDP, plus any income
earned by residents from overseas investments, minus income earned within the domestic
economy by overseas residents.
Gross National Product in Netherlands increased to 165016.60 EUR Million in the second
quarter of 2015 from 164336.30 EUR Million in the first quarter of 2015. Gross National
Product in Netherlands averaged 129675.08 EUR Million from 1988 until 2015, reaching an all
time high of 173843.60 EUR Million in the fourth quarter of 2007 and a record low of 76625
EUR Million in the third quarter of 1988. Gross National Product in Netherlands is reported by
the Statistics Netherlands.

22

FOREIGN INVESTMENT
A Foreign Direct Investment (FDI) is a controlling ownership in a business enterprise in one
country by an entity based in another country.
The origin of the investment does not impact the definition as an FDI, i.e., the investment may be
made either "inorganically" by buying a company in the target country or "organically" by
expanding operations of an existing business in that country.
Around 6,300 foreign companies have established their operations, including the likes of BASF,
Cisco Systems, Microsoft, Nike, Sabic, Siemens and Yakult. The Netherlands is one of the
largest recipients of FDI in the world. Foreign companies made inward direct investments worth
589 billion US dollars (431 billion euros). Foreign investors provide 15% of Dutch employment.
The Netherlands is a stable and vibrant parliamentary democracy, recognized worldwide for its
transparency, fairness and effectiveness. According to the World Bank, the Dutch government is
one of the most effective in the world. Our political system is characterized by plurality and
consensus-building, resulting in coalition governments that truly represent the voice of the
people. The Dutch were one of the first countries in the world to give women the right to vote
(1922).
The legal system is fair and transparent and well equipped to deal with business, trade, taxation
and patent issues. There are specialized courts for dealing with criminal and administrative
issues, as well as with tax law, planning law, environmental law and trade and commerce. There
is a rich variety of world-class law firms both home grown and large international ones that
can provide assistance with tax law, mergers and acquisitions, and European law. The Hague is
the seat of the European Patent Office.
The Dutch tax system has a number of features that may be very beneficial in international tax
planning. The relevant factors include a corporate income tax rate of 20% on the first 200,000
euros, and 25% for taxable profits exceeding 200,000 euros, which is well below the EU national
average.Companies can benefit from an effective tax rate of only 5% for R&D income from selfdeveloped patented intangible assets and also from self-developed unpatented intangible assets
which qualify for the so-called WBSO. The Dutch ruling practice, which provides clarity and
certainty on tax assessments in advance, can be obtained on future transactions, investments or
corporate structures. There is also a broad tax treaty network. The Netherlands has signed treaties
23

with more than 80 countries that ensure the avoidance of double taxation on income and capital.
This reduces withholding taxes on dividends, interests and royalties (for interest and royalties, in
some cases, taxes are reduced to 0 %).
There are no withholding taxes on outgoing interest and royalty payments. Dutch tax law also
provides the participation exemption, which states that all benefits related to a qualifying
shareholding, including cash dividends, dividends-in-kind, bonus shares, hidden profit
distributions and capital gains, are exempt from Dutch corporate income tax.Investors can
benefit from a 30% tax break for highly qualified foreign employees
The Netherlands offers a highly pleasant living environment. Leisure amenities are within easy
reach and Dutch cities have much to offer, such as the centuries-old architecture of Amsterdam,
Delft and Leiden as well as cultural activities and world famous museums such as the Van Gogh
Museum and the Hermitage Amsterdam. Housing is also fairly affordable compared to other
countries, according to IMD. In addition to the various international schools in the Netherlands, a
large and growing number of schools teach in two languages (mostly Dutch and English).
Finally, the Dutch healthcare system officially ranks among the worlds best, according to the
Commonwealth Fund.19
FDI in Figures
The UNCTAD 2014 World Investment Report classifies the Netherlands as one of the largest
potential investors for 2013-2015. In fact, companies active in the Netherlands are more likely to
invest abroad. A strong international orientation and a liberal policy towards foreign investment
characterise the Netherlands' policies in this field. Many Dutch companies are multinational by
nature and some of these are listed on foreign stock markets. There are no regulatory restrictions
on foreign direct investment.
After slowing down in 2012, FDI again recovered in 2013, a trend which strengthened in
2014. In 2013, the Netherlands Foreign Investment Agency was involved in supporting 193
projects, which represented EUR 1.7 billion in FDI and created 8,500 new jobs. As to the number
of projects, in 2013 the United States was the largest investor, followed by China, South Korea,
the United Kingdom and India.

19 http://www.hollandtrade.com/business-information/holland-information/foreigninvestment/
24

Foreign
Direct
Investment

2012

2013

2014

FDI Inward
Flow (million

17,655

32,039

30,253

684,397

735,361

664,442

Number of
Greenfield
Investment
s***

168

161

166

FDI
Inwards

11.2

20.6

18.7

FDI
Stock

83.1

86.1

76.7

USD)

FDI
Stock

(million

USD)

(in
% of GFCF****)

(in % of

GDP)

25

TRADING IN NETHERLANDS (IMPORT-EXPORT)

Netherlands has a liberal economic and trade policy. The country is a member of the WTO, as
well as many other regional economic groups (COMESA, SADC, and IOC).
The Netherlands earns almost 30% of its income from the export of goods and services. In 2012,
the value of exports was 86.7% of the Netherlands' GDP.
Hollands exports totalled 404.6 billion euros in 2011, up 8.9 % from 2010. Hollands export
trade was the second-highest in Europe after Germany. Our prominence in European exports can
mainly be attributed to transit exports to other European countries. In this sense, we really are the
gateway to Europe for many products from other regions. Half of our exports consist of transit
exports.
As the fifth largest exporter of goods in the world, the Netherlands occupies a prominent position
when it comes to world trade. In 2011, the Netherlands exported goods worth a total of more
than 638 billion US dollars, which is 3.8 % of the world's total exports.The Netherlands is also a
significant exporter of commercial services - exports of commercial services amounted to 131
billion US dollars (Statistics Netherlands 2012) in 2011, which placed the country ninth in the
world rankings.
The Netherlands is the second-largest exporter of agricultural products worldwide, after
theUnited
States.In
2012, Holland's
most
important
export
partners
were: Germany (24.1%); Belgium (12.1%);France (8.9%); UK (8.0%); Italy (4.8%)
and
US(4.1%).In
2012, Holland's
most
significant
import
partners
were: Germany (16.7%); Belgium (10.0%);China (8.4%); UK (
6.7%);
US
(6.6%)
and France (4.6%).

26

THE GLOBAL FINANCIAL CRISIS AND ITS EFFECTS ON

THE NETHERLANDS
World trade fell by almost 6% quarter-on-quarter in the fourth quarter of 2008, and even by 11%
in the first quarter of 2009. Such near collapses are bound to have considerable consequences for
export-oriented open economies like the Netherlands. Figure 1: export of goods and services (%
of GDP, 2007) 0 20 40 60 80 100 Greece United Kingdom Spain France Italy Portugal EU Euro
area Finland Germany Sw eden New member states Austria The Netherlands Ireland Belgium
Luxembourg* * Luxembourg stood at 180% and falls outside the scale.20
The financial crisis affected the Dutch economy through three channels: plummeting global
demand, problems with bank balance sheets, and the decline in producer and consumer
confidence. To each of these channels the Dutch economy seems to be relatively vulnerable,
compared to other European countries.
At the outbreak of the global financial crisis, the Dutch economy was assessed to be relatively
well prepared to weather the storm, given its very low unemployment level, large and stable
current account surpluses, a low government debt level and, at that time, a budget in surplus. The
fact that the Netherlands seemed to remain untouched by the (then) overseas problem, supported
this view. Economic growth remained robust and above the euro area average throughout 2007.
However, the negative effects of the financial crisis became more apparent in 2008 and economic
growth came to a grinding halt in the second quarter. For 2009, GDP growth is expected to show
the sharpest contraction ever and to be below the euro area average. In the wake of the crisis,
typical Dutch strengths, like the pension system and its strong position in world trade, now have
turned out to be vulnerabilities. On the other hand, the capacity of the economy to recover seems
to be relatively robust in the Netherlands. It has a highly flexible labour market, a low
unemployment and a very high participation rate. Furthermore, the government's budget
surpluses of the supported by a flexible labour market. ECFIN Country Focus Volume 6, Issue
10 Page 7 past years enabled the government to allow the full working of the automatic
20 http://ec.europa.eu/economy_finance/publications/publication16339_en.pdf
27

stabilisers and to implement stimulus measures. Also, the low level of government debt enabled
the government to intervene in the financial markets. Furthermore, the considerable current
account surplus diminishes the Dutch dependency on foreign capital, making the country less
dependent on changes in international capital flows. This does mean, however, that over the
coming years a considerable fiscal adjustment will have to be made, not least to address the
rising fiscal cost of ageing and the cost of bank rescues, while occupational pension funds will
have to recover their losses or adjust contribution and benefit rates. Hence, for all its comparative
strengths, tough times are ahead for the Dutch economy.21

SWOT ANALYSIS
The Strategy contains a Strengths, Weaknesses, Opportunities, and Threats (SWOT) analysis
which identified major strengths as political stability, dynamic entrepreneurship, favourable trade
agreements, strong public / private sector dialogue and shared goals, and positive economic and
social indices. Weaknesses include uncoordinated institutional support, inadequate economic
infrastructure, weak technology / innovation base and inadequate R & D, low productivity,
product and market concentration and an inward oriented manufacturing sector.
Weakness
(a) The limited attention attached to career guidance, and particularly to contacts with the labour
market, within the general education part of the education system.
(b) More generally, the fragmented nature of the guidance system as a whole: arguably, it is not
currently a system at all, in any meaningful sense, but a series of disconnected entities.
(c) The lack of accountability, monitoring and quality assurance: this is particularly evident in
relation to schools, but is an issue in all sectors.
(d) The lack of clarity regarding the role of government within a decentralised and marketised
system. Seven years later it can be concluded that these weaknesses still stand very strongly.
More background to the Dutch guidance system and its weaknesses can be found in Jansen,
2006.
Strengths of the Dutch guidance are also pointed out in OECD, 2002. This report mentioned as
potential strengths of the Dutch guidance system 3
(a) The extent and quality both of labour market information and of consumer information, for
use in guidance.
(b) The formal affirmation within the vocational education system of the central importance of
the students career path.
21 Centraal Planbureau (2008), CPB Memorandum 199.

28

(c) The emergent market in career guidance and information services created by the policy of
decentralisation and marketisation: still limited and fragile, but with potential for development.
(d) The network of Public Employment Services, in Dutch since 2009 UWV Werkbedrijf
(formerly known as CWI), alongside the werk.nl website and the proposed customer support
centre.

REFERENCES
1. http://www.oecd.org/eco/surveys/economic-survey-netherlands.htm

2.
3.
4.
5.
6.
7.
8.

http://www.doingbusiness.org/~/media/GIAWB/Doing%20Business/Documents/Facthttp://www.hollandtrade.com
http://data.worldbank.org/indicator/SI.POV.GINI
Wikipedia.org
www.levensontwerp.nl
http://www.tradingeconomics.com/mauritius/unemployment-rate
http://www.doingbusiness.org/~/media/GIAWB/Doing%20Business/Documents/FactSheets/DB15/DB15SSAFactSheetEnglish.pdf
9. http://hdr.undp.org/en/content/table-1-human-development-index-and-its-components
10. http://data.worldbank.org/indicator/SI.POV.GINI
11. http://www.globalfinance.mu/index.php?
option=com_content&view=article&id=115&Itemid=461
12. http://www.ukessays.com/essays/economics/impact-of-the-financial-crisis-globally-andin-netherlands-economics-essay.php
13. http://ec.europa.eu/economy_finance/publications/publication16339_en.pdhttp://data.wor
ldbank.org/indicator/SI.POV.GINI
14. http://www.hollandtrade.com/business-information/holland-information/foreigninvestment
15. Centraal Planbureau (2008), CPB Memorandum 199.

29

Thankyou

30