FOREWORD & SUMMARY

This independent advisory report is a response to the request to translate the Draghi report – which outlined the future of Europe’s earning capacity – to the context of the Netherlands. Dubbed ‘the Wennink Report’, it comes at a time when the Netherlands finds itself at a crossroads. Years of economic success have brought us broad-based prosperity, a strong social security sector and a high degree of wellbeing among the population. But these achievements offer no guarantees for the future. Dark clouds are gathering over our society. The war in Ukraine, an ageing population, the need for a sustainability transition and the pressure on public services make it clear that the foundations under our prosperity are beginning to erode. These great societal challenges require fundamental choices.

The essence of these challenges is economic in nature: in order to cover the rising cost of healthcare, pensions, defence and the energy transition we need annual economic growth of at least 1.5%-2.0%. However, the current outlook is sombre. The Dutch central bank (De Nederlandsche Bank) and the Netherlands Bureau for Economic Policy Analysis predict annual growth of only 0.5%-0.9% in the medium term, which is not enough to sustain our current public services, let alone make improvements. The Netherlands is in danger of losing its capacity to meet the challenges society faces.

To turn the tide we need a fundamental change of course. Further economic growth will have to come almost entirely from higher labour productivity, though in fact our productivity growth has been slowing for decades. We need a breakthrough to reverse this trend. Productivity growth is the only sustainable way to maintain prosperity, wage levels and public services. This will require investment of at least €151-€187 billion in the high-productivity sectors of our economy. This investment will have to be undertaken in the next 10 years, largely by the private sector.

This growth requirement comes at a time when the Netherlands and Europe are having to fight for their position in the world. Europe once used to be a pioneer in innovation, but it has not been for many years now. As Mario Draghi showed, the gap between Europe and the technological frontrunners, China and the United States, is widening rapidly. These countries are investing massively – much more than Europe is – in key technologies such as artificial intelligence, semiconductors, drones, biotechnology and renewable energy. Europe and the Netherlands are dependent, and are in danger of becoming more and more dependent if nothing is done. However, the battle is not yet done. The Netherlands has all the necessary ingredients to remain a relevant player in global technology. We have a strong knowledge base, innovative businesses and a tradition of public-private partnership. In this respect it is important to note that the Netherlands will always be dependent on other countries for certain technologies and raw materials, even if we manage to reverse the current trends. Those dependencies are unavoidable and do not necessarily have to be problematic – technology supply chains are complex and interconnected. It becomes a risk when the dependencies are one-sided – if we become simply a ‘buyer’ of technology and are no longer a key player in the global high-tech value chains. In that situation, we would lose our strategic relevance, and other parties would set the conditions and prices for our access to technology.

So it is essential to focus on domains where we can build and maintain a strategic position. We must concentrate our efforts on high-end niche technologies – areas in which we can stand out. These are more difficult to imitate and can therefore give us a more sustainable competitive edge. The focus in this report is therefore on four domains:

Together these domains are decisive when it comes to our future prosperity: they form the backbone of the great transitions of this century, they are characterised by an explosive growth in demand – partly due to their international societal relevance – and they increasingly determine the geopolitical balance of power. By means of targeted investment in these areas, the Netherlands can strengthen its strategic relevance in Europe and the wider world, and contribute to solutions for the great challenges of our time.

The right parameters are the key to investment and growth

The willingness to invest in the Netherlands’ future earning capacity is great. These investments will only happen if the right parameters are in place, but this is the very area that has deteriorated in the past few years. The Netherlands is faced with more and more ‘overdue maintenance’, as a result of which businesses, knowledge institutions and financial institutions are hampered by fundamental obstacles in various areas. In order to remove these obstacles, we have to make choices. We have to choose to create the right parameters for a highly productive economy, and take swift action in four categories:

There is a lack of speed and decisiveness in permit procedures and in regulation. This means societal goals become subordinate to slow and complex procedures. Risk-averse public administrators and supervisory authorities hamper innovation, while not enough decisive action is being taken on important issues. So instead, make the permit system faster, more predictable and more straightforward for projects that are vital for our earning capacity, such as energy infrastructure and industrial investments. Unlock impasses – such as the current deadlock on nitrogen emissions – take back national control of permit procedures for strategic projects and introduce regulatory sandboxes for strategic innovations, so that new technologies and investment projects can be tested, used and scaled up more rapidly.

A second major challenge is the availability of well-qualified talent. Year after year the quality of our education is deteriorating, and technically qualified talent is becoming scarcer. We lack structured reskilling and upskilling programmes that can help tailor the skills of our labour force to the changing demand. And we increasingly discourage international students and knowledge workers who could fill part of this gap. Furthermore we are creating obstacles to a healthy labour dynamic by clinging to uncertain temporary contracts and rigid permanent ones. That is why we need a National Talent Agenda that will focus fully on training, education and skills so that the future growth we aspire to can be achieved. The social security system and labour market policy also need recalibrating to ensure they match our economic and technological ambitions.

Access to an affordable and reliable energy supply is the third essential parameter for many investments. Due to congestion on the power grid, thousands of businesses and organisations are having to wait to be connected, which stalls innovation and the sustainability transition in the Dutch economy. In the short term, the existing grid capacity could be used more efficiently, through more flexibility and priority allocation. In addition, legal, financial and spatial planning interventions will be needed in order to achieve a permanent solution to this problem. Electricity prices in the Netherlands are significantly higher than in surrounding countries, which prompts strategic industries to move elsewhere. In the short term, therefore, enhance the energy mix with affordable production sources and tax advantages, so that we can compete with Belgium and Germany in terms of prices. For the long term, work towards a robust energy mix with sufficient security of supply for industry and other strategic sectors.

The fourth parameter we need to put in order is the economic infrastructure. The Rotterdam and Schiphol mainports, Brainport Eindhoven and innovation ecosystems such as Leiden Bio Science Park and Foodvalley in Wageningen are all places where scientific knowledge and industrial competencies come together. The Netherlands needs a national plan to strengthen these ecosystems. Specific points for attention are streamlining spatial planning procedures and investing in housing, energy infrastructure, digital networks and knowledge infrastructure. By engaging in public-private partnerships in these areas, we can build trust and enable the parties involved to make the greatest possible contribution to the Netherlands’ international competitiveness.

If these parameters are in place, a great deal is possible in the Netherlands. Our country has exceptional investment potential. For the purpose of this report, 51 concrete propositions were collected from more than 30 consortiums across the four above-mentioned domains, by means of a broad public-private survey. More than a thousand experts fleshed out proposals representing a total investment potential of around €126 billion, most of which can be financed with private funding. The propositions are an elaboration of the innovation infrastructure that was in part developed over the past few years through the National Growth Fund, and are aimed at bringing innovative technologies to market more quickly. These investments will make a significant structural contribution to the economic growth that the Netherlands needs. The 51 propositions from this agenda can evolve to form the core of a Dutch investment and industrialisation strategy.

Ensuring the right parameters are in place for investment is not an easy task. It requires difficult choices that have been postponed for too long: about how we want to use the limited space we have in the Netherlands, about allocating the scarce capacity on the power grid, about nitrogen emissions and about the use of labour. Not everything is possible, and it is definitely not possible to achieve everything at once. But if we have the courage to make those choices, there is significant scope to achieve the Netherlands’ growth potential and safeguard our strategic relevance.

Implementation: decisive governance and stable financing

A plan is only as good as its implementation. Without the appropriate financing and administrative organisation, the recommendations in this report cannot be achieved. First of all, it is important to secure as much private investment as possible. To achieve this, the Netherlands will have to win back the trust of investors, both here and abroad. Years of unstable policy have led to a breach of trust that can only be remedied by means of a credible, consistent strategy for the coming 10 years. Only then can ambitious public-private cooperation be restored.

Public investment is also needed. First and foremost, in order to put in place the necessary parameters. In the coming 10 years, at least €19-€72 billion will be needed for this. But fostering innovation also requires public funding, which must be spent in such a way as to maximise private investment. Two strong institutions will be needed to ensure our public funds are used as effectively as possible. The first is a new National Investment Bank that will draw together existing instruments and focus on public-private co-funding of the necessary investments in technology and infrastructure. With €10-€20 billion in working capital, up to €100 billion could be mobilised. The second is the new National Agency for Groundbreaking Innovation, which, with a budget of €2 billion, will focus on fostering innovative ecosystems and funding strategic innovation projects that have groundbreaking potential. Both institutions should operate at a remove from the political arena, with professional management and a clear mandate. In this way, long-term stability can be guaranteed.

Scope needs to be created for these public investments, which demands less government expenditure on goods and services and more investment within the government budget. Greater insight is needed into the long-term return on investments, so that our budget system rewards an approach that looks further ahead. Expenditure on goods and services should be limited, inefficient tax measures should be abolished or improved, and non-strategic state holdings should be sold. Furthermore, a new government must be willing to allow a controlled increase in the national debt, for investments that will demonstrably yield major economic benefits. Serious investment in our future prosperity requires difficult choices, including in public finances.

Lastly, this task demands a new, strong administrative structure that will actually make these choices happen. Future earning capacity must be designated a matter for top-level decision-making, under the responsibility of the prime minister. In addition, the Minister of Economic Affairs must be able to pursue comprehensive economic policy, and should therefore be given back stewardship of energy and trade policy. An independent Government Commissioner for Future Prosperity will help implement interministerial tasks and will organise the public-private dialogue through a National Investment Council. With a statutory mandate, a dedicated fund and an effective implementation unit, this commissioner will be able to overcome impasses and expedite projects. In this way, strategic goals – such as solving the issue of grid congestion – can be achieved through clear prioritisation, interministerial coordination and public decision-making power.

These ambitions also require changes to the civil service at large: in order to make this administrative structure work, governance must become less complicated and more professional. The extreme burden of accountability on political office holders has led to a kind of process fetishism. As a result, processes have been placed in the way of goals, and government no longer serves society to the extent it should. Political office holders, civil servants and supervisory authorities must find courage again. Courage to take action, courage to take risks and courage to pursue societal goals quickly and effectively.

Let's get started

Not taking action is a choice too. Every day that we are not investing in the future of our country, we are allowing the cost for future generations to rise. This report shows that the possibilities are there: we know what is needed, what we need to invest in and how we need to do that. The report thus also expresses a great deal of confidence in the future of the Netherlands. The will to build, to innovate and to work together is present everywhere. Let us harness that energy and make a start today with the choices and investments that will make our country stronger and more resilient. The future won’t wait.

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