Economy of the Netherlads

The Netherlands has been a trading nation for centuries due to its open economy and outlook. The Dutch are seasoned travellers. They are proficient in languages and skilled in negotiating trade agreements and implementing projects against the odds.

As an open economy, the Netherlands is susceptible to international developments, notably in recent years the global recession – which has been exacerbated by falling share prices, the attacks of 11 September 2001, the war in Iraq and the outbreak of SARS.

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Nevertheless, the Netherlands was the world’s eighth largest exporter of goods and services in 2003. Its workforce numbered 7.5 million, three-quarters of whom worked in the service sector. Per capita gross domestic product (GDP) was 27,900. The unemployment rate was 5.3%. And growth was strongest in the public sector, education and health care.

Traversed by the rivers Rhine, Maas and Scheldt as they meander towards the North Sea, the Netherlands is a hub of transport and distribution: a natural gateway to Europe and centre for multinational enterprise. Its advantages include an advanced infrastructure both for transport and telecommunications. Many Asian and North American imports to Europe are transhipped at Rotterdam or Amsterdam, the country’s two transport centres.

The seaport of Rotterdam is the largest in the world, transhipping tens of millions of tonnes of goods per year. And Amsterdam Schiphol Airport is the fourth largest airport in Europe for both passenger and goods traffic. Dutch transport companies are clustered around the two main import and export centres: Amsterdam Schiphol Airport and the seaport of Rotterdam.

The best-known transport companies are Nedlloyd, Frans Maas and Smit International. The world’s oldest national airline, KLM Royal Dutch Airlines, had to merge with French airline Air France in 2003.

Many Dutch companies operate globally. The Netherlands’ three largest international trading companies are Ahold, SHV Holdings and Hagemeyer. Many manufacturers, such as Unilever Philips, Akzo Nobel and Shell, also do a great deal of trade.

Dredging is a Dutch specialty and companies such as Boskalis, HAM and Ballast Nedam have larger foreign operations than domestic ones. And KPN Nederland is a major player in international telecommunications, working with many non-Dutch companies.

Dutch manufacturers too have a global outlook. They export goods worldwide, maintain subsidiaries in many countries and often join forces with foreign partners. The main manufacturing industries are chemicals, food processing, metalworking and the refining of gas and oil. The printing and electronic engineering industries are also world-class. Dutch metalworking companies specialise in making machinery driven by advanced electronic controls, a speciality that has turned the Netherlands into a world leader in the manufacture of vehicles, food processing equipment and machinery for the chemical industry. It has also bolstered the electronics industry.

The north of the Netherlands contains huge reserves of natural gas, making it Western Europe’s largest producer. Drilling companies operate in gas and oil fields both on land and in the waters off the Netherlands’ North Sea coast.

A crucial link in Western Europe’s energy supply chain is the seaport of Rotterdam, where large quantities of crude oil arrive by vessel. The port is home to large transhipment companies and refineries, from which considerable quantities of crude oil and its petroleum products are carried directly to the industrial areas of Germany and Belgium.

The presence of refineries and offshore installations has led to an array of activities serving the oil and gas industries. Four large steel construction companies, for instance, design and build entire chemical factories, oil refineries and offshore installations. And dozens more businesses produce specialist equipment. Several Dutch research institutes even have laboratories for simulating offshore conditions.

Reducing emissions of greenhouse gases, as required by the Kyoto Protocol, is one of the world’s most difficult environmental problems, closely linked as these emissions are to economic growth. The Dutch government acts to cut emissions and binds manufacturers to strict environmental standards. But the Netherlands’ emissions of carbon dioxide have increased in recent years, mainly because the export-driven Dutch oil, transport and chemical industries are all such voracious consumers of energy.

Given the Dutch economy’s strong focus on exports, acting nationally to cut greenhouse gas emissions is more expensive than acting internationally. Emission-reducing measures raise the cost of Dutch exports substantially. The European system of trading emissions due to start in 2005 offers the Netherlands an efficient way of meeting the Kyoto Protocol target. It will allow the Netherlands to buy emission permits from other countries, which will then reduce their emissions accordingly, saving the Netherlands from having to take more expensive measures.