After several years of continuous growth, the Dutch economy has started to slow down. But the Netherlands is still the world's eighth-largest exporting country (third largest in the export of food) and the sixth-largest source of investment. Its gross domestic product (GDP) is the 15th-highest in the world. Its workforce numbers 7.3 million, 60% of whom work in the service sector. Per capita GDP is currently Ä 22,570, and the unemployment rate is around 2.4%.
The Dutch economic system is still widely regarded as a model of consensus. A structural approach to problems bolsters economic stability. The Netherlands has an age-old culture of negotiation. This tradition lives on in the close and regular contact between trade unions, employersí organisations, and government. Employers and employees also have regular bilateral contact. Government interferes as little as possible.
Now that the economy is slowing down, it is uncertain whether the "polder model" will continue to guide the Dutch economy. The answer to this question will affect the relationship between employers and employees.
| Sector | %GDP |
| Agriculture and fisheries | 3 |
| Construction and installation | 5 |
| Industry | 20 |
| Services | 60 |
| Public sector | 12 |
| ----- | |
| Total | 100 |
| Country | Exports (in billions of US dollars) |
| United States | 1189 |
| Germany | 470 |
| Japan | 343 |
| United Kingdom | 338 |
| France | 314 |
| Canada | 247 |
| Italy | 227 |
| The Netherlands | 213 |
| PR China (Mainland) | 212 |
| PR China (Hong Kong) | 187 |
source: IMF 2000
The Netherlands is an important centre for multinational businesses. Its attractions include its advanced infrastructure for telecommunications and goods and passenger transport. What is more, many foreign companies come to the Netherlands because of its central geographical location, its flexible working hours and its educated, multilingual workforce. The port of Rotterdam and Schiphol airport are the two most important international transport hubs. The Netherlands has long had a balance-of-payments surplus: More than half the Gross Domestic Product (GDP) comes from international trade. Many Dutch companies have subsidiaries in other countries.
In the past twenty years, services have grown into one of the Netherlands' main economic sectors. The export of commercial services has risen more rapidly in the past ten years than the export of goods. Trade is the main activity in the service sector, followed by transport and communications, construction, banking and insurance, and other commercial services. Most Dutch companies are active mainly in the Netherlands. Most international business is conducted by transport companies, technical consultancies and trading companies. ABN Amro and ING are the largest Dutch commercial banks, with branches worldwide serving both Dutch and non-Dutch companies as well as governments.
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 trading.
Dutch transport companies are clustered around the two major
centres of import and export: Schiphol airport and the port of
Rotterdam. The best-known are KLM Royal Dutch Airlines, Nedlloyd,
Frans Maas and Smit International. The dredging companies Boskalis,
HAM and Ballast Nedam have larger foreign operations than domestic
ones. KPN Nederland is a big name in international
telecommunications and works with many non-Dutch companies.
The Dutch manufacturing sector has an international outlook.
Dutch manufacturers export all over the world, have branches in
many countries, and often join forces with foreign companies. The
main manufacturing industries are chemicals, food processing and
metalworking. There are also highly developed printing and
electrical engineering industries. Production processes in all of
these industries have been largely automated in the past ten years,
making them strongly competitive on world markets, with plants both
in the Netherlands and abroad.
The Netherlands is home to the world's largest chemical
companies. The Dutch metalworking industry specialises in making
machinery, Its advanced electronic control systems have made it a
world leader in the manufacture of vehicles, food processing
equipment and machinery for the chemical industry. This has also
boosted the development of a strong electronics industry. The main
markets for Dutch manufactured goods are Germany, France, Belgium
and the UK. The Netherlands is the second-largest supplier of
industrial high-tech equipment and consumer goods to these very
demanding markets. Germany imports more from the Netherlands than
from the USA or the UK.
There are huge natural gas reserves in the north of the Netherlands, making it Western Europe's largest producer. Drilling companies operate in gas and oil fields both on land and in the North Sea (in the Dutch part of the continental shelf).
The port of Rotterdam is a crucial link in Western Europe's energy supply chain. Large quantities of crude oil arrive there by ship for use throughout the region. The port has many refineries and terminals, and pipelines transport crude oil and oil-based products directly to the industrial centres of Germany and Belgium.
The presence of refineries and offshore installations has led to a wide range of activities serving the oil and gas industries. Four large steel construction firms, for instance, design and build entire refineries and offshore installations. And dozens more companies produce specialised equipment. Several Dutch research institutes have laboratories for simulating offshore conditions.
In the late 1980s, the Dutch government introduced strict environmental legislation. This encouraged researchers to develop technologies for purifying wastewater, neutralising waste gases and processing industrial and domestic waste. The Netherlands' production plants are now among the world's cleanest. Around 40 Dutch companies are making electricity generators driven by biomass, sunlight or wind. More than 2% of electricity now comes from these renewable sources. The goal is to make that 10% by 2020.
The Netherlands has few natural resources. Dutch society therefore focuses on developing and applying knowledge. More than 60,000 researchers work in Dutch companies, universities and research institutes. Each year, Ä 4.6 billion is spent on research - half by companies and a quarter each by universities and research institutes. Dutch researchers produce 7% of the EU's scientific publications and hold 6% of its patents. Around 5,000 Dutch companies conduct their own research to develop new products and make production more efficient. The country's five largest multinationals - Philips, Shell, Akzo Nobel, DSM and Unilever - are at the forefront of industrial research and development.
Innovation is a matter for business, but government supports it too, by encouraging universities to apply and disseminate knowledge, by ensuring that knowledge is protected by patents, by supporting blue-sky technologies, and by attracting knowledge-intensive companies to the Netherlands from abroad. Government also encourages Dutch companies and centres of learning to take part in European research and innovation projects.
The Netherlands' high population density, extensive industrialisation, intensive farming and many cars have brought about rising levels of pollution in the past few decades. But pollution has no regard for national borders. Pollutants are brought into the country by three major European rivers: the Rhine, the Maas and the Scheldt. Air pollution even has a worldwide impact in the form of damage to the ozone layer and the greenhouse effect.
In the late 1980s, a report by the World Commission on Environment and Development posed a new challenge for Dutch environmental policy. To enjoy a sustainable high-quality environment, by the turn of the millennium the country would have to reduce its emissions of some pollutants by 70 to 90%. Strategies for achieving this goal have been largely successful. The fourth National Environmental Policy Plan (2001) confirms the established policy of improving the environment sustainably while expanding the economy. Traffic and agriculture both have a major environmental impact. Reducing carbon dioxide emissions is an especially difficult task.
Government tries to raise public awareness of environmental issues and encourage people to do something about them. It has concluded voluntary agreements on reducing the environmental burden with industries such as manufacturing, transport, waste processing, agriculture, and retail.
These voluntary agreements, or "covenants", have the same legal force as private-law contracts. They set out specific environmental targets, which each industry draws up a plan to achieve. If an industry fails to draw up a satisfactory plan on time, government will step in with statutory measures.
So far, covenants have been successful. Dozens of them are now in effect. As well as covenants, government provides information to the public and offers subsidies and tax relief to eco-friendly companies.
Most Dutch people take the environment seriously and are willing to do what they can to help. For instance, by using less energy, they have reduced their per capita carbon dioxide emissions to among the lowest in Europe. Dutch people have also adapted easily to separating household waste. They dispose of glass, paper, batteries and paint at special collection points and put organic and non-organic waste into separate bins for collection. Dutch agriculture has also become more ecologically aware.
Despite its small size, the Netherlands is one of the world's three largest exporters of agricultural produce. Dairy farming and market gardening are its main agricultural activities. Agriculture employs around 3.7% of the Dutch workforce and accounts for 2.6% of the country's GDP.
Its productivity has grown enormously in the past few decades. This is largely due to high-quality training, first-class research, and an effective system of disseminating practical advice to farmers. But growth is no longer a priority. The priorities now are the environment, animal welfare, and the quality of agricultural produce. Eighty percent of Dutch agricultural exports go to the EU, with Germany the largest market.
Arable farming Changes in EU agriculture policy (as set out in Agenda 2000) are gradually doing away with guaranteed prices for grain, sugar and potato starch. Arable farmers are therefore having to adapt to a more competitive market.
Arable farming faces major changes. Arable farms will become less uniform. The trend is towards diversity. Some arable farmers are breeding more livestock, and others are concentrating on market gardening. Some are developing what used to be sidelines, such as recreation and selling produce directly to the consumer, and others are switching to organic farming.
In recent decades, market gardening has expanded both in output and acreage. Its main products are flowers, vegetables, fruit, mushrooms, trees and bulbs. Greenhouse growers are currently spending large amounts to meet environmental targets agreed on with government. The objective is to reduce the use of fertiliser and pesticides and hence the production of waste. Greenhouse growers are also implementing an energy covenant made with government to reduce carbon dioxide emissions and use energy more efficiently. Many market gardeners are now using natural predators like wasps to protect their produce against harmful insects and diseases. This allows them to use fewer toxic pesticides.
Organic farmers make almost no use of chemical pesticides or fertiliser. Their output is relatively small but growing. From 1986 to 1996, the acreage worked by organic farmers grew on average by 1,200 hectares a year. Organic farmers are now aiming to improve their management and sales structure and make the prices of their produce more competitive. Large food retailers are becoming more interested in organic produce. Albert Heijn, the Netherlands' largest supermarket chain, plans to stop selling food sprayed with pesticides within the next ten years. Thirty percent of Dutch consumers now buy organic produce more often than they used to.
Until 1950, most livestock (pigs, cows and sheep) in the Netherlands were in the hands of small farmers. Since then, livestock farming has industrialised. Dairy farming is the largest subsector, and livestock is slaughtered for meat. In 1984, the EU introduced limits on dairy production in the form of milk quotas. This encouraged the farmers to become more efficient, producing the same amount of milk with fewer cows. Besides raising dairy cattle, which graze outdoors, many farmers breed other livestock - especially pigs and poultry - intensively in indoor pens. Most of the pork, poultry and eggs produced are exported.
Livestock diseases continue to be a problem, despite stringent EU measures. This was made clear by outbreaks of BSE, swine fever and foot and mouth disease in 2001. We can expect new measures in response.
The two main branches of the Dutch fishing industry are deep-sea and coastal fishing. The largest catch comes from the North Sea. But fish and shellfish farming and freshwater fishing are also important. Sea and coastal fishing are done by a modern fleet of cutters and freezer trawlers. Cutters fish for sole, plaice, cod, whiting, herring and shrimp. The largest markets are for flatfish such as sole and plaice. Trawlers fish for herring, mackerel and horse mackerel. Shellfish, such as oysters and mussels, are produced on farms, mainly in the waters of Zeeland (in the southwest of the Netherlands) and in the Waddenzee (between the Dutch mainland and the West Frisian Islands). There is also a great deal of cockle fishing in the Waddenzee. Most of the catch is exported.
Under EU fishing policy, the quota of fish that each member state may catch is decided annually. This helps prevent overfishing. Every year, expert biologists recommend a quota to the European Commission. The objective is to keep the stocks of each species above the safe biological minimum. The past few years have seen an increasing effort to keep fishing sustainable. Nets can be designed to catch fewer small fish, and by driving fish into the nets with electricity, fishermen can avoid disturbing life on the seabed.
Agribusiness is an important industrial sector in the Netherlands. It includes all kinds of activities related to the agricultural sector: the production of food, alcohol, tobacco and other non-food agricultural products, along with all the trade and services related to farming. More than half the produce of Dutch agriculture and market gardening is processed by the food, alcohol and tobacco branches. The highest turnovers are found in slaughtering, meat processing, dairy products and the production of animal feed, tobacco products and alcoholic beverages.
The Netherlands has a long tradition of transport. The Rhine, Maas and Scheldt rivers flow through the Netherlands to the North Sea, making the country the Gateway to Europe. Now that Europe's internal borders are becoming less important, the Netherlands is an even more attractive location for international business, at the heart of the European distribution network. Seagoing vessels annually carry tens of millions of tonnes of goods in and out of Rotterdam, the largest port in the world. And Schiphol Airport, near Amsterdam, is Europe's fourth largest airport for goods and passengers.
Car ownership has grown hugely since the 1970s. In 1999, there were more than six million cars on the Dutch roads. The Netherlands is taking measures to reduce road congestion to ensure that it can to maintain its economically vital position as a transit centre and guarantee access to commercial centres. The authorities are building new infrastructure where congestion is a problem and encouraging alternatives to driving: car-sharing, cycling, walking, teleworking and - most of all - public transport.
The Netherlands is also a world leader in telecommunications. It has a high-quality telecommunications infrastructure and is one of Europe's most densely cabled countries. All its telephone exchanges are digital, allowing users to speak and send computer data down the same line.
Telephone subscribers can now switch telecoms carriers while
keeping their old connection and number. At the same time, cable
companies are seeking to use their networks for more than just
transmitting TV and radio signals. They are keen to enter other
markets such as Internet access, teleshopping, video on demand, and
telephony itself. Government is promoting a free market in both
telecommunications and postal services.
The telecommunications market has been wholly liberalised.
Mobile telephony is growing fast in the Netherlands. There are five carriers, ensuring competitive prices for services and subscriptions. The latest generation of mobile telephones - linked to the Universal Mobile Telecommunications System (UMTS) - can be used to send and receive computer data and surf the Internet.
Every year, Dutch public transport carriers take passengers almost 25 billion kilometres, while motorists travel 89 billion. The Netherlands has an extensive network of trains, trams and urban and regional buses. Amsterdam and Rotterdam also have their own metro systems. The large cities are all served by express trains, which leave every half or quarter hour. More and more companies are providing their employees with public-transport season tickets. And a European network of high-speed trains is gradually taking shape, shrinking journey times between the large Dutch cities and Brussels, Paris, London and Frankfurt.
Urban and regional public transport mainly takes the form of the bus. There is a nationwide faring system for buses, trams and metros, which divides the whole country into zones. Passengers pay a fixed fare per zone, stamping their ticket (the Nationale Strippenkaart) in a time clock for each journey they make. There are also community minibuses, driven by volunteers and serving less densely populated areas. In addition, the Netherlands has 20,000 taxis. Special train taxis operate in many towns and cities, allowing passengers leaving trains to share rides at a fixed low fare. Regional taxis serve a similar purpose in less densely populated areas.
The Dutch goods transport industry accounts for 8% of the gross domestic product and a large share of the European market. For more than 30 years, Rotterdam has been the largest port in the world. Its current capacity is more than 300 million tonnes per year, and it handles 30% of all seagoing goods loaded and unloaded in the EU. The port is constantly modernising to maintain its leading position. Container terminals now dominate it, and a new deep channel has recently been cut between Rotterdam and the sea to provide access for ever-larger supertankers. The Netherlands' other major seaports are Amsterdam, Velsen/IJmuiden, Delfzijl, Eemshaven, Vlissingen, Terneuzen and Vlaardingen.
More than 400 million tonnes of goods arrive in the Netherlands each year, largely by sea, road or inland waterway. Most of these goods are destined for the hinterland, chiefly Germany, and continue their journey mainly by barge or truck. Dutch goods transport companies are among the largest in the EU, accounting for 40% of goods carried by water and 25% of those carried by land. The total annual volume of freight exported and forwarded by the Netherlands is around 350 million tonnes, including the natural gas that is exported via pipelines.
Dutch railways carry only a very small share of imports and exports: 1% and 2% respectively. But the Betuwe Line, to be built from Rotterdam to Germany, will soon boost their share of goods transport. The volume of goods carried by air is also expected to grow from the present one million tonnes per year.
Air transport In addition to Schiphol Airport, the Netherlands has a number of smaller airports near Rotterdam, Eindhoven, Groningen, Maastricht and elsewhere. The worldís oldest national airline, KLM Royal Dutch Airlines, had to merge with French airline Air France in 2003. Other Dutch airlines are Martinair and Transavia, which specialise in holiday travel. Martinair also specialises in intercontinental goods transport.