Earning capacity in the Netherlands

Doing business in the world of tomorrow and beyond

What are some of the changes affecting the Dutch economy and what will be the key opportunities for Dutch businesses to excel in the future? And what will be the role of entrepreneurs and innovation?

Rabobank conducted a series of interviews with scientists, employees, customers and representatives from NGOs. We discussed key economic and social trends in which Rabobank could potentially play a role. We shared our findings in a series of long articles on the website www.dewereldvanovermorgen.nl. This week’s theme: earning capacity in the Netherlands.

The Netherlands’ strengths

With its strategic geographic location and excellent arterial roads, the Netherlands has been a successful and open trade economy for many centuries. Despite its modest size, the country accounts for 3 percent of global trade and ranks seventh in the export of goods. It is also the world’s second-largest exporter of agricultural products after the United States. While having been mainly an agricultural nation in the past, services currently account for 70 percent of the Dutch economy and more than 80 percent of the nation’s jobs are generated in this industry.

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Changing production chains

Whereas Dutch companies in the past tended to have control over the entire production process, a growing number of businesses currently outsource all or part of their products or production processes to companies that can operate at a lower cost. This is prevalent in areas such as IT services, marketing and transport and widens the circle of companies and countries involved in a specific product or service, since businesses are always on the lookout for geographic areas where they can produce at the lowest cost.

Bottom and top

Chances are that many Dutch companies in the future will choose to further specialise in a small part of the value chain – preferably the part that is most lucrative to their business. Since production costs tend to be lower in low-wage countries, manufacturing companies currently outsource a portion of their operations to these countries. Meanwhile, the efficiency of production processes in the Netherlands keeps improving. Since the activities at the bottom and top of a product’s value chain typically generate the most profit, companies focus less on the primary process of manufacturing and more on design, research and development at the bottom of the chain and on marketing, specialised logistics and after-sales at the top of the chain.

A glimpse of the future

The Dutch economy will earn a growing share of its collective income from international value chains going forward and will continue to excel in those areas which have long been its strengths, including trade and logistics, food production, water management, high tech, life sciences and, to a more limited extent, chemicals and energy. The domestic economy has been propelled by economic growth in emerging economies such as China, Brazil, Russia and India. Companies need to make an effort, however, to meet the changing needs of consumers, such as the demand for greater sustainability and more personalised services.

Driver of wealth

Entrepreneurs of all kinds are vital to economic growth: they generate income and jobs, create innovative new products and services and thereby contribute substantially to national wealth. But how well are they able to anticipate changes in the market? This is what will determine Dutch earning capacity in the future. With a rapidly ageing population and a shrinking workforce, the way to progress is increasingly about coming up with clever inventions: in other words, innovation.

Keys to success

Rabobank identifies at least three keys to success for innovation and entrepreneurship: a well-trained workforce, access to appropriate finance and a facilitating government that grants people the freedom to foster an entrepreneurial environment. Innovative startups play a special role in this process, being in the vanguard of innovation and known for using new earnings and business models. With many established companies that seek to expand into new areas choosing to partner with such startups, it makes sense for Rabobank to be a founding partner of Startup Fest Europe, held for the first time this year. New businesses, startups and scale-ups are the key drivers of innovation and change in the Dutch economy, offering future opportunities for Dutch businesses.

Looking to tomorrow and beyond

Rabobank believes the Netherlands has everything it takes to maintain its wealth and standard of living in the future. In some areas Dutch businesses have held leading positions in the world for decades. An increasingly efficient manufacturing industry and growing worldwide demand for Dutch knowledge and expertise will ensure that things remain that way. Companies can really make the difference through creative innovations and smart entrepreneurship.

FOR MORE INFORMATION ABOUT THE STRENGTH OF THE DUTCH BUSINESS COMMUNITY IN THE WORLD OF TOMORROW AND BEYOND, read dewereldvanovermorgen.nl/verdienvermogen.

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